US insurer issues third central London loan as competition to finance capital’s assets heats up
Pricoa Mortgage Capital has continued making inroads into the UK lending market with a loan to Hines for the acquisition of 1 Westferry Circus at Canary Wharf in London.
The US insurance group, which opened for lending in Europe last year, has made a seven-year loan of around £50m to the US property company for the £83m acquisition on behalf of Hines Global REIT.
Hines was attracted by the 60% loan to value that Pricoa was prepared to lend on the 203,000 sq ft asset – which is not as dry or super-prime as other office buildings fought over by lenders in central London in recent months – and by Pricoa’s flexibility.
Some 75% of the income, secured on lettings to energy company Valero and accountant Littlejohn, expires in six-years and Hines wanted a lender prepared to finance out beyond the expiry.
Pricoa is also thought to have offered an attractive margin in the 230-250 basis points range over the seven-year swap.
Competition to finance London assets and experienced borrowers is increasing, as liquidity for these kinds of deals continues to improve and new lenders enter the market. However, although margins have fallen this year by at least 50 bps, they are not as tight outside the City and West End core.
Ian Brown, Hines’ UK finance director, said: “We were pleasantly surprised by the level of interest in the financing. There are more new parties to go to now. Pricoa was prepared to be flexible on covenants and most importantly to structure around the lease breaks and give us a seven-year loan”.
The transaction involved early pre-payment penalties, he said, “but we don’t think we are likely to exit terribly early”.
Drew Abernethy, Pricoa’s head of European originations, said Westferry Circus was the sixth central London office property that the US mortgage lender has funded. The other five were security for two previous loans, to O&H Properties.
Pricoa is also the frontrunner to refinance Plantation Place in the City, alongside another US insurance lender new to Europe, Pacific Life.