BAML finances £580m Devonshire Square acquisition

By James Buckley - Monday, April 16, 2018 15:53

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Bank of America Merrill Lynch has financed TH Real Estate and Danish pension fund PFA Ejendomme’s £580m acquisition of the sprawling 13-property Devonshire Square estate in the City of London with a £232m senior loan, CoStar News can reveal.

TH Real Estate and PFA completed its deal to buy Devonshire Square last Friday, with US co-working group WeWork taking a 10% stake in the ownership structure. TH RE and PFA will hold 45% each.

BAML has financed the acquisition with a 5-year senior loan at a 40% LTV, implying an overall loan size of circa £232m.

The consortium exchanged contracts to buy Devonshire Square from Blackstone last November.

The deal means the estate has sold for around £30m more than it was being marketed for in 2016 before it was withdrawn in favour of a refinancing of the underlining debt.

The consortium appointed Eastdil Secured to source acquisition finance to buy the 626,135 sq ft estate with mandate to secure a combination of senior and mezzanine debt. WeWork has taken around 20,000 sq ft of the previously 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.

Blackstone opted to pull the sale of Devonshire Square in 2016 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 has delivered Blackstone a 78.5% premium on its 2012 purchase price.

In September 2016, 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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