JP Morgan has bought the underlying loan behind a major City office development being worked up by Brookfield for £131.4 million.
Canadian investment giant Brookfield Properties lodged its plans for a major "retrofit-first" redevelopment of Milton Gate, law firm Addleshaw Goddard's to-be-vacated headquarters in the City of London, at the beginning of December.
Designed by Allford Hall Monaghan Morris, the proposals seek to redevelop the prominent City office near Moorgate, retaining 70% of the structure. The plans would increase the size of the building by close to 50%, from 200,000 square feet to 290,000 square feet of offices with access to west-facing terraces on all floors.
In a filing on 30 December, Situs AMC, as special servicer to the London Office 2021 DAC commercial mortgage backed securitisation, said JP Morgan had completed the acquisition of two tranches of notes in the CMBS, the £31.207 million Class B notes and the £100 million Class XB notes. Situs said it had previously recommended the sale as being liable to secure "maximum return to debt holders".
The agreement is a consensual restructuring between JP Morgan and Brookfield, which will see the latter continue to own the asset and continue to progress the required planning permissions and approvals for the redevelopment.
JP Morgan provided a loan on 18 August 2021 of £164,250,000 to the Amber Milton Gate vehicle set up to buy the site. That was transferred to the London Office 2021 DAC CMBS on 16 December 2021.
A special servicing transfer of the securitised senior loan took place on 21 October 2024. At the time, 201,666 square feet of the property was let to law firm Addleshaw Goddard for one year with an option to terminate the lease on or around 3 May 2025. The tenant has now served notice to terminate the lease.
Situs, as special servicer, said it had discussed loan extension options with the operating adviser and the sponsor and no agreement was reached. It said discussions had also been held around the injection of additional equity but this had not been pursued.
It added a consensual sale had been considered and it was estimated that would provide £100 million for the asset and £105 million for the special purpose vehicle.
It added that JP Morgan as controlling class and Class A lender submitted a non-binding offer to buy the securitised senior loan by way of a "credit bid in the amount of £131,400,000 representing a portion of the Class A Loan and the Issuer Loan”.
Situs said no competing bid has been received from the Class B noteholder and added that it had concluded the maximum return to the debt holders was represented by the loan sale.
Brookfield bought Milton Gate from Chinese life insurance company Taikang Life for around £215 million in 2021. The entire property was let to Addleshaw Goddard on a single full repairing and insuring lease for 16 years and six months from 20 March 2008 expiring on 19 September 2024.
In 2022, Addleshaw Goddard completed a prelet of 114,000 square feet of offices for a relocation to Pembroke's 41 Lothbury in the City, in a deal revealed by CoStar News.
In London, Brookfield has developed over 3 million square feet including London Wall Place, Principal Place, 100 Bishopsgate, and One Leadenhall.
Brookfield declined to comment.