Indian developer Lodha Group has raised £517 mln (€578 mln) of development finance from non-bank lender M&G Investments which triggers the construction of a super-prime residential scheme in London’s Grosvenor Square.
M&G has underwritten the entire loan in one of the largest bilateral financings of a luxury residential scheme in the capital for several years.
Lodha won planning consent in 2015 for No 1 Grosvenor Square, after buying the site of the former Canadian High Commission the year before for more than £300 mln. The project will provide 48 residences with onsite leisure amenities and is due for completion in December 2019.
The developer financed the site acquisition with JPMorgan, which provided senior debt, and Apollo which advanced a mezzanine loan. Lodha began a search 12 months ago for a partner to refinance because JPMorgan does not lend on development.
M&G has advanced a whole loan, which suggests that the loan to cost will be at least 60%. The duration is likely to be around three years, allowing for the two-year construction period plus 12 months stabilisation. M&G said the investment will be held by funds it manages, which include junior and senior investing vehicles. It has invested over £7 bn in commercial mortgages since starting lending against real estate eight years ago.
Grosvenor Square in the heart of Mayfair, is changing, with the US embassy also leaving the location for a new southbank base. Its former building in the square is being redeveloped as a Rosewood Hotel.
Ab Shome, Lodha’s director of finance, said M&G’s size and long-term outlook made them 'the perfect funding partner'.
Dan Riches, a real estate finance director at M&G, said: 'M&G’s direct origination model gives our institutional investors direct access to prime real estate such as No 1 Grosvenor Square. Our ability to invest and hold large loans on the most complex of transactions has proven attractive to borrowers and provides us with more opportunities to create value for our investors.'
Lodha Group is India’s largest real estate developer. In London it is also developing a project called Lincoln Square which was financed with £290 mln of debt from another non-bank lender, Cain Hoy, in May.
