China Investment Corporation (CIC), the country’s biggest sovereign wealth fund, has returned to the debt markets to seek to leverage last year’s acquisition of Winchester House seeking around £160m in senior debt.
CIC acquired the 310,000 sq ft Winchester House from KanAm, the German open-ended property fund manager, for £245m last November with agreed financing term sheets from Wells Fargo and Deutsche Pfandbriefbank (PBB).
At the 11th hour, CIC dropped the Wells Fargo-led circa £150m five-year ticket, opting instead to hold the asset on an all-cash basis, given the sovereign wealth fund’s low cost of capital.
In the intervening seven months, spreads on senior debt have tightened by around 50 to 75 basis points which CIC is understood to be keen to capitalize on and has already received expressions of interest or terms sheets from a number of lenders.
Winchester House is home to Deutsche Bank’s London headquarters, with the investment bank understood to have a break clause in its lease across the entire building in 2018.
Deutsche Bank and Morgan Stanley are understood to be interested in securing the financing ticket, alongside pfandbrief banks, including PBB, the minority-lending bank in the original ticket.
Invesco, which owns a 5% stake in Winchester House, is running the financing process, which could yet include further lenders.
At a £160m-sized loan, the LTV Winchester House would be 65%.
The five-year duration would be virtually co-terminus with Deutsche Bank’s potential Winchester House exit in 2018. However, given the scale and depth of CIC’s capital, the refinance risk is likely to be considered low.
Winchester House was CIC’s first direct UK property acquisition, forming part of four major London prime office properties sold-off by the KanAm last year, as the fund’s life neared maturity.
All parties declined to comment.