Ronson Capital Partners, Gerald Ronson’s private equity group, has lined up £170m in development financing to fund its residential riverside development in Westminster, with LaSalle Investment Management and Capital A Finance taking a 50:50 share of a £25m mezzanine loan joining two existing senior lenders.
In the first quarter, Ronson’s RCP first secured a £30m junior loan from Crosstree Real Estate Partners – priced at high teen internal rates of return.
Crosstree’s junior loan is subordinated to LaSalle and Capital A’s £25m mezzanine loan, with equity-like risk. The five-strong third party funding package totals £200m for a residential development projected to have an end value of just north of £350m.
Lloyds and Barclays have priced the development loan on the basis of annual and exit fees, with the facilities expected to achieve around 5% IRR, while LaSalle and Capital A’s mezzanine loans are expected to deliver around a 12-13% IRR.
Capital A Finance was founded by former Investec Bank’s Daniel Austin and Jonathan Arnst last September to deploy stretched senior and mezzanine, backed by Pears Group.
The two-years and three-month duration development finance will fund the conversion of RCP’s conversion of Riverwalk House, at 155-166 Millbank, into a block of 121 flats over 17 storeys, slated for completion in autumn 2015.
RCP acquired Riverwalk House from Derwent London for an initial £70m in September 2011, then an empty office block. As part of the deal, Derwent will receive a top-up sales fee on the initial price – an overage fee – once the development is complete and the flats are all sold.
Over a third of the apartments have already been sold, achieving in excess of £2,600 per sq ft.
“This represents our team’s 15th investment provided in the last 18 months and takes our total loan book to c. £500m,” said Amy Aznar, head of debt investments at LaSalle in a statement.
“We are delighted to work with RCP, Capital A and both the senior lenders on this landmark development and look forward to growing our relationship with all the parties in the coming years.”
Daniel Austin, chief executive officer at Capital A Finance PLC, also said in the prepared statement: “Capital A is delighted to continue its support of RCP, and this transaction represents our strategy of backing best-in-class operators in their chosen sector.”