Brookfield secures £280m Santander-led development loan for new Amazon HQ

Brookfield Office Properties has agreed a £280m development loan for Principal Place to finance the construction of the 15-storey office block over 600,000 sq ft on the border of Liverpool Street and Shoreditch.

Brookfield logoSantander is the agent on the three-bank development club deal, with LBBW, the German lender, and Crédit Agricole Commercial Investment Bank (CIB) all joint leads on the underwriting.

CoStar News understands that Santander and LBBW are to provide £105m each, while Crédit Agricole CIB is to provide a £70m commitment.  Pricing on the development facility is understood to be sub 300 basis points over three-month LIBOR.

The development funding, which could close before the year end, secures the construction finance for the new City office block almost three years after the original development – under Hammerson’s ownership – was aborted after City law firm CMS Cameron McKenna pulled its 200,000 sq ft pre-let citing “current uncertainties in financial markets”.

Principal Place picFive months later Brookfield acquired Principal Place, paying a deposit of £61m, as part of a wider £581m six office portfolio purchase as Hammerson underwent a re-invention as a retail-focused REIT.

Brookfield then secured Amazon as the anchor tenant pre-let, with the online retailer set to relocate its UK headquarters from Slough, having agreed to take 431,000 sq ft or 71% of Principal Place’s circa 607,000 sq ft office space.

In addition, there is around 20,000 sq ft of retail space, including cafés and restaurants offering alfresco dining.

Assuming Brookfield leases Principal Place’s office space at around the market average for grade A City office rents – at around £54 per sq ft equating to an annual rent of £32.8m – this would suggest an end value in excess of £700m, after the retail space is factored in, which would imply a sub 5% net initial yield.

Construction is already underway, with the development’s completion slated for 2016 while Amazon will take up residence in 2017.

Brookfield Property Partners are the developers responsible for Principal Place.

Just under three weeks ago, on 20 November, Brookfield acquired the junior loan under CityPoint tower for just over £70m from Mount Kellett Capital Management, in an attempted loan-to own strategy for the City of London of London skyscraper.

CityPoint has been in receivership for more than two years, after KPMG’s Andrew Patrick Quinn and Steven Dean Hunt were appointed joint receivers in October 2012.

Last week, Brookfield acquired Moorgate Exchange from BlackRock Europe Property Fund III and CarVal Investors for £211m.

Brookfield Office Properties and all three banks declined to comment.

About CoStar News

Finance Editor, CoStar News
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