Deals

Barings writes £43m London office loan amid strong Asian demand

The seven-year facility will finance the acquisition of 165 Fleet Street by a Chinese borrower as capital from the continent drives record investment volumes in the sector.

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Barings Real Estate is capitalising on the strong Asian capital flows targeting office assets in the City of London, which have driven record investment volumes in the second quarter of the year.

The private lender has provided a £43.2 million (€48.5 million) loan to support the freehold acquisition of 165 Fleet Street in the City of London. Barings did not reveal the identity of the borrower, but said it is part of a large financial services group based in China. The facility is a seven-year fixed-rate first-mortgage loan, representing a loan-to-value ratio of 60.7 percent.

The asset was built in 1955 and has undergone extensive renovations and upgrades since 2005. The property comprises around 67,562 square feet of office accommodation over eight upper floors as well as a self-contained retail unit that fronts Fleet Street. It is 89 percent let, occupied by five office tenants and a retail tenant.

“The loan for 165 Fleet Street, backed by a strong sponsorship, has enabled the purchase of a substantially renovated asset in an increasingly attractive London sub-market with the potential for rental growth,” said Chris Bates, head of real estate core mortgage Europe at Barings.

Bates noted that Barings remains confident “in the outlook for London and its attractiveness for international business”. In June, the private lender provided an £83 million loan to back the acquisition of London’s Corn Exchange by Hao Tian Asia Investment Company.

The financing of 165 Fleet Street comes at a time when office investment volumes in London have reached a record high, with £3.6 billion of stock traded during Q2 2018, which represents an 85 percent increase quarter-to-quarter and a 67 percent increase year-on-year, according to consultancy firm CBRE.

Although the elevated level of activity was led by the £1 billion sale of 5 Broadgate to Hong Kong-based investor CK Asset Holdings, a total of £2.8 billion was acquired by Asian investors during the quarter, accounting for 77.7 percent of the total volumes traded in London. As well as continued activity from Hong Kong, investors from Singapore and South Korea were also active, a trend that is likely to continue, CBRE said.