Euro banks to lead Liverpool One £500m refinancing deal

Agreement on city's shopping centre marks foreign lenders' appetite for investing in UK property

France's biggest bank is part of a consortium that will refinance a £500m loan on Liverpool's premier shopping centre, owned by the Duke of Westminster's property company.

Calyon, the investment banking arm of France's Credit Agricole Group, the Royal Bank of Scotland (RBS) and Germany's Deka and Eurohypo banks have agreed terms with Grosvenor to refinance its flagship Liverpool One shopping centre.

Liverpool's 1 million sq ft retail centre opened two years ago and is part of Grosvenor's 42-acre retail, office and residential development in the centre of the northwest city.

If the refinancing is finalised, the four banks will replace a £500m loan provided by Barclays Capital, HSBC, Eurohypo and RBS in 2005. The loan, which only matures in 2012, was used by Grosvenor to fund construction.

Deka Bank, which is part of the German savings bank Sparkassen-Finanzgruppe, and Calyon will replace HSBC and Barcap in the "club deal". For Calyon it could mark its first significant direct UK property loan.

The refinancing will not only provide further evidence of banks increasing desire to ramp up property lending after a two-year dearth but points to foreign banks' eagerness to enter the UK commercial property sector. It also marks another milestone for Grosvenor which endured a difficult first phase of development at Liverpool One when construction costs ran over by more than £100m.

Since the centre opened two years ago, it has performed well and is almost fully let with the latest trading figures in May showing that retail sales were up by 37 per cent.

Eurohypo is leading the refinancing talks on behalf of the banks. Grosvenor and the other investors in the Grosvenor Liverpool Fund, which owns the scheme, will likely have to inject further equity. Real estate banking sources said banks are keen to lend against prime commercial property despite the billions of pounds that many banks have written off since the property crash.

In what could be another major property refinancing deal this year, it has emerged that Spanish banking giant Santander and Eurohypo, with some Middle Eastern banks, are in early talks with Saudi Arabia's Olayan Group to refinance its exclusive Knightsbridge Estate in London.

The Olayan Group in partnership with UK-based Chelsfield Partners bought the 3.5 acre site on Brompton Road, near Harrods from Irish group Avestus Capital Partners for £580m in June. It is thought to have approached banks to see what appetite there may be to potentially providing a £350m loan which would be secured against the estate.

Anglo Irish Bank and Bank of Ireland originally financed Avestus's purchase of the site in 2005 with a £435m loan. None of the parties involved wished to comment.