German banks provide loans for £200m stake in Nomura's HQ

Canadian pension fund secures debt deal on Square Mile's Watermark Place development
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The Independent Online

Helaba and Landesbank Berlin are financing Oxford Properties' purchase of a £200m stake in Nomura's London HQ, as German banks ramp up their UK property exposure.

The two regional banks are in advanced talks with Oxford to provide £170m of loans secured against the 541,000 sq ft Watermark Place scheme on the north bank of the Thames.

The parties, which all declined to comment, have not finalised the deal but completion is thought to be imminent. Oxford Properties, the property arm of Canada's Omers pension fund, bought the stake last month when it exercised a pre-emption right to purchase UBS Global Asset Management's half stake for £200m.

UBS and Oxford developed the building in 2008 in a 50:50 joint venture and then let it entirely to Japan's Nomura Bank last year in one of the City's biggest deals.

Nomura relocated from Canary Wharf after it bought Lehman Brothers' European and Asian investment banking arms. There are 5,000 staff in Watermark, on which Nomura has a 20-year lease paying a rent of £40.50 per sq ft. It was a deal heralded as a turning point in the Square Mile, following the property market's collapse in 2008.

Securing property finance has been difficult during the past two years and agreeing a deal with Helaba and Landesbank Berlin is considered a coup for Oxford.

It is the latest development in Oxford's acquisitive London property strategy. Two weeks ago, in a further commitment to London, it agreed to jointly develop the "Cheesegrater" skyscraper with British Land in a £340m deal.

It was also one of the underbidders to buy a 25 per cent, £448m stake in the Crown Estate's Regent Street estate, but lost out to Norway's Norges Bank.

The conclusion of a financing deal at Watermark Place will also be positive news for Germany's group of state-owned regional Landesbanken banks which have had a tough ride since the onset of the credit crunch. The predominantly wholesale banks are likely to be heavily affected by the Basel III regulations on capital requirements and the sector is undergoing consolidation.

However, Helaba – which poached Richard Bentley from Deutsche Pfandbriefbank last week to replace its retiring London head, Ingeborg Warschke – has been one of Germany's best performing banks. Johann Berger, Helaba's vice-chairman, said this week that it had €170bn on its balance sheet and real estate was its largest lending position.

Helaba's total lending on UK property is €2.3bn and this year it will lend more than €200m with a target to do the same again in 2011. Landesbank Berlin has been less active this year, but is still keen to lend on UK property in a market where few other banks are willing to provide loans.