PIMCO and Legal & General Group have been accused of placing undue pressure on property valuers in a dispute over The Finance Tower, a 142-metre Brussels skyscraper. The building’s owner has collapsed into insolvency and is fighting lender efforts to freeze rental income.
The owner filed a lawsuit in the English High Court to stall the move, according to filings in London and New York courts.
The building is ultimately owned by JR Global REIT, a Korean-listed property investment vehicle placed into insolvency last month.
JR REIT bought the tower in 2020 with about €724 mn of debt. Almost half of that financing came through PIMCO from four Allianz-owned entities.
L&G and Sumitomo Mitsui Financial Group each provided about €135 mn. BayernLB provided about €90 mn.
In a New York filing seeking documents from L&G’s Chicago-based U.S. unit, lawyers at Boies Schiller alleged the lenders tried to push down the building’s value.
They claim the aim was to trigger a loan condition that would force cash to be retained and used to reduce debt.
The owner’s lawyers said the lenders were trying to manufacture a cash trap event. They alleged the lenders placed undue pressure on Knight Frank valuers to reduce the valuation below €950 mn, or about $1.1 bn.
Large office towers such as The Finance Tower trade infrequently, which leaves more room for valuation disputes. Knight Frank resigned as valuer, and JLL later appraised the building at about €920 mn.
JR Global’s lawyers called that valuation unreasonably low. They said Knight Frank had produced a report valuing the building closer to the €1.2 bn purchase price.
Representatives for Knight Frank, L&G, and PIMCO declined to comment on live litigation. JLL did not respond to a request for comment.
According to a London High Court filing, Knight Frank valuers met in January with Bruno Dord, head of European debt origination at PIMCO Real Estate. The filing alleges Dord told them any valuation above €950 mn was ridiculous.
Knight Frank resigned shortly after that meeting. Dord did not respond to a request for comment sent to his LinkedIn account.
The building’s owners argue JLL used incorrect assumptions and methodologies. They said JLL overstated the risk that the Belgian government, the tower’s sole tenant, could leave when its lease expires in 2034.
The loan on the building matured in 2024. The owners tried to bring in new lenders but ultimately had to inject more capital to reduce the outstanding principal.
The existing lenders then agreed to refinance the tower with €600 mn of debt. The refinancing still left JR Global under strain.
Meritz Securities originally led the acquisition. The holding vehicle later listed on the Korean Stock Exchange and is now owned by 28,000 investors.
To provide the extra capital needed for the refinancing, the company issued a bond in Korea. After missing a bond payment, the REIT entered bankruptcy protection in April.
A JR Global REIT spokesperson said the company remains fully operational. The spokesperson said the firm is using a court-supervised restructuring programme to renegotiate its financial structure without entering formal rehabilitation proceedings.
The Finance Tower was one of the largest deals in a €20 bn wave of Korean investment into European real estate near the peak of the low-rate era. Those buyers often targeted large offices with long leases to highly rated tenants, seeking bond-like income.
Those investments have since been hit by falling valuations. Higher interest rates have hurt commercial property broadly, while older offices face higher spending needs to meet environmental standards.
Post-pandemic doubts over tenant demand have added more pressure on large office buildings. Deals for offices across Europe have slowed, especially in smaller and less liquid markets.
Belgian commercial real estate investment has more than halved since its 2022 peak. Brussels office leasing has weakened, and vacancy rates have risen.
