Westbrook nears £350m West End refinancing

Westbrook is close to agreeing a new financing package for the £500m ($799m) Shell-Mex House in London’s West End in what will be one of the largest office refinancings of its kind since the credit crisis.

The US private equity group is in exclusive talks with Deka Bank and ING, the banks, to provide more than £350m of debt to back the 550,000 sq ft block, which was bought for close to £500m at the height of the property boom from Robert and Vincent Tchenguiz, David and Simon Reuben and Jack Dellal.

The emergence of competition to underwrite such a refinancing is a sign that banks have become more willing to fund prime London property even when original deals were highly leveraged. Funders continue to retreat from more secondary parts of the real estate market outside the capital, however, with an increasingly wide two-tier market emerging for real estate finance.

The deal is one of the largest of a recent wave of debt restructurings that have arisen as facilities agreed during the boom years for five-year terms approach expiry in 2011 and 2012. There is £161bn of debt due to expire in the next five years in the UK.

As part of the process, Westbrook is expected to pay down an amount of the debt and bring in a small amount of junior debt to add to the package. In total, it is expected to have agreed to new debt of about £375m. Westbrook declined to comment.

Several other banks put forward terms on the refinancing package, suggesting that the market for such prime asset refinancings has come deeper in recent months. The Shell-Mex debt needed to be refinanced by July 2012.

Westbrook had been in talks to sell the property although it is believed to have shelved plans following funder interest and in order to benefit from further asset value growth. It has restructured the leases in the building, including an extension of a lease with Shell until 2020 while Pearson, the owner of the Financial Times, has a lease that runs until 2040.

On Monday, Vico Capital, the company of Brian and Mary O’Donnell, the Irish investors, agreed a £107m refinancing of the Credit Suisse-occupied 17 Columbus Courtyard in Canary Wharf with MetLife and with junior debt provided by Duet Private Equity.

Vico needed to refinance debt after a loan provided by Morgan Stanley expired in October. MetLife also refinanced a property portfolio owned by London & Stamford last week.