Green CMBS proposed for LRC €343 mln Paris office deal

LRC Group has bought a large office building near Colombes in Paris with debt from Goldman Sachs which will be securitised as the first European green CMBS.

The private property group has acquired River Ouest, a 64,000 m2 campus located in the Bords de Seine district of Bezons on the right bank of the River Seine opposite Colombes, north west of La Defense.

The vendors are a consortium led by AEW, including Caisse de dépôt, Credit Agricole’s Predica and Scor, which acquired the building via an OPCI in 2011. It was developed by HRO and completed in 2009.

According to rating agency presale reports, the 81 Quai Voltaire building was valued last July by CBRE at €343.3 mln and was acquired by LRC with €196.2 mln of debt from Goldman Sachs.

Goldman has launched River Green Finance 2020 to securitise the debt in what will be the first European CMBS green bonds issuance.

The E-shaped building is rated BREEAM Very Good and the bonds will comply with the International Capital Market Association Green Bond Principles 2018.

Christian Aufsatz, managing director, head of European Structured Finance at rating agency DBRS Morningstar, said that while the transaction’s ‘green’ aspects did not affect DBRS’ rating analysis, ‘we understand that it will allow the bonds to be included in the Euronext Green Index. This could be of interest for certain investors.’

French multinational IT company Atos is the largest tenant, accounting for 83% of the rent on a lease expiring in 2029. The other tenants are Dell Technologies and Sophos.and the average rent is €375 per m2.

LRC, which is led by London-based Israeli investor Yehuda Barashi, is buying the property together with a group of Israeli investors led by Harel Insurance. According to the loan documents, Aroundtown, Germany’s largest listed company, has an option to to join the owners.

Goldman’s floating rate loan is priced at 3-month Euribor + 2.4%, a relatively high margin reflecting the large size of the asset and the secondary location. The loan to value is 57.2%.

The structure of the four tranche CMBS is more complex than is usual in post financial crisis securitisations because a portion of the loan lacks mortgage security. Goldman has advanced two loans, with facility A structurally subordinated to facility B.

LRC is well-known for buying the 600,000 sq ft Royal Mint Court office complex in London with Delancey before selling it to the Chinese government for a new embassy in 2018.

Securitisation is making a modest comeback in Europe. Last year there were 17 CMBS deals worth €6.5 bn according to DBRS.

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