Worthington Properties has secured a £45m loan facility from three public funds, to advance the construction of a 125,000 sq ft office in Manchester city centre.
The money has been awarded from the North West Evergreen Fund, a local authority pension fund, and the Growing Places Fund, advised by CBRE Capital Advisors.
The three-year facility will enable Worthington Properties to begin construction in early 2017, with plans for the scheme to be finished in summer 2019.
Designed by Glenn Howells Architects, the £70m building on the site of 123-127 Deansgate was approved at the end of 2015.
The loan agreement with Worthington is the latest example of the Manchester office market’s dependence on public money to bring forward projects. While developers face rising land values and construction costs, the banks remain resistant to lending speculatively, and charge higher interest rates than public sector funds. Other offices that have received Evergreen support include Allied London’s No1 Spinningfields, Peel Media’s Project Tomorrow, and Nikal and Abstract Securities’ Soapworks.
Russ Worthington, director of Worthington Properties, said: “Securing the funding is testament to the quality of the proposals at 125 Deansgate along with the high profile location of the scheme. These investors are incredibly astute and have to be confident the development would provide a return for them.
“They would have not provided the facility if they didn’t see the value in the development and we’re proud to be working in partnership with them on this. This funding will mean we are able to progress with speculatively developing the building.”
Andrew Antoniades, senior director, CBRE Capital Advisors, said: “This is a fantastic development that we are very pleased to have arranged the funding for. Despite strong underlying fundamentals in the Manchester real estate market, development finance remains scarce throughout the UK and the private sector debt market is increasingly unwilling to fund such schemes.
“Consequently, investment funds such as these are vitally important to the North West economy, and its continued growth. As such, we are pleased to provide funding support with a sizeable loan package to help ensure the city has high quality Grade A commercial space to continue to attract new business and support employment.”
The North West Evergreen Fund is made up of 16 local authority limited partners, and is capitalised through the European Regional Development Fund and other public money allocated under the Joint European Support for Sustainable Investment in City Areas, managed by the European Investment Bank in the North West on behalf of the Homes & Communities Agency.
The Evergreen model provides loan funding to be invested in projects which will generate a financial return and will then be recycled back into the fund to help support further projects.
Nabarro advised Worthington Properties on the deal, while Gowling WLG provided legal advice on construction, property and development to the investors.
Savills and Knight Frank have been instructed as agents for 125 Deansgate.