Cain Hoy’s £450 mln (€537 mln) development loan to Canary Wharf Group for a partially pre-let London office tower demonstrates how alternative lenders are moving into areas vacated by banks.
Private investment company Cain Hoy announced on 24 April that it has funded £337.5 mln of the facility and arranged the Qatar Investment Authority’s (QIA’s) participation for the remaining £112.5 mln.
As joint owner of Canary Wharf Group with Brookfield Property Partners, the QIA is effectively lending on its own development. The loan enables CWG to press on with One & Five Bank Street, a 27-storey, 715,000 sq ft office building that is only 40% pre-let, at a time when bank finance for speculative construction remains extremely scarce in the UK.
Cain Hoy’s managing director John Cole said: 'It is true to say that the market for development financing is thinner than it was towards the end of 2015 and in the early part of 2016. That is probably due to the fact that the banks have plenty of exposure that they’re happy with. Large-scale, particularly not fully-leased, office development is an area that the banks have not been writing. This is an area we are happy to continue to put capital into, with the right people for the right transaction.'
The loan is the largest that Cain Hoy has underwritten to date but it has provided other large lines of finance, notably a £390 mln (€455 mln) bilateral loan for property company Almacantar’s forward purchase of One and Two Southbank Place, at London’s riverside Shell Centre redevelopment.
The latest transaction takes Cain Hoy’s debt book to approximately £2 bn (€2.4 bn), spread across some 12 different loans.
Cole added: 'Brexit is happening and this transaction is a message of the confidence we have in the UK and more importantly in London. The fundamentals are good, it is with a phenomenal sponsor and it meets all the key objectives for us of what a real estate development should look like. We are very pleased to have been able to back Canary Wharf Group and as importantly to team up with a partner of the quality of the QIA.'
The loan term is believed to run beyond the 2019 completion date for One & Five Bank Street where Société Générale has pre-leased approximately 350,000 sq ft. The building, which includes three levels of trading floors, has an ‘outstanding’ BREEAM environmental and sustainability rating.
The French bank is currently based on the edge of the City at Tower Hill. CBRE, GM Real Estate and JLL are the letting agents.
