AEW and Natixis IM in Refinancing of Iconic ENI Headquarters

AEW and Natixis Investment Managers Private Debt have invested €28m in a senior debt facility to refinance the headquarters of ENI, the Italian oil company.

The participation in the €159.5m mortgage facility will have a duration of five years.

The mortgage is secured on two iconic buildings in Rome’s Europarco Business Park. The buildings were constructed in 2018 and were valued at €286.1m at the time of the deal.

The building has been constructed to a high standard technical specification and has received LEED Gold certification. Leadership in Energy and Environmental Design (LEED) is a green building certification program used worldwide.

ENI has taken a 12-year lease on the building which means there is potential to refinance it for a further seven years after the five-year mortgage facility expires.

Cyril Hoyaux, managing director of AEW, says the deal made complete sense at a time of great uncertainty in the take-up of office space in Europe. “This deal offers us very predictable cashflows over the next five years and even beyond,” says Hoyaux. “The building is let 100% to a blue-chip tenant which is one of the seven oil supermajors. The Italian government also has a 30.3% stake in ENI, which provides additional security.”

“The 55.7% loan-to-value (LTV) is historically low for a building tenanted by an investment grade-rated company. The margin above 200 bps for a deal with such a quality is relatively high, but is achieved without taking extra risk,“ says Arnaud Heck, Head of Real Estate Finance at Natixis Investment Managers Private Debt. “The robustness of the real estate debt market during the Great Financial Crisis of 2007-2009 offers insight into how real estate debt might perform in the current crisis,” he says.

Real estate debt benefits from strong risk reducers such as lower rate risk, visibility of future cash flows, priority access to rent payments, and a protective equity cushion, Hoyaux notes. “Even if predicted value corrections could strongly impact the equity part of the financing, the loan-to-value should still remain well below 100%“.

In addition, senior debt benefits from priority ranking over other stakeholders. And one of the advantages of illiquid assets is that even in crisis-hit markets values are slow to move.

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