Loans of more than €120m on Irish student housing units
Units connected to US property investment giant Hines have been forced to secure waivers on more than €120m of debt owed to Wells Fargo that was borrowed to acquire student accommodation complexes in Dublin.
The move was a result of the impact of the Covid pandemic on the businesses.
Hines has five student accommodation facilities in the capital, which are managed by its Aparto subsidiary.
They include The Loom, Montrose, Beckett House in Summerhill, Binary Hub and Dorset Point. Aparto also operates student residencies in other countries.
Accounts just filed in Luxembourg for a company behind two of the Irish developments show that the Binary Hub tangible asset value was €72.2m at the end of 2021, while Dorset Point’s was €70.5m.
The company has borrowings against the two units totalling €92.4m from Wells Fargo.
A separate company owned by Hines controls the complex at Summerhill. Its tangible asset value was €56.4m at the end of 2021. It borrowed €34.5m from Wells Fargo.
The Binary Hub, Dorset Street and Summerhill student accommodation units contain a total of more than 1,300 beds.
Hines bought the projects on behalf of a group of German pension funds in late 2016.
An original condition of the loans provided by Wells Fargo to the two companies behind the Binary Hub, Dorset Point and Summerhill properties is that they must ensure that the debt yield up to the end of August this year is 8pc, and thereafter at least 8.5pc.
Debt yield is one of the most important financial and risk measures in commercial and so-called multifamily property developments.
“The most notable impact that the Covid-19 pandemic had on the company has been on the compliance with its financial covenants related to the debt facility granted by Wells Fargo,” note both sets of recently filed accounts for the companies.
“As at December 31, 2021, the company is in breach of the debt yield covenant and has requested a waiver from the lender,” the accounts add.
The firms note that following negotiations, Wells Fargo agreed this year to provide a waiver over the debt yield condition, covering the full academic year from September 1, 2021 to the end of August this year, provided the borrowers meet certain conditions.
“One of the most significant is that a certain level of restricted cash be maintained in lender-controlled accounts with the possibility for the lender to release portions of it to cover current operating obligations.
“For the company, the lender has requested to hold the cash blocked in restricted accounts until new financial covenants conditions are met, with releases being permitted only to fund interest, opex [operating expenditure], property manager’s fees and lifecycle capex [capital expenditure] in accordance with the documented waterfall,” the accounts point out.
Both the firms behind the three accommodation complexes sealed a deal this year for a restated and amended loan facility with Wells Fargo.
This includes a revised covenant which means the debt yield must be at least 5.5pc up to the end of this month, and 8pc thereafter.