Blackstone is on the brink of securing a £170m purchase of Cannon Bridge House in the City of London, through the acquisition of the B-Loan underneath the securitised debt from Fortress Investment Group.
Blackstone will today complete the purchase of the outstanding £27m B-Loan, secured by Cannon Bridge House, for approximately £11m from Fortress, reflecting a circa 60% discount on the unpaid balance, writes James Buckley and James Wallace.
Once this transaction completes, this will allow Blackstone to repay the Canon Bridge Loan – which has an unpaid balance of £155.1m – tomorrow at par and take imminent ownership of the office block.
Westbrook instructed GM Real Estate last June to sell Cannon Bridge House, a 283,000 sq ft prime office development at 25 Dowgate Hill, EC4, after the agent reported to the US investor on a rationale for a sale. A guide price of £185m was set, reflecting a net initial yield of circa 6%.
Notehodlers in the Hercules (Eclipse 2006-4) CMBS are expected to be repaid imminently, which in turn will trigger a fresh acquisition finance mandate by Blackstone subject to the all-cash close, in line with the private equity firm’s typical leverage appetite of circa 70% LTC, which would equate to a £120m financing package required.
The decision to sell the asset coincided with the extension of the leases of three of the property’s tenants covering 85,412 sq ft – or 32.6% – of the 262,000 sq ft of office space, increasing the weighted average unexpired lease term to around seven years.
Cannon Bridge House is multi-let to tenants including Natixis Capital Partners, IG Index, Winterflood Capital, and Tyler Capital.
Westbrook bought Cannon Bridge House in 2006 for £206m in a joint venture with Atlas Capital and Lehman Brothers’ private equity division, financed by a £180m whole loan extended by Barclays Capital. Barclays split the loan into a £156m senior loan, which was spun into the Hercules (Eclipse 2006-4) CMBS transaction, and a £24m junior loan.
The timing of the sale was driven by two factors. Firstly, the recent re-gearing of the lease, including the removal of a future break clause; and secondly Capita’s negotiations with the junior lender to delay all future interest payments until the loan’s full repayment at maturity.
Not selling Cannon Bridge House by the loan’s maturity, on 17 January 2015, meant the junior lender would accrue interest at 9% per annum. However, last week Capita issued a stock market update stating that all parties had reached a standstill agreement for just one month, implying an imminent sale.