Developer could be forced to halt work next year unless it can secure extra funding
THE DEVELOPER of the Pinnacle skyscraper is scrambling to secure extra funding to avoid being forced to halt construction on the 945-foot tower.
Arab Investments (AI) has made a plea to some of the Pinnacle’s 60 original investors for extra cash to help complete the tower on Bishopsgate, after lending conditions for speculative building projects in the UK failed to recover.
AI has tapped investors for £330m so far – enough to complete just three floors of the proposed 64-storey, 1m square foot tower, according to several sources.
City A.M. understands that HSBC had agreed in principle to provide a £600m loan to complete the £1bn project several months ago, but pressured AI to secure a pre-let tenant to take up at least 300,000 square feet in the building before it would release the funds.
Several property sources said the bank might offer a smaller loan if AI can lock down a pre-let deal for more than 150,000 feet.
AI’s managing director Khalid Affara said it made sense to return to its original investors rather than accept the terms. “We are currently in discussions with the banks about the major investor SEDCO behind the project, with other investors, injecting a substantial further equity investment so that we can dramatically reduce the amount of debt necessary for the Pinnacle to be completed,” he said.
“If this offer is accepted then the full works will be approved much more quickly and without completing a major pre-let prior to development finance getting into the project.”
Several companies including Schroders, Aon and Jardine Lloyd Thompson are currently in the market for offices of more than 100,000 square feet.
However, restarted work on the Cheesegrater and the Walkie Talkie towers by listed firms leaves the Pinnacle in an increasingly crowded market when it is ready for tenants in early 2013.
“They’ve got a very unique building on their hands – which makes it incredibly expensive,” said one property insider. “They’re going to be very reliant on generating very high rents to pay for construction.”
The company brought in CB Richard Ellis as a second leasing agent alongside Savills in September to try and pursue all potential tenants. Davies Arnold Cooper, the law firm advising AI on the project, agreed in 2009 to take up 100,000 square feet. Serviced offices provider Regus has also taken 80,000 square feet.
“Arab does have opportunities for pre-lets, but there are not that many companies out there looking for vast amounts of space. Firms like Schroders might decide to stay put in the current climate,” said a person familiar with the City market.
HSBC, CB Richard Ellis and Savills declined to comment.