Blackstone’s decision late last year to seek a refinancing, rather than pursue a sale, of the 23-acre St Katharine Docks marina in London has led to a major financing opportunity for two firms keen to build property loan portfolios in the UK market.
German insurer Allianz Real Estate and Canadian property giant Brookfield have joined forces to provide debt capital for five years to Blackstone, secured on the estate, which contains more than 500,000 square feet of commercial space including bars and restaurants, and is let to around 80 tenants.
The size of the deal has not been divulged, although Real Estate Capital understands it is around £300 million (€334 million) of debt. The floating-rate deal, brokered by advisory firm HFF, sees Allianz provide a senior loan, as well as a capex facility to back Blackstone’s continued asset management of the estate, specifically the redevelopment of the 90,000 square feet Devon House.
Brookfield’s contribution is a mezzanine loan of unconfirmed size, provided through its Brookfield Real Estate Finance Fund V.
The financing is the latest chapter in the story of central London’s only marina, which dates to 1827. Blackstone inherited it through its 2014 £448 million acquisition of its previous owner – entrepreneur Nick Leslau’s Max Property. The firm had been launched in 2009 to take advantage of property market conditions, although Leslau insisted at the time the sale did not represent him calling the top of the market.
Blackstone’s subsequent investment in the marina, which had already been established as a leisure venue, saw it refurbish property and bring in new tenants including shared office giant WeWork. It was widely reported last May that Blackstone had hired advisors for a £435 million sale of the improved estate, although CoStar News reported last October the sale had been dropped when bids fell short of the asking price.
For Allianz and Brookfield, Blackstone’s need for fresh financing, to replace existing debt provided by Morgan Stanley, has provided the opportunity to deploy large-scale debt capital against a scheme undergoing continued asset management in a market both firms are aiming to build debt exposure to.
While Allianz remains an investor in prime property across its debt and equity strategies, it is aiming to add an element of value-add to its lending book to increase pricing. So far, the UK has provided those opportunities. In April, the firm lent £50 million as part of the £100 million development financing for 80 Fenchurch Street, a prime office property in the City of London.
“St Katharine Docks ticked several boxes for us,” Allianz Real Estate head of debt Roland Fuchs told Real Estate Capital. “It allows us to pursue our strategy of lending in the UK, it fits with our enhanced value-add strategy and it is sponsored by a prime borrower in Blackstone.”
Brookfield, meanwhile, made the decision late last year to allocate a chunk of its latest debt fund to Europe, having previously only lent to the real estate market in its native North America. Brookfield is lending in the UK through its fifth real estate debt fund, which closed on $3 billion last November.
The asset manager, with $38 billion of assets under management in Europe, could deploy its total $600 million allocation in the UK “if the opportunity presents itself”, Brookfield managing partner Andrea Balkan told Real Estate Capital last December.
The St Katharine Docks deal also represents the first joint-financing deal between Allianz and Brookfield.
“Blackstone is one of the most important relationships on the equity side of our business, but this is the first time we have done a debt deal with them,” added Fuchs.