Date: April 2020
Location: 16 states
Financing: $775 million, $200 million PNC hold
Financing type: Syndicated term loan
Scope: 36 office buildings primarily leased to the U.S. General Service Administration
Closing a $775 million syndicated term loan with 25 co-borrowers to recapitalize a portfolio of 36 office buildings across 16 states would be an impressive accomplishment in normal times. PNC Real Estate’s deal with the NGP Group closed in April 2020, just as the coronavirus pandemic was heating up but after stay at home orders were implemented around the world. The transaction included solutions from PNC teams comprising experts in syndications, capital markets, derivatives, valuations and loan administration.
NGP has been a leading real estate investment group for more than 20 years primarily focused on acquiring, owning and managing U.S. government-owned real estate. The portfolio consists of 78 buildings in 26 states representing more than $2.2 billion in value.
A major driver of the recapitalization was NGP’s desire to extend the duration of its financing and lock in favorable interest rates for its extensive portfolio.
Thanks to a 20-year relationship with NGP, PNC Real Estate had the opportunity to put a multi-bank deal in front of them.
As the COVID-19 crisis began to take hold, many of the structural aspects of the deal required substantial changes. Renegotiating with partners, rethinking evaluations and resizing the loan were just a few of the challenges the team faced in order to meet a mid-April closing date.
As Joint Lead Arranger and Administrative Agent, PNC Real Estate worked closely with the participants to keep the transaction on track even as pressure mounted for the deal to be further restructured based on the volatility introduced into the markets by coronavirus.
PNC held the majority of loans in the original portfolio with swaps with different durations in place for each loan. During the refinancing, those swaps had to be unwound. The derivatives team worked closely with NGP to find an appropriate replacement strategy for the portfolio. Along the way, calculations were updated frequently due to market volatility. From day to day, the difference in the rate that NGP could expect to lock in and the cost of unwinding the existing swaps varied significantly.
After months of collaboration, PNC Real Estate delivered the terms and interest rate protections the client needed to move forward with the deal.
In describing the process, David Kent, Managing Partner, NGP, said This transaction was a clear example of the benefits of a strong lender relationship, goodwill and trust built up over the years. PNC Real Estate kept the participants focused on the deal and resolved the tough issues that emerged in an unprecedented situation.