Allianz enters Spanish lending arena with €134m loan

Allianz Real Estate has made its first foray into the Spanish lending market with the €134 mln financing of Merlin's Marineda shopping centre in the northwestern coastal town of La Coruña.

'The financing of Marineda is our first transaction in Spain and a further step in our strategy to expand our lending business in Europe,' commented Helmut Mühlhofer, head of debt and capital markets at Allianz Real Estate. 'It also shows that the Spanish real estate market is becoming increasingly interesting for institutional investors like Allianz.'

The 10-year facility with a conservative loan-to-value of 50% was signed at a fixed interest rate of 2.66% with no annual amortisation requirement.

This compares to a margin of 350 basis points for HSBC's €225 mln five-year bridge loan (50% LTV) to Intu Properties for Puerto Venecia Centre in December last year and 250 bps for ING Real Estate Finance's €125 mln loan (55% LTV) granted to TIAA Henderson Real Estate in November for Islazul in Madrid.

Merlin spree
Newly formed Spanish REIT Merlin Properties, managed by Magic Real Estate, acquired the shopping and leisure complex last summer for €260 mln, or a yield of 6.6%. It was Merlin’s second acquisition since listing on the stock exchange in June 2014 in a €1.3 bn IPO, the largest-ever by a REIT in Europe. A week after going public, Merlin paid €740 mln for the acquisition of Tree Inversiones Inmobiliarias Inversiones that held 880 bank branches leased to Spanish bank BBVA.

Marineda City is Spain’s second-largest shopping and leisure complex, comprising some 200,000 m2 of GLA and 6,500 parking spaces. Opened in April 2011 following a total investment of €450 mln, the complex includes a 45,000 m² El Corte Inglés department store, a 30,000 m² Ikea, 21,500 m² of restaurants and leisure units, a 13-screen cinema, bowling alley and ice skating rink. The adjoining 4-star Carrís Marineda City hotel has a surface area of 6,000 m2.

Following the financing, Merlin's loan-to-value ratio stands at 39%, with €1.14 bn of gross debt financing in place. The weighted average maturity is 9.1 years, with a cost of 3.8% until late 2017 and 2.7% thereafter.

Allianz Real Estate moved into the European debt space in 2011 with an initial focus on France and Germany. In late 2013 it announced plans to roll out its debt strategy across Europe, targeting a €5 bn debt portfolio over the next three years, from €2 bn at present.

Debt investors head south
In general, debt investors are seeking greener pastures down south to secure higher returns at a time when a sharp rise in non-bank lenders is squeezing interest rate margins in Europe's core countries - the UK, Germany and France.

Financing margins in Germany - Allianz's strongest market - stood at 0.60 to 1.75% in February 2015 for a 55 to 75% LTV compared to a 2.25% to 3.65% spread for a 55 to 65% LTV in Spain, according to research from Cushman & Wakefield.

Even so, margins have already fallen significantly in Spain, where up until early 2014 lenders could finance at a 3 to 5% cost. They are expected to continue to drop in the next months. 'Margins will respond to ever-increasing levels of competition and certain lenders may be motivated to vacate this super prime space, seeking instead to deliver higher returns further up the risk curve,' commented Frank Nickel, chairman of C&W's EMEA Corporate finance.

Virna Asara
Finance editor