BNP Paribas is providing a loan-to-value ratio of just 50% to Blackstone for its £415m purchase of Broadgate Quarter, EC2.
It is the lowest gearing the US private equity house has sought this year and reflects the lower- risk nature of the asset.
For its opportunistic funds, Blackstone has tended to seek stronger returns through increased leverage.
In September a finance facility with Goldman Sachs for £250m secured against logistics assets was geared at a 70% loan-to-value ratio. A pan-European retail portfolio, Kingfisher, was leveraged at 75% with a €335m (£235m) ticket from Bank of America Merrill Lynch in July.
Broadgate Quarter’s City location, high occupancy and strong rental income of £19.4m pa made it an ideal investment for Blackstone’s core-plus strategy, which seeks returns closer to 10% than the 15% targeted for its opportunistic fund.
However, law firm Ashurst, which occupies 80,000 sq ft in the complex, is expected to move to the redeveloped London Fruit and Wool Exchange, E1, in 2018 with further lease expiries across the campus in 2019 and 2020, opening up a large asset management angle for Blackstone.
The 460,000 sq ft office complex near Liverpool Street in the City of London was one of the few UK purchases that have been made for the company’s core-plus strategy after it bought Times Square, EC4, and 125 Old Broad Street, EC2.
The company agreed to buy Broadgate Quarter at the end of October. It paid £40m less than a previous offer of £455m to then owners Hines and HSBC Alternative Investments. The prospective purchaser pulled out of advanced negotiations for the asset at a time when uncertainty in the Chinese economy had caused unrest in the City market.
The sale price still represented a marked uplift on the £290m paid by Hines and HALE in 2012.
