King’s Cross project rescued at 11th hour
By Daniel Thomas, Property Correspondent
The £2bn ($3.3bn) redevelopment of the King’s Cross area of central London has secured an 11th-hour funding package for its next phase after talks with a consortium of international banks fell through.
The 8m sq ft office, retail and residential scheme, one of Europe’s largest redevelopment projects, was last month close to signing a £400m development finance deal with a consortium of banks including EuroHypo and Deutsche Postbank.
However, talks over the funding package ended as conditions in the financial market deteriorated. The partnership behind the development will instead need to use its own money to take the project forward – a sign of fast-changing circumstances in the traditionally debt-reliant commercial property market.
Argent, the developer, backed by the Hermes-managed BT Pension Scheme, needs to start the next phase of work this month in order to finish the first buildings in time for the September 2011 term at the University of Arts, one of the main tenants. Argent has also agreed to let space to Sainsbury’s for its new headquarters.
Following weeks of talks with other stakeholders in the joint venture behind the redevelopment, Argent has agreed to fund the necessary work, partly through an existing mezzanine facility.
In addition, the developer has agreed with its partners, including landowners London and Continental Railways and DHL-Exel, that the money it will pay for the site is to be reinvested in the development.
The intention is to bring in new finance when the banking markets open again for lending to commercial property. The investment figure was not available but an announcement is expected this week. No one from the partnership would comment in the meantime.
The King’s Cross development would have had little problem in securing development finance before the recent banking problems, given its size, the collateral offered by the land around King’s Cross and the pre-lets agreed with occupiers such as Sainsbury’s.
Sir David Clementi, the outgoing chairman of Prudential, was this month appointed to chair the King’s Cross Central General Partnership, the vehicle responsible for leading the delivery of King’s Cross.
Copyright The Financial Times Limited 2008