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EXCLUSIVE: Blackstone Seeks Loan Extension As Market Instability Thwarts £450M Portfolio Sale

The majority of the portfolio that needs to be refinanced is in the Finnish capital of Helsinki.

Private equity giant Blackstone has asked lenders to extend the maturity of a loan secured against a €513M (£450M) portfolio of secondary offices and shops, Bisnow can reveal, after instability in the market meant the firm could not sell them before the loan expired.

A notice to bondholders earlier this week said that Blackstone is seeking an extension to a €297M (£262M) loan that matures on 15 February. 

The loan is secured against a portfolio of 45 properties in Finland that was valued at €513M last August. The portfolio is 77% offices, 17% retail and 6% storage, comprising 418 tenants, and it produces rent of €41M (£36M). 

The properties are part of the portfolio of Sponda, the listed Finnish property company Blackstone took private in 2018 in a deal that gave the company an enterprise value of €3.8B (£3.4B). 

In the bondholder notice Blackstone and Sponda said “due to ongoing macro-economic instability and market disruption the senior company has requested a one year extension to the senior loan maturity date to 15 February 2024”.

They said that in return they would increase the interest rate being paid on the loan by 1.25%, and  pay a fee equivalent to 0.25% of the outstanding amount of the loan. 

Blackstone and Sponda have put forward a business plan alongside the loan maturity extension request, the notice said, outlining how they propose to either sell or refinance the portfolio in the next year. The proposal means the lenders will get a better return than enforcing the loan now, they said. 

Refinancing or selling secondary assets has become much more difficult in the past six months due to the dramatic rise in interest rates on both sides of the Atlantic. That has made banks more conservative about the assets they will lend against, and buyers demand big discounts on all but the very best assets. 

The portfolio secured by this loan is made up of noncore assets owned by Sponda that Blackstone planned to sell off. The original portfolio comprised 63 assets, but 18 have been sold over the past four years, raising about €280M. That was used to reduce the original €577M loan, provided by Citibank and Morgan Stanley, to €297M. 

The remaining portfolio consists of small, secondary assets around Finnish capital Helsinki that have very high vacancy. A report from loan servicer Mount Street in November last year said the portfolio was 46% vacant, with an average lease length of 2.5 years. 

“There has been polarisation within the European office sector following the shift to hybrid working practices in the aftermath of the pandemic, impairing demand for properties without strong environmental credentials or flexible amenities,” ratings agency Fitch said in a note on the portfolio in December. “The underlying portfolio in this transaction has a weighted average score of 4 [out of 10] in our analysis, reflecting its secondary quality alongside pockets of material obsolescence risk.”

Blackstone bought Sponda primarily using its Blackstone Real Estate Partners Europe V fund, which raised €8B of equity in 2016. The firm said in its annual report that the fund had bought €11.8B of assets and sold €6.6B of what it bought. It has made a 1.7 times multiple on its invested capital and a 42% internal rate of return on the assets it has sold. 

Blackstone has sold other parts of the core Sponda portfolio when business plans have been completed, and it retains much of the original portfolio.