Great Portland Estates, the central London-focused real estate investment trust, has raised $200m in the US private placement market, in the latest sign of a property company looking to diversify from bank finance.
The group said it had decided to raise the capital after its original $75m placement had been oversubscribed five times, and that it would invest the money in its portfolio of offices and retail outlets at prime central London sites.
“Having debt from a source that isn’t a bank is clearly useful at the moment, and we saw a good opportunity in the market to do it,” said Nick Sanderson, GPE’s finance director.
The appetite for GPE’s debt will offer encouragement to other UK property companies as they seek to access finance away from the bank lending market. Long the traditional source of finance for the property industry, banks have pulled back from issuing new loans ahead of regulatory changes that will increase the cost of lending to the sector.
The private placement consists of two tranches of debt: a $160m, seven-year senior note, priced at 4.2 per cent, and a $40m, 10-year senior note, priced at 4.82 per cent. Royal Bank of Scotland and Lloyds acted as joint agents on the issuance.
Analysts welcomed the news as a sign that property companies were reducing their dependence on bank finance.
“This deal shows once again that the quality Reits are not at the mercy of UK bank lending (or lack of it), and have diverse funding options available,” said Harm Meijer, a property analyst at JPMorgan.
Shares in GPE closed up 1p to 367p.