HATFIELD PHILIPS INTERNATIONAL WINDERMERE X CMBS LIMITED - Investor Call. 22 January 2015

Transcription

1 HATFIELD PHILIPS INTERNATIONAL WINDERMERE X CMBS LIMITED - Investor Call 22 January 2015 Hatfield Philips International 25 Canada Square 34 th Floor London E14 5LB

2 Disclaimer This report has been compiled by Hatfield Philips International Limited ("Hatfield Philips") in its capacity as Special Servicer of the loans which are discussed in this report. Hatfield Philips makes no representation as to the reliability of the information provided to it by third parties in order to compile this report. Information in this presentation should not be considered as advice or a recommendation to investors or potential investors in relation to holding, purchasing or selling securities or other financial products or instruments. This presentation may contain forward looking statements. While due care has been used in the preparation of forecast information, actual results may vary in a materially positive or negative manner. Forecasts and hypothetical examples are subject to uncertainty and contingencies outside Hatfield Philips s control. Neither the whole nor any part of this report may be reproduced in any published document, circular or statement, nor is it to be relied upon by any party, without the prior written permission of Hatfield Philips. Hatfield Philips disclaims any duty, responsibility or liability of any nature whatsoever to any party in respect of this report other than to its contractual partners. 1

3 WINDERMERE X CMBS LIMITED DEAL SUMMARY Asset Profile Current Balance ( ) Whole Loan (Borrower No. Transfer Loan balance) A-Note B-Note(s) Properties Location Type Maturity Loan Date Workout Bridge 370,524,657* 328,418,429 30,000,000 6 Germany Jan-2014 In Special Jan-2014 Enforcement Lightning Dutch 13,792,500 13,792,500 N/A 1 Netherlands Retail Aug-13 In Special Oct-12 Disposal Built 3,961,369 3,961,369 N/A 2 Germany Retail Sep-2011 In Special Nov-2011 Consensual Sale Sub-total 388,278, ,172,298 9 IFP and Pavia (Fortezza) 58,130,461 58,130,461 N/A 5 Italy Apr-15 Primary N/A N/A Enel Tower (Fortezza) 39,935,576 39,935,576 N/A 1 Italy Apr-15 Primary N/A N/A Tour Esplanade 257,000, ,000,000 N/A 1 France Oct-2016 Primary N/A N/A Sub-total 355,066, ,066,037 N/A 7 Total 743,344, ,238,335 30,000, * The difference between Borrower and Lender balances is due to the discrepancy in respective interest rates (fixed vs floating) and to the hyper-amortisation of the A-Note following the Default Value Valuation Current Current Current Loan ( ) Date Senior LTV Occupancy Bridge 325,000,000 Sept % 98.4% 4.47 Lightning Dutch 17,290,000 Aug % 84.7% 2.77 Built 3,480,000 Jun % 100% 7.54 Sub-total 345,770,000 IFP and Pavia (Fortezza) 47,120,000 Jun % 7.18 Enel Tower (Fortezza) 32,700,000 Jun % 3.26 Tour Esplanade 313,900,000 Jun % 100% Sub-total 393,720,000 Total 739,490,000 2

4 BRIDGE LOAN Loan Workout History Performance/Credit Events UPB at Origination EUR 372,090,000 Current UPB EUR 370,524,657 Initial Whole Loan LTV 75.0% Current Whole Loan LTV % Special Servicing Transfer Date 15/01/2014 Estimated Final Resolution Date Q2 IPD 2017 Asset Stats Lettable area 191,561 sqm No. of assets 6 Asset type Valuation/Date EUR 325,000,000-01/09/2013 Location Germany NRI EUR 27,760,765 ERV EUR 25,700,000 Vacancy 1.63% 4.47 years Transferred to Special Servicing on 15 January 2014 due to maturity default Enforced and appropriated shares on 24 January 2014: Fast, efficient, cost-effective Control Cash, stop any leakage to sponsor Default waterfall means no payments to B-lender Senior loan hyper amortises In April 2014, after a competitive process, Valad was appointed as new Asset Manager for the portfolio The transition phase has not caused any disruptions to the day-to-day operation of the 6 assets The loan has a healthy cash flow. Interest is expected to be paid regularly and soft amortisation is expected to be paid based after Opex and Capex requirements Since transfer to Special Servicing, the Senior Loan has been hyper-amortised by circa EUR 17.3m; this includes the expected repayment at the January 2015 Note Payment Date During 2014, Valad conducted several AM initiatives to stabilise the income and reposition some of the assets, the main highlights are: Berlin: 15 new leases and 2 lease renewal for c. EUR 700k of GRI Occupancy level remained stable at circa 97% Düsseldorf: 3 new leases and 1 lease renewal for c. EUR 790k of GRI increased from 3.82 years in Q to 5.66 years in Q Occupancy increased from to 85.8% to 90.8% Eschborn: Runner-up for Bilfinger s new HQ AM s gather a significant amount of knowledge on the property that can be deployed for new enquiries Wiesbaden: Main tenant will vacate to a new bespoke HQ, but negotiations continues with the current subtenant HPI and Controlling Class Note Holders are discussing the exit strategy for the Loan HPI, Borrowers and Valad are also exploring the option for a portfolio sale as this may be more favourable in the current market environment Should a portfolio sale not be pursued, HPI, Borrowers and Valad have conducted a pitch process and have selected a preferred agent for two of the properties (Frankfurt and Sulzbach) Asset management activities continue in order to maintain/enhance the value of the properties 3

5 Alt Moabit, Berlin Construction Year ,074 sqm Site area 21,750 sqm Multi-let Annualized GRI 5,961,410 Vacancy 3.39% 2.46 years 76,100,000 / 1,583 psm The property has approximately 100 tenants and it is let on short/medium-term leases Approx. 28% of current GRI expiring in 2015 and 27% in 2016 are intended to be re-geared as early as possible The Business Plan is to maintain the income profile and the current level of occupancy 4

6 Kaiserswerther Strasse, Düsseldorf Construction Year ,953 sqm Site area 5,545 sqm Multi-let Annualized GRI 2,154,198 Vacancy 10.90% 3.69 years 27,700,000 / 2,317 psm The property has approximately 25 tenants and it is let on short/medium-term leases Approx. 20% of the rental income is due to expire in 2015 and 2016 and the AM in already discussing lease extensions with the tenants The Business Plan is to continue improving the current income profile and the level of occupancy 5

7 Galluspark, Frankfurt Construction Year ,281 sqm Site area 18,211 sqm Single-let* Annualized GRI 5,102,081 Vacancy 0.16% years 78,000,000 / 1,761 psm The current lease agreement was extended in early 2011 The property is fully let to a single tenant (Deutsche Bahn), LT rated AA/Aa1/AA (S&P/Moody s/fitch) The Business Plan is to dispose of the asset as-is *1,300 sqm of canteen and retail space separately let 6

8 Am Unisys-Park, Sulzbach Construction Year 1972 / ,282 sqm Site area 12,590 sqm Single-let Annualized GRI 1,654,531 Vacancy 0.71% 8.25 years 19,600,000 / 1,134 psm The current lease agreement was extended in the second half of 2012 The property is fully let to a single tenant (Clariant), LT rated BBB-/Ba1 (S&P/Moody s) The Business Plan is to dispose of the asset as-is 7

9 Abraham Lincoln Park, Wiesbaden Construction Year ,740 sqm Site area 16,748 sqm Single-let Annualized GRI 5,648,218 Vacancy 0.00% 2.50 years 49,500,000 / 1,664 psm Main tenant will vacate to a new bespoke HQ Negotiations are ongoing with the current subtenant The AM is currently conducting a broker pitch to select the lead broker to market the asset for letting 8

10 Alfred-Herrhausen-Allee, Eschborn Construction Year ,223 sqm Site area 11,775 sqm Single-let Annualized GRI 7,240,326 Vacancy 0.00% 3.00 years 74,100,000 / 1,842 psm The sole tenant (Vodafone) will vacate the property The current letting market in Eschborn is challenging The property was runner-up for Bilfinger s new HQ The Special Servicer and the AM s team spent approx. 500 hours pursuing this deal, the majority of knowledge gained during the process can be redeployed for further lettings The AM is working to determine the precise requirements of potential occupiers and it is currently seeking new enquiries 9

11 BUILT LOAN Loan Workout History Performance/Credit Events UPB at Origination EUR 9,250,000 Current UPB EUR 3,961,369 Initial Whole Loan LTV 86.6% Current Whole Loan LTV 113.8% Special Servicing Transfer Date 02/11/2011 Estimated Final Resolution Date Q1 IPD 2015 Asset Stats Lettable area 2,649 sqm No. of assets 2 Asset type Retail Valuation/Date EUR 3,480,000-14/06/2013 Location Germany NRI EUR 324,360 ERV EUR 302,832 Vacancy 0.0% 7.5 years The loan transferred to Special Servicing on 02 November 2011 due to maturity payment default. Borrower-led sale of the 5 assets was initiated under supervision of the Special Servicer. Two assets were sold in May 2012 and one in January The Special Servicer successfully effected a change in marketing agents in March 2014, which led to the prolongation of the anchor tenant lease in the Hildesheim property as well as the recommencement of a full marketing process. At the end of 2014 a buyer for both assets was identified, but the offer was withdrawn on the day before notarization. The broker was able to identify further potential investors. Currently, two are conducting due diligence process and final bids are expected on January 28 th. If the offered prices are in line with the Special Servicer's expectations a SPA for both properties is likely to be notarised in the next few weeks. Replacement of the broker and taking control over the marketing process Instructed and supervised broker to contact all tenants and to prolong their lease agreements. Lease with the tenant in Hildesheim extended with being more than 9 years. Coordination of involved parties (property management, broker, corporate service provider, tax advisor and legal advisor) inspections completed on a regular basis Close monitoring of the marketing process HPI, Borrower and Controlling Class agreed upon the exit strategy for the remaining two assets A Borrower-led sale is in place, and the broker is endeavouring to finalise the sale process soon 11

12 FORTEZZA LOAN PORTFOLIO Loan Performance/Credit Events UPB at Origination EUR 103,539,015 Current UPB EUR 98,066,037 Initial Whole Loan LTV 68.7% Current Whole Loan LTV 123.9% Special Servicing Transfer Date Asset Stats Lettable area 53,861 sqm No. of assets 6 Asset type Valuation/Date EUR 79,820,000-28/06/2014 Location Italy NRI EUR 9,429,905 ERV EUR 7,142,153 Vacancy 1.93% N/A (in Primary) Estimated Final Resolution Date Q4 IPD years It is highly probable that the IFB and Pavia debt milestones will not be met. The servicer will, therefore, have the option to initiate a voluntary liquidation, which has downsides (as highlighted in the following slide). At this stage the servicer is more inclined towards a maturity extension till January 2016 for the following reasons: 1) Negotiations at Enel Tower are ongoing with the aim of removing the break option set for December This lease re-gear is key for a full recovery as it will considerably increase the capital value; 2) The properties have recently been in the market and a further marketing campaign now could have a negative impact; 3) The loans are fast amortising due to full cash sweep, and 9 extra months could reduce the balance by a further EUR 5m; 4) The Fund demonstrated solid commitment, being transparent during the marketing process and focusing on tenant negotiations for possible lease re-gear. The loans went under a restructuring in Q and the loans maturity date was extended from 12 January 2014 to 15 April 2015 with a further option to extend to 15 January 2016 assuming debt payment milestones were met. The risk associated with the extension was mitigated by the servicer through: PoA from Fortress (the sponsor) as Unit Holder to HPI, and mechanism to cause a voluntary liquidation in the event milestones are breached: Fund s articles have been amended such that units held by the sponsor are sufficient for required voting majority; PoA remains in effect even if the sponsor transfers Units to third party; Additional collateral: covenant for fund manager to credit all income/proceeds from unencumbered asset into pledged rent accounts. The funds would then be applied to pay Windermere XIV and Windermere X lenders pro-rata based on loan balance (circa 70%/30% split). A new property valuation is being tendered and will be available during February Debt reduction milestones 15 April 2015: EUR 40m for Enel Tower and EUR 25m for IFB and Pavia; Enel Tower milestone has already been met - loan balance is currently below EUR40m; IFB and Pavia milestone is not expected to be met. Full cash sweep: since January 2014 the loan balance has been reduced by EUR 5.4m (Enel Tower EUR 1.5m; IFB and Pavia EUR 3.9m). Marketing activity: An agent was appointed in April 2014 and the properties were put on the market for either a single asset sale or portfolio sale. The agent approached over 60 selected investors and NDAs were signed with 15 parties. Despite the investors initial interest, only one offer was received for a portfolio sale in October The portfolio offer was for 9 properties including Enel Tower, 3 properties from IFB and Pavia and 5 properties from the Fintecna loan in Windermere XIV. The offer was rejected by the Fund as some properties had a low allocated price versus the fund manager s expectation. However, for the IFB and Pavia properties, the offer was satisfactory and the agent is in negotiations with the investor for a potential three asset deal. In the event that the deal is not concluded, the Fund intends to re-market the properties around June

13 FORTEZZA LOAN PORTFOLIO Voluntary liquidation issues Failure to meet the 15 April 2015 debt milestone would cause an event of default at borrower level. Non-extension or acceleration would result in the Fund becoming illiquid, probably resulting in insolvency proceedings. Considerations: the Lender will not be in control of an insolvency procedure over the Fund; the court determines strategy the liquidation of real estate funds (compulsory wind-up) has never been tested in Italy before, so the outcome is highly uncertain; timing and cost are also uncertain (for normal bankruptcy 4-7 years depending on court location and in-court costs of around 10% of the proceeds. A voluntary liquidation as per Power of Attorney granted to the Lender by the Sponsor, in conjunction with an extension, has the following downsides: to avoid default, the debt repayment milestone would have to be waived. A waiver in this regard may result in the PoA becoming invalid it is uncertain if the voluntary liquidation, further to the use of the PoA, would itself constitute an event of default which could lead to insolvency. 13

14 Napoli, via Porzio Construction Year Early 1990s 20,675 sqm Multi-let Annualized GRI 4,659,690 Vacancy 0.00% 3.25 years 32,700,000 / 1,582 psm The office space is let to ENEL (accounting for 96.7% of the GRI), LT rated BBB/Baa2/BBB+ (S&P/Moody s/fitch) Wind, the third mobile operator in Italy, has a lease in place for the antenna; LT rated BB-/B2/B+ The borrower is currently in negotiation with ENEL and WIND for a possible re-gear. The Business Plan for this property is to re-gear the lease and then sell in Q

15 Sesto S.G., Viale Italia Construction Year ,852 sqm Multi-let Annualized GRI 1,974,820 Vacancy 0.00% years 21,300,000 / 2,162 psm During July 2014 the Borrower was able to re-gear one office lease shifting the break date and lease expiry by 6 years to 31/12/2023 and 31/12/2029 respectively. The annual rent was reduced by 387k. The borrower is also in advanced discussion to re-gear the aerial lease contract. A sale agent is appointed 15

16 Milano, Via Bertolaia Construction Year Late 1980s 3,131 sqm Canteen Single let Annualized GRI 217,651 Vacancy 15.78% 1.25 years 2,170,000 / 693 psm During July 2014 as part of a three lease package re-gear agreed with ENEL (which included the property in Lecco and Sesto S.Giovanni) the Borrower agreed the following terms for the canteen lease. The lease expiry was reduced by 6 years to 31/12/2017 and the lease break was reduced by 2 years to 31/12/2015. Annual rent was reduced by 217k. This was a compromise to allow a lease extension in the other two properties. The asset cannot be sold with the current tenant due the short, micro-location and asset specs The Business Plan for this property is to find a new tenant on a 6 years lease and then sell in Q

17 Lecco, C.so Martiri della Liberazione Construction Year Early 1960s 6,146 sqm Multi-let Annualized GRI 597,872 Vacancy 8.87% 8.33 years 5,000,000 / 471 psm During July 2014 the Borrower was able to re-gear one office lease shifting the break date and lease expiry by 6 years to 31/12/2023 and 31/12/2029 respectively. The annual rent was reduced by 387k. The borrower is also in advanced discussion to re-gear the aerial lease contract. A sale agent is appointed 17

18 Grosseto, Via Bonghi Construction Year Early 1950s 3,443 sqm Multi-let Annualized GRI 329,872 Vacancy 0.00% 3.87 years 3,250,000 / 944 psm The two leases were recently renewed (to July 2018 and December 2018 respectively) and the CapEx refurbishment plan has been completed The Business Plan for this property is to dispose of the asset as soon as possible A sale agent is appointed 18

19 Pavia, Viale Indipendenza Construction Year ,615 sqm Single let Annualized GRI 1,650,000 Vacancy 0.00% 4.67 years 15,400,000 / 1,451 psm The lease with the sole tenant was extended for 6 years despite the tenant initially sending a notice to vacate CapEx refurbishment plan has been recently completed The Business Plan for this property is to dispose of the asset as soon as possible A sale agent is appointed 19

20 Rome, Via Raffaele Costi Unencumbered Construction Year Early 1990s 10,530 sqm Vacant Annualized GRI N/A Vacancy 100% N/A BOV range 2m / 4m* The property has been vacant since 2009 HPI visited the property and discussed future possibilities with local brokers Significant CapEx would be spent prior to letting The Business Plan for this property is to lease the property and then sell * 30% of the proceeds will be payable to Windermere X 20

21 TOUR ESPLANADE LOAN Loan UPB at Origination EUR 257,000,000 Current UPB EUR 257,000,000 Initial Whole Loan LTV 67.5% Current Whole Loan LTV 81.9% Special Servicing Transfer Date N/A (in Primary) Estimated Final Resolution Date Q3 IPD 2016 Asset Stats Lettable area 53,850 sq m No. of assets 1 Asset type Valuation/Date EUR 313,900,000-30/06/2011 Location France NRI EUR 25.68m ERV EUR 25.4m Vacancy 0% years Performance/Credit Events The shareholding of the Tour Esplanade Borrower (the Borrower ) was restructured in 2014 to enhance tax efficiency without affecting the Lender s security: The Borrower was transformed from a société par actions simplifiée into a société civile immobilière, a non-listed, tax-transparent real estate investment company. The Servicer, together with its advisors, extensively reviewed and consented to the Borrower restructuring. Further to the vacation of the single tenant SFR in December 2012, the Borrower was able to secure a new strong governmental tenant (Ministry of Energy and Ecology). A CapEx programme was put in place which has been carried out by the Borrower, funded by shareholder equity. A new CapEx reserve account has been set up, pledged to the Issuer with a balance not lower than 3m. The lease contract with the ministry started in July 2014 and expires in December This is a 13.5 years lease term without break. The annual rent is EUR 25.68m. As part of the incentive to the tenant, a rent-free period of 18 months was granted until December The Borrower is currently meeting its debt service obligation through recourse to equity. The CapEx program was completed at the end of 2014 and the tenant moved into the property in 2 phases as work was completed; 60% of the building was handed to the tenant in July/August 2014 and the remaining 40% in December The Servicer inspected the property in October The property appeared fully restored and offices were occupied by employees in all floors. The lower floor level related to the canteen had still working ongoing that have now been completed with the canteen fully operational. CapEx were also carried out on the two level parking which also appeared in optimal condition during the visit. The loan is performing and all debt service has been paid on time. The maturity date is set for October 2016 and the Servicer will enter into discussions with the Borrower in the second half of 2015 to assess its exit strategy. Reasons that the Borrower will be able to repay the loan at maturity include: 1) the property has gone through an extensive CapEx program, 2) the property is located in a prime area of Paris - the financial district La Défense ; 3) a new lease has been recently signed with a strong governmental tenant and the unexpired lease length is 12.9 years. 21