13.11.09

By Deirdre Hipwell

Landesbank Berlin buys out senior lenders to Goldman Sachs London HQ to protect position

German bank Landesbank Berlin (LBB) has taken control of the debt secured against Goldman Sachs’ London headquarters after buying out three senior lenders in an innovative bid to protect its position.

Property Week understands that LBB has paid around £200m to buy out Eurohypo, Deka Bank and Landesbank Baden Wurttemberg (LBBW), which all provided senior debt secured on Peterborough Court at 133 Fleet Street in Midtown. All four banks were part of a larger lending consortium that funded the £350m purchase of the property by Canadian company Jesta Group in 2007.

There are few examples in the UK commercial property market of junior lenders taking such action.

Jesta bought the property from US company Tishman Speyer, which paid £280m for it in a purchase and leaseback from Goldman Sachs in 2005.

Barclays Capital Mortgage Financing originally financed Jesta’s purchase, at a loan-to-value ratio of more than 75%, and then sold down all the debt in various tranches to a host of other lenders.

LBB was a junior lender in the funding consortium and, in a striking move, is thought to have decided to inject more money to take out and repay the senior lenders to protect and elevate its own position in the consortium.

The bank, which is a wholly owned subsidiary of the listed Landesbank Berlin Holding, is now the most senior lender in the consortium and will control any decisions regarding further restructuring of the debt.

The 370,000 sq ft property is let on a long lease to investment bank powerhouse Goldman Sachs. Goldman Sachs has occupied the building since 1991, when it was built.

Peterborough Court will have been impacted by the sharp fall in values across the UK property market during the past two years and, although it will have benefited from the current resurgence in values, it has better prospects of regaining much of its value in the longer term.

LBB’s decision could indicate its confidence in the future performance of the asset.

The well-located building is let to an excellent tenant, which just posted bumper third-quarter figures following a tough two years as a result of the downturn.

Several lenders and borrowers are having to carry out innovative refinancing of purchases made at the top of the market. Lenders are constantly “stress testing” loans and ensuring stable financing structures are in place.

Various large assets in the City, such as Plantation Place and Cannon Bridge House have been subject to ongoing financial structuring among lenders and investors.

All parties declined to comment.

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Source: Property Week (www.propertyweek.co.uk)