Quinlan Private, the property investment firm led by financier Derek Quinlan, has pulled out of a deal to fund 50 per cent of an office block in west London.

The firm had agreed to provide more than £100 million (€143 million) to fund the office development in Paddington, west London, with joint venture partner Morley Fund Management.

Morley has asked a number of underbidders to provide alternative funding for the 250,000 sq ft office block following Quinlan's decision to pull out of the project.

Quinlan's withdrawal has been attributed to the continuing problems in the debt markets, where the cost of borrowing money has risen sharply following the collapse of the US subprime mortgage market.

Property sources said Quinlan was not proceeding with the project because the firm intended to use the funds for other investment opportunities that it believed would arise in the property market.

It expects that large companies and financial institutions will rush to sell property assets to improve liquidity.

Construction work on the Paddington building, based at 2 Kingdom Street, is scheduled to start next year.

The investment is thought to be based on rents of £55 per sq ft, reflecting a development yield of about 5.5 per cent.

Morley had asked for the original 360,000 sq ft building to be scaled back by a third because of concerns that it would not be able to attract tenants for most of the property.

The landlord of a neighbouring building, covering 250,000 sq ft, has managed to attract a tenant to take under a third of the space, at a rent of about £55 sterling per sq ft.

Morley, which is owned by Britain's largest insurer Aviva, manages property assets in Europe worth €44 billion.

Quinlan Private has property assets worth more than €10 billion.

They are under management in Ireland, Britain, central Europe and the US.