WeWork exchanges on £580m Devonshire Square buy

By James Buckley - Thursday, November 23, 2017 15:26

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US co-working group WeWork has exchanged contracts to buy Blackstone’s sprawling 13-property Devonshire Square estate in the City of London for £580m.

The deal means the estate will sell for around £30m more than it was being marketed for last year before it was withdrawn in favour of a refinancing of the underlining debt.

New York-based WeWork, which was valued this summer at around $20bn, has appointed Eastdil Secured to source acquisition finance to buy the 626,135 sq ft estate and is looking for a combination of senior and mezzanine debt. WeWork is likely to occupy part of the vacant space at Devonshire Square.

WeWork first dipped its toe into commercial property in the UK earlier this summer with the £40m acquisition of 120 Moorgate, a 200,000 sq ft development opportunity, also in the City. The purchase of Devonshire will be WeWork’s third property investment in the City of London this year.

Over the last few years, We Work has amassed an 18-strong portfolio of co-working offices dotted around the capital, home to more than 16,000 members.

In May, WeWork and private equity firm Rhone Group raised several hundred million dollars for a real estate investment fund. Buying its owns properties will allow WeWork to benefit from the valuations uplift it says it creates as a tenant.

Blackstone opted to pull the sale of Devonshire Square last November after instructing CBRE and Eastdil to sell it for as much as £550m. The US private equity giant withdrew the estate to focus on its asset management plan for the development, before considering refinancing options.

A sale at £580m will deliver Blackstone a 78.5% premium on its 2012 purchase price and follows the PE giant’s sale of Lacon London to clandestine Middle Eastern investor Al Ain Properties for £285m.

Last September, global private markets investment manager, Partners Group bought a £50m mezzanine loan secured by the Devonshire Square estate. The debt was the mezzanine component of Morgan Stanley's refinancing of the estate. Morgan Stanley agreed a deal in May 2016 to provide a £320m senior loan to Blackstone to refinance Devonshire Square. The five-year loan, which reflected a loan-to-value ratio of around 60%, carried a margin of around 280 basis points over three-month LIBOR. The deal refinanced a £220m acquisition loan from Goldman Sachs secured in 2012, as well as the £50m mezzanine loan.

Morgan Stanley took the decision immediately afterwards to sell off the mezzanine component in the secondary markets before reaching an agreement with Partners Group, a global private markets investment manager with $55bn in assets under management. 


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