Goldman Marketing U.K. CMBS Backed by Logicor Warehouses

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Goldman Sachs is marketing commercial U.K. mortgage bonds backed by a portfolio of distribution warehouses owned by Logicor, a portfolio company of the Blackstone Group L.P., according to presale reports from Moody’s Investors Service and Fitch Ratings

The £680 million ($1.05 billion) transaction, Logistics UK 2015 PLC, offers £312.6 million of class A notes that are rated ‘AAA’/’Aaa’ by Fitch and Moody’s, respectively, and benefit from 51.6% credit enhancement. The deal also offers five subordinate tranches: £67.45 million class B notes rated ‘AA’/’Aa2,’ £67.45 million class C notes assigned ‘A’/’A2’ ratings, £60.8 million class D notes rated ‘BBB’/’Baa2,’ £76 million class E notes rated ‘BB-‘/’Ba2,’ and £61.75 million class F notes assigned ‘B’/’B1’ ratings.

The class B, C, D, and E notes benefit from 41.2%, 30.7%, 21.3%, and 9.6% credit enhancement, respectively.

All classes of notes have an expected maturity of August 2018, but have two one-year extension options. The notes reach legal final maturity in August 2025.     

Goldman Sachs is serving as the sole arranger and lead manager on the deal; ING Bank NV is a co-manager.

The collateral consists of a single, floating-rate loan backed by 42 distribution warehouse facilities located throughout the UK. The properties are most heavily concentrated in the Midlands (64%), Yorks and the Northeast (23%), and the South East (8%).

The loan has a 0.1 year seasoning and an initial loan-to-value (LTV) ratio of 69%/70% according to Moody’s and Fitch, respectively. In its presale report, Fitch notes that this leverage level is high compared with similar European CMBS deals; however, deleveraging requirements and the interest coverage ration cash trap test (1.2x) are both low.

Both Moody’s and Fitch cite the quality of the portfolio and the experience of Logicor as key strengths of the deal. A majority of the properties are let at prime market rents and located in desirable locations. Furthermore, the warehouses are considered to be suitable for a broad range of occupiers.

Logicor operates over 91 million square feet of logistics distribution warehouses throughout Europe and has an established management network.

Moody’s also notes that over the past three years, the distribution warehouse market has experienced high investment and occupational demand. As a result, supply has dropped to three million square feet in 2015 from 24 million square feet in 2008.

There will be a roadshow in London taking place July 24 through July 27; the deal is expected to price late next week.

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