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Every week there seems to be another property company announcing its plans to refinance – what’s the reason behind this and is it the best time?
A company might want to refinance for a number of reasons, to take advantage of better interest rates thus reducing costs, to consolidate debt or to reduce or alter risk or to free up capital. Last week, Land Securities announced the details of a new £1.26bn revolving credit facility (RCF), similarly LondonMetric a £400m RCF, Shaftsbury Estate also refinanced with a new £130m 15 year loan and British Land refinanced an RCF worth £400m. An RCF is where a financial institution allows a borrower to take out a loan where they have the flexibility to decide how much and how often they want to withdraw. There is a commitment fee and interest expenses involved in this flexible loan.
Clearly the dramatic decrease in cost of borrowing means it’s a sensible time to refinance but there has also been increased competition between lenders meaning they are increasingly willing to offer more flexible terms. A great example of this can be seen by LondonMetrics RCF – it has replaced 5 secured facilities with its £400m unsecured revolving credit facility.
For long term holders of real estate reducing risk is important and refinancing at low interest rates is a way to guarantee low borrowing costs for the long term. Shaftsbury Estates 15 year loan is a great example of this – they have a fixed rate with Aviva Commercial Finance of just 3.2%; this can also benefit insurers who are looking for long term, low risk income.
This news was brought to you by Morgan Pryce, a specialist tenant acquisition agent with offices in Oxford Circus and the City. Morgan Pryce specialises in search, negotiation and project management and works exclusively for tenants.