There has been much talk and speculation in German real estate circles as to whether a revival of the moribund CMBS market is imminent, following the refinancing during the month by listed housing investor Gagfah of one of its largest portfolios. So far most observers are adopting a ‘wait and see’ attitude, as are investors in the company’s stock after an initial thumbs-up when the deal was announced.
Gagfah, which is still 66% majority-owned by US private equity group Fortress, signed a refinancing deal for its €2.06bn securitised German Residential Funding (GRF) portfolio in a 5-year (plus one-year extension option) CMBS financing structure at 2.76%. Capital repayment of 0.5% annually is included. The loan on the portfolio, which covers more than 61,000 apartments and 470 commercial properties, had been scheduled for repayment in August, and was seen as a key hurdle for the group to overcome in its overall battle to refinance its debt burden.
In earlier talks, Gagfah had targeted €600m for refinancing the GRF portfolio with the help of a bank consortium, then €700m, then €1bn – so the step to refinancing the whole package through a CMBS at an overall lower interest rate is being seen as somewhat of a coup.
Earlier this year Gagfah managed to refinance €1.1bn of its loans on its Dresden Woba portfolio with Bank of America Merrill Lynch, having earlier reversed its decision to sell off the portfolio to external bidders. Gagfah ended up paying 3.34% for the new loan. Bank of America Merrill Lynch subsequently sold bonds backed by that loan in the first public CMBS deal in Europe this year. Gagfah still has to refinance a further €150m of debt due in October this year, but these two big refinancings will make a major difference to its overall financing position.
Gagfah has 145,000 of its own apartment units valued at €8.1bn, and manages a further 40,000 for third parties, making it the second-largest German residential property owner after Deutsche Annington..
The original GRF portfolio with its €2.06bn loan was paying 4.32% annually, so the new rate of 2.76% is a sizeable step. New CEO Thomas Zinnöcker commented on the latest CMBS agreement, “The refinancing at such attractive terms puts us in a great position and enables us to shift focus on our core business.”
Several analysts liked the deal so much they hastily issued revised ratings for the stock. The new lower interest rate surpassed even the company’s own expectations of 3.0-3.5% in their assumed best case, and could well help the company to return to its previously active policy of dividend payouts to shareholders, they suggested.