PGIM Real Estate Finance has provided a £50.1m loan to a private Middle Eastern investor to help finance the acquisition of WeWork-let Fox Court, WC1.
Kildare Partners sold the 103,555 sq ft building last month for £101.5m – a net initial yield of 5.1%.
PGIM Real Estate Finance agreed a 15-year loan with the investor. WeWork signed to take 70,000 sq ft at the building in 2015 on a 20-year lease. The rest of the building is let to the government’s appeals service and healthcare management company Map of Medicine.
“The growing demand for flexible space provides an interesting opportunity to finance a non-traditional office sector, particularly as PGIM continues to expand its debt offering,” said Aaron Knight, a director with PGIM’s London office who led the debt transaction.
“Given the improvements in the variety and quality of office space available, we expect Midtown to withstand any potential Brexit impact because of its diverse tenant mix, which also has strong ties to the resilient legal profession.”
Midtown has historically been a hub for law firms. However, a recent shift in occupier trends has brought technology and financial firms to the area and led to a more diverse range of office tenants.
Fox Court is due to benefit from nearby infrastructure projects, such as the development of Crossrail, which should improve connectivity to the area as phased operations begin from late 2017.
“Our decision to proceed with PGIM for this financing was justified by the smooth and efficient process from start to finish that enabled our client to complete within the targeted timeframe and on very competitive terms,” said Adam Butcher, a principal with Butcher Barnet Spencer who advised the sponsor on the transaction.
“This transaction is an example of increasing demand in the market for core plus and value add properties,” said Bryan McDonnell, a principal with PGIM’s London office. “Borrowers who are faced with high single tenant concentrations and near term lease roll, or those seeking higher whole loan leverage, are looking beyond the typical core lending market.”
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