Average interest Rate for Commercial Real Estate LoanWeighted average interest rate for commercial real estate loans
Brookfield's large USD 3.5 billion USD two-way TLA share, which is typically offered to the banking sector rather than institutions, is part of a larger transaction in which Brookfield will acquire the 66% of the Real Estate Investment Trust (REIT) GGP it does not yet own. Hybride capital investments grade/utilized loan comprises the proportionate portion aimed at maximizing bank solvency.
USD 2 billion long-term loan B (TLB) is anticipated to draw large numbers of institutions - especially CLOs - interested in higher-rated securities, despite some concern about the retailing environment. GGP was assessed by S&P as GGPBB- with the proviso that GGP would be a "highly strategical subsidiary" of Brookfield, which would be assessed as GBB by the rating authority.
Moody's Investors Service evaluated the issue price of Brookfield's Bonds on the basis of its assistance to Brookfield. GGP's large investment fund also shows its wish to reduce debts and debts, one of the investors said. As a rule, indebtedness to the TABS is less expensive than TLB securities, but is shorter-term and has a quicker repayment plan with more restricted conditions.
The TLB will be priced in the 225-250bp region, which also exceeds the average BB-TLB spread of 215 bp. This proportional share comprises an A-1 loan of USD 1.5 billion, an A-2 loan of USD 2 billion and a USD 1.5 billion syndicated line of revolving loans. Bankers refused to speak. Moody's predicts net indebtedness of up to 10x after the deal, but anticipates GGP to cut its indebtedness through net proceeds from assets disposals and surplus liquidity, but remains reluctant to invest in the retailing and real estate sector.
Apart from the concern, there has been apparently unsatiable appetite for variable rate bonds, especially those with higher credit scores, as investor protection against interest rate hikes is sought. Credit resources have flowed in for nine successive week. TLA pulp consumption is strong as 2018 has seen a 40% decline in supplies. To date, borrowers have taken out only USD 29 billion of pro-rata lending this year, compared with USD 48 billion last year.
Just four US$1 billion or more worth of total revenue recognition agreements were signed this year, among them a US$1.5 billion TLA from Global Payments Inc. As TLA takes up so much of the debts block, the widely diversified TLB will be available in less time, which should facilitate the sale, a second shareholder said.
The Brookfield Property Partners Group is one of the world's leading commercial property groups and was established in 2013 through a spin-off from Bookfield Asset Managements. Included in the company's product range are the fashion show in Las Vegas and the Water Tower Place in Chicago. Brookfield has not answered any questions about any comments.