National Post (National Edition)
Caisse pays £265M for key British Exchange
Joint venture with U.S. equity firm TPG
MONTREAL • Canadian pension fund Caisse de dépôt et placement du Québec is bulking up its real estate holdings in Britain with the purchase of the prestigious Woolgate Exchange in London’s financial district.
Caisse subsidiary Ivanhoe Cambridge is buying the 351,000 square-foot, eightstorey building located close to the Bank of England for £265-million ($400-million) together with U.S. private equity firm TPG. It’s the Caisse’s second real estate purchase in London in the past 12 months, vaulting its total current property holdings in Europe to more than $6-billion.
Canadian pension funds have been devouring real estate worldwide in recent years, buoyed by the poten- tial for stable income to help meet their payout obligations to depositors. But London in particular has been a difficult market to get into recently because the pool of hungry buyers has outweighed the supply of available property.
“We are convinced that [this asset] will generate attractive returns for our depositors,” Ivanhoe chief executive officer Daniel Fournier said in a statement Monday, adding the company plans to open an office in London.
The deal is unusual in that it came about after the building’s previous owners, Dublinbased property group D2 Private, defaulted on a loan and were unable to hang on to the property.
As explained in a report in trade magazine Property Investor Europe on Jan.23, D2 Private bought Woolgate Exchange in 2006 for £325-million, borrowing £272-million to finance the purchase. But the value of the building fell in the wake of the credit crisis two years later and the owners were unable to repay the loan at maturity, leaving creditors Credit Suisse and Irish Bank Resolution Corp. in control.
The creditors then mandated agents to sell the building. A deal with Malaysian sovereign wealth fund PNB fell apart. That’s when TPG jumped in, buying up a subordinate tranche of the debt from Irish Bank and eventually negotiating with the junior and senior creditors to buy the building with the backing of Ivanhoe.
According to Ivanhoe’s statement Monday, its purchase will partially repay the junior loan secured against the building while fully repaying senior bondholders.
“This innovative trans- action again highlights our ability to source and execute quality property investments through complex commercial mortgage-backed security restructurings,” TPG partner Kelvin Davis said. “We believe there will be a number of other similar opportunities throughout Europe in the years ahead.”
Ivanhoe is paying the vast majority of the purchase price, said company spokesman Sébastien Théberge. It will be managed by a joint venture between the two partners. The building is currently leased to Portigon AG, formerly part of the dissolved German bank WestLB.
According to Property Investor Europe, New York City-based insurer MetLife is financing Ivanhoe’s portion of the Woolgate purchase. The move is part of a wider gearing up by U.S. banks and insurers to provide debt financing to European real estate deals to fill a void left by embattled regional lenders, the magazine said.
The deal for Woolgate Exchange comes roughly two months after its last London purchase, a $100-million investment to acquire majority ownership stakes in two multi-residential complexes, Peony Court and Chantrey House. That followed another residential property purchase earlier in the year worth $150-million for four rental buildings in the centre of the city.