The clock is ticking on the financing of the Pinnacle Tower, and one more door has shut on developer Arab Investments.
Brookfield, the main contractor on the building, is understood to have considered financing the project to the tune of £100m before Christmas.
But it now appears that they have decided against putting their own money in, once again putting the onus on Arab Investments to secure a deal before November this year, when they need to begin paying off the loan they used to buy the site in the first place.
The Pinnacle is far from the only potential London landmark that has had trouble getting off the ground with investors. The long awaited Noho Square has been hit by one developer rejig after another, although the consultants have now been appointed.
As one person at a major developer says: “there isn’t any funding, that’s the truth of it”. Unless you’re a developer with enough capital on your balance sheet to finance a scheme off your own back, you’re going to have to go to the banks, which, for all the noise the government has made about Project Merlin, aren’t willing to lend.
And why would you lend to a speculative development, often without any sort of tenancy, when you are already overexposed to property?
One option is to do a joint venture to reduce your risk, as Land Securities did on the Walkie Talkie tower with Canary Wharf. Great Portland Estates have also sold a 50% stake in the 100 Bishopsgate scheme to Canadian developer, Brookfield properties.
But the irony remains that even though the London commercial market seems to be just about the only area in which construction is booming, we seem to be heading for a squeeze in supply in about three years time. “There’s widespread acknowledgement that there will be a shortage of good new office space coming into the market when a lot of the leases signed in the late nineties are coming to an end,” says Donal McCabe, director of corporate communications for Land Securities.
“It’s a good time to be building, but others [developers] are struggling to find finance,” he says. The demand is there, but the banks have bigger worries than raising shiny new landmarks in the City.