AXA Real Estate JV forward funds BNPP pre-let King’s Cross development with £300m

AXA Real Estate Investment Managers has confirmed it is forwarding funding the development and eventual purchase of a 398,000 sq ft office development in King’s Cross from developer BNP Paribas Real Estate for around £300m.

The purchase of the 11-storey King’s Cross building is also circa 55% pre-let to BNP Paribas’ as their UK headquarters on a 15-year lease, ensuring the financial viability of the scheme for AXA Real Estate which is acquiring the office property in a 50:50 joint venture partnership with an as-yet-unnamed large third party international client.

BNP Paribas Real Estate will be letting agents on the remaining space, and will be marketed by its central London leasing team by the end of the year.

Forward funding has become increasing prevalent in real estate, driven by the virtual absence of development finance from traditional bank lenders and lack of offering from new insurance and senior debt lenders.

AXA Real Estate’s deal with BNPP RE is one of the largest forward funding deals since the global financial crisis.

The King’s Cross scheme forms part of Argents’ 67-acre King’s Cross Central redevelopment which expects to deliver eight million sq ft of mixed-use space into the central London district and is the largest regeneration project in Europe, undertaken.

Around two weeks ago, Eurohypo – which on Friday changed its name to Hypothekenbank Frankfurt AG – closed a circa £72m speculative development loan for two development properties over 190,000 sq ft at the King’s Cross Central scheme, a joint venture between Argent, London & Continental Railways and DHL.

The loan marks Hypothekenbank Frankfurt last ever new property loan, as parent company Commerzbank seeks an orderly wind-down of its €56bn European real estate loan book and a permanent exit from the sector.

The King’s Cross scheme also offers circa 13,000 sq ft of retail and café space as well as storage facilities and accommodation for a fitness centre.

Construction of the building, which will achieve a BREAAM Excellent sustainability rating, is expected to commence at the beginning of 2013, with delivery in the fourth quarter of 2014.

The scheme will benefit from its close proximity to the major transport hub of King’s Cross and St. Pancras, providing easy access to six tube lines, national railways and the Eurostar.

Anne Kavanagh, global head of asset management at AXA Real Estate, said:  “This acquisition demonstrates our ability to find value in the competitive London market and confirms our ability to source investment opportunities around which we can establish joint ventures between our clients.”

Huw Stephens, Head of UK Transactions at AXA Real Estate, added:  “This is a high quality asset that is extremely well located in the very high profile King’s Cross Central regeneration area, next to a transport hub with seamless links to London, the UK and Continental Europe.

The fact that the scheme is being built to the highest standards of sustainability and is already 55% pre-let to a strong tenant over two years ahead of delivery makes this an even more compelling investment.”

The building, next to St Pancras station, was designed by Jean-Michel Wilmotte.

Philippe Zivkovic, executive chairman of BNP Paribas Real Estate, said: “With Kings Cross, BNP Paribas Real Estate, who is the market leader for office development in France, has pre-sold its first UK development.

“This iconic 11-storey office building will be our showcase building in the UK and further demonstrates our wish to reinforce and expand our United Kingdom operations.”

jwallace@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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