Wells Fargo has provided a £120m five-year investment loan to King’s Cross Central Limited Partnership on the developer’s One and Two Pancras Square office buildings.
The facility converts a £72m, five-year development loan originally made in 2012 by Eurohypo, before it was taken over by Wells Fargo. The first loan was a rare example at the time of speculative development finance, with an initial margin of 450bps and around 50% loan-to-cost.
The investment facility is a conversion of the speculative development loan, with the outstanding total topped up to £120m and provided at a lower interest rate reflecting the decreased risk involved.
Both Grade A office buildings are now fully let, with tenants such as Louis Vuitton, The Office Group, Performing Rights Society for Music and train manufacturer Bombardier taking space.
“The original development deal wasn’t really sized to be a regular investment transaction, it was sized to be enough to get [King’s Cross Central] through development and letting and to give them a holding period thereafter,” said Michael Acratopulo, managing director and deputy head of commercial real estate UK at Wells Fargo.
“So, there was always going to be another discussion if they decided to keep the asset, about what the right level of debt would be at that point in time.”
The scheme’s success at securing tenants and generating rents reported to be as high as £80 per sq ft had brought the opportunity to convert the loan forward.
“What has happened at King’s Cross is it’s been more successful than the business plan accounted for. That’s measured in terms of rents they’re achieving, the speed at which they let up and the speed at which they’ve sold residential units,” said Acratopulo.
Wells Fargo’s investment facility comes as Barclays’ provides a new £215m development loan to King’s Cross Central to develop further retail, leisure, residential and office space at its 67-acre site.
Much of the new development will be retail and leisure and will include a Waitrose supermarket, Guardian Media Group’s ‘Living Newspaper’, plus a number of restaurants.
The two recent loans are another score for King’s Cross Central, which also won backing from Royal Bank of Scotland in February. RBS supplied £100m for the development of Three and Four Pancras Square office buildings.