Lehman Launches Giant U.K. CMBS Conduit

Lehman Brothersis marketing Windermere VIII, the largest U.K. commercial mortgage-backed securities conduit transaction to date. The £1.038 billion ($1.98 billion), the deal is backed by eight loans on 52 properties in England, Scotland and Wales, with significant exposure to the office market in the City of London.

Tarig El-Sheikh, a structurer in Lehman's global real estate finance group, said the quality of the underlying collateral sets Windermere VIII apart from other similar U.K. CMBS deals and from previous issues from the program. The firm wants to improve liquidity in the sector and larger issuances with high-quality collateral is one way of achieving this. "An issuance of this size, similar to those in the U.S., aids in promoting liquidity in the secondary trading markets," he said.

This transaction adheres to previous Windermere deals in terms of structure, and includes some assets which have been securitized in previous transactions. Indeed, Triton Court was included in Windermere IV, and Mid City Place was seen in Windermere VI, El-Sheikh said.

Although 88% of rents are from the office sector, El-Sheikh said the Central London properties are well positioned to take advantage of improvements in the City of London letting market over the next two to three years. "The assets benefit from prime locations in respective market places as competition for best units emerges," he said.

Lehman originated the loans and is arranging the deal. One of the loans--CityPoint--is jointly originated withGoldman Sachs.