The £219m GBP-equivalent dual currency transaction which has now closed, represents a significant milestone for the commercial real estate market in Europe.
The CRE CLO is backed by a portfolio of nine commercial mortgage loans originated by Starz Mortgage Capital and Starz ICAV (for and on behalf of Starz European Loan Fund I), and is secured by 17 properties in the UK and Europe – 84.8% are GBP-denominated across eight regions throughout the UK, 15.2% are EUR-denominated, across Spain (5.8%), Ireland (4.8%), and the Netherlands (4.6%).
S&P Global Ratings Europe Limited, a division of S&P Global Inc. (S&P) and Kroll Bond Rating Agency UK Limited (KBRA) have assigned ratings to ten classes of Starz Mortgage Securities 2021-1 DAC, a static CRE CLO transaction.
The Reed Smith team was led by structured finance partner Iain Balkwill and senior associate Josh Hughes, supported by a large cross-practice team from across the firm including Trish O'Donnell who provided U.S. securities and risk retention advice. In addition, partner Kamal Arulvel played an integral role in connection with the structure having advised on the existing warehouse lines that were refinanced as part of the securitisation and performed the role as lead counsel on the origination of some of the loans.
Balkwill said: “We are pleased to have advised Starz on this strategic and significant transaction that will further enhance their position as a leading commercial real estate lender in Europe.”
“It was always a matter of time until we would start seeing CRE CLOs in Europe. Starz have truly taken up the mantel by unlocking this market and if the United States is anything to go by, then there is absolutely no reason why we will not witness a wave of CRE CLO’s in the upcoming years. The closing of this deal against a backdrop of booming CMBS market activity, demonstrates that securitisation technology has an integral role in financing European commercial real estate.”
Reed Smith advised Starz as sellers, operating advisor, advancing agent, special servicer and retention holders as to English Law and U.S. Law.
David Arzi, CEO- “This represents a true milestone for Starz, and the culmination of a number of years work with Reed Smith in building out our European lending platform. We are just delighted to have closed this transaction, and look forward to continuing to build on what we have achieved to date as the market grows and develops.”
The UK loans are backed by residential properties including an indoor market in London, three hotels in Stoke, Elstree and Bolton, and an office park in Motherwell. The European loans comprise a loan backed shopping centre in Alcalá de Henares in Spain, an apartment complex in Dublin, and an industrial warehouse in Lisse, the Netherlands.
Other parties involved in the transaction include another team at Reed Smith (led by Angelina Soon) providing legal advice to Situs Asset Management as servicer, U.S. Bank Trustees as trustee, Allen and Overy providing English Law advice to the Trustee, Cadwalader to the arranger and placement agent, and Arthur Cox providing Irish Law advice to the issuer and acting as Irish listing agent.
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