Oxford Properties and Brockton Capital have sealed their joint venture to speculatively develop The Post Building in central London and closed the financing with BNP Paribas and pbb Deutsche Pfandbriefbank.
The two banks will provide the joint venture with £230 million of debt for the 320,000 sq ft office redevelopment which is close to the new Crossrail station at Tottenham Court Road in London’s West End.
The finance, which is believed to be priced with a margin in the mid-200 basis points, represents a loan-to-cost of approximately 60 percent.
The Post Building will be predominantly offices plus street level retail and restaurants, affordable housing and a rooftop garden and will be completed in Q1 2018. David Marks, co-managing partner at UK private equity firm Brockton, said the JV believes “both local and international occupiers will be equally excited to call it home, from 2018.”
Oxford Properties, the real estate arm of Canada’s Ontario Municipal Employees Retirement System, has been one of a handful of large investors prepared to develop offices speculatively this cycle.
The company joined forces with fellow Canadians, Brookfield, to develop London Wall Place, and with UK REIT British Land to build The Leadenhall tower, both in the City. In the capital’s West End Oxford teamed up with the Crown Estate to develop St James Market. None of these projects were pre-let but all are now substantially leased.
At INREV’s annual Investment Intentions survey in London last night, it was observed by Noel Manns of Europa Capital, and others, that Canadian pension funds have been one of the few sources of development finance in the UK in the last few years.
Rob Wilkinson, CEO of AEW Europe who took part in a panel discussion, said: “It is a fair comment because investors are generally quite risk averse overall… But I think (funding) will come from the larger and braver investors and I think maybe it will come this year.”
Russell Chaplin, chief investment officer for property at Aberdeen Asset Management, said: “Canadians like to ‘build to core’ – it’s a concept they are familiar with.” Hermes’ Ben Sanderson agreed with Wilkinson that 2016 “could be the year development accelerates.”
Deutsche Pfandbriefbank has also been a selective supporter of development this cycle, in the UK and its home market in Germany. In London in 2011 it was one of the first banks to back a speculative office scheme post crisis, financing Orion and Quadrant Estates’s heavy refurbishment of the then empty Carmelite building.
BNP Paribas has been an active lender on central London offices over the last two years. Head of UK real estate finance Romain Simon said: “The Post Building is a landmark project..This transaction extends our relationship and demonstrates our commitment to continuing to serve our financial sponsor client base.”