Intermediate Capital Group’s real estate arm, ICG Real Estate, has written a £177 million (€197 million) loan to Slovakian developer JTRE for the construction of a mixed-use scheme on the South Bank of London’s River Thames .
The facility will fund the Triptych Bankside development, a scheme with a projected gross development value of £400 million comprising two residential towers, a low-rise office building, retail and ‘cultural facilities’. The 266,000-square-foot complex is due to be completed by 2022. As part of the project, JTRE is also developing a new ‘elderly care almshouse’ on Southwark Park Road which, according to the developer, will contribute to the wider local community.
“Securing the loan, especially at a time like this, is a huge vote of confidence in JTRE,” Pavel Pelikan, executive director of JTRE, said in a statement announcing the deal.
The deal demonstrates that, although the covid-19 pandemic has led to a reduction in the availability of development finance in the UK market as many lenders focus on their existing loan books, some lenders are willing to write new loans against construction projects.
Kevin Cooper, co-head of ICG Real Estate, told Real Estate Capital that the company had assessed the impact of covid-19 on delivery. “Our underwriting always provides for the capacity for sales velocities to extend and for prices to fall due to cyclical downturns. Today, this underwriting has a higher bar due to the increased uncertainty around the covid-driven economic outcome,” he said.
London-based ICG provided the loan jointly through its residential for-sale-focused development debt strategy and its commercial real estate-focused partnership capital strategy.
According to a CBRE report, published on 22 April, development finance availability in the UK has contracted since the coronavirus outbreak, with fewer lenders open to new opportunities and most focusing on their existing loan books.
Cooper agreed that development finance in the London market is currently scarcer and more expensive. “We have noticed a material reduction in liquidity in the large loans space as some lenders pause due to triage requirements on their portfolios.” However, he noted that activity in the market had not stopped, but pricing had increased. “The bar for new business is higher, and pricing has increased, but the market has not stopped.”
He argued that the quality of the scheme, the development experience and the strong capitalisation of JTR convinced ICG to write the Triptych loan. “The scheme is well-designed with excellent amenities. The buildings are efficient and being delivered to a high environmental standard,” he added.
The South Bank area of London is well-established as a culturally rich location, featuring a variety of property types due to significant investment over the past decade, Cooper said. According to him, the mixed uses within the scheme reflect its immediate environment. “Strong occupier demand has been evidenced in the recent past and there is limited short-term supply coming forward. As a residential location, the area has flourished over the years with high purchaser demand on recently-developed schemes nearby.”