The Blackstone UK logistics commercial mortgage-backed securities transaction is £339.5 million, of which the lenders, Bank of America and Deutsche Bank, will retain £76.4 million, according to the presale document by rating agency KBRA.
CoStar News first reported last week that the two banks launched Blackstone’s second UK logistics CMBS this year, called Stark Financing 2023-1 DAC.
The interest-only loan matures in three years but has two one-year extensions. It is priced at the benchmark Sterling Overnight Interbank Average rate, plus 2.85%. Proceeds from the loans will be used to refinance Industrials REIT, which Blackstone acquired in a £700 million take-private in June.
The debt is backed by a £617.4 million portfolio of 103 industrial and logistics properties across the UK. The biggest property is the Dana Trading Estate in Kent followed by Compass Industrial Park in Liverpool.
The 7.1 million-square-foot portfolio produces £39.6 million in net operating income, reflecting a 6.4% yield.
The portfolio is 93.8% occupied. Its weighted average rents are around 10.5% below market, according to valuation reports. KBRA notes that there is potential to increase the rent as leases representing 27.4% of base rent are scheduled to expire this year and next. However, the rating agency did not take into account any upside potential in its financial analysis.
The CMBS has three tranches, from A to C notes, plus an X1 and X2 tranche to receive excess interest. The class A notes have an initial balance of £170 million and are rated AAA by KBRA. The Class B notes have an initial balance of £50 million and are rated AA and the class C tranche has a £30 million balance. The X classes have an initial balance of £100,000 each.
The CMBS has an £18.25 million liquidity facility to meet shortfalls in property protection amounts, senior expenses and interest on the Class A, B and C notes. Cash will be trapped if the loan to value exceeds 62.5% or the debt yield falls below 10%.
The loan had an LTV of 52.4% and a debt yield of 11.9% on closing, according to the presale document.