April 10, 2011 11:35 pm
One of the UK’s tallest skyscrapers will next week hit the market after the decision to sell the Citigroup Centre in London’s Canary Wharf for more than £1bn.
Jones Lang LaSalle, the property agent, has been instructed to sell the 45-storey Citigroup tower in Canary Wharf for more than £1bn by the owners, the private investors Glenn Maud and Derek Quinlan. The money will be used to pay back the debt that helped buy the building during the property boom.
The 1.2m sq ft office tower at 25 Canada Square is the third-tallest building in the UK at 656ft (200m), and is visible across the London skyline. It is let to Citigroup, the US bank, as its headquarters for Europe, the Middle East and Asia.
The building was one of the UK’s biggest property deals yet when bought by Mr Maud and Mr Quinlan from Royal Bank of Scotland for £1bn in 2007 at the height of the property boom. Months later the commercial property market crashed, and the owners have been looking for an exit since last summer.
The sale is understood to be a consensual decision by the owners and the consortium of banks that backed the purchase.
There is thought to be about £875m of senior debt against the tower, with an additional charge of more than £100m owing to an interest rate swap agreement. Such swaps can mean a big liability if broken. It is thought that many of the banks that funded the original purchase would be willing to provide stapled debt through a new syndicate, but on a smaller scale.
There have been attempts to securitise the income from the building rather than selling it, given a weighted unexpired term of 24 years and rental income of £57.6m a year. The lease is subject to an uplift in 2015 followed by annual increases indexed at 3.2 per cent. This means that annual income could reach nearly £70m within 10 years.
Andrew Hawkins, of Jones Lang LaSalle’s City investment team, which is managing the sale of the building, otherwise known as 25 Canada Square, said that investor interest was likely to come from many international markets as well as UK real estate investment trusts, insurers and annuity funds.
Non-domestic investment continues to target the London real estate market. Most recently, it is understood that a private Asian investor has put the Aviva Tower under offer in the City for a price approaching £300m. The interest in the City property market reflects investor appetite for prime international property. Such property can offer a yield return akin to a bond given its secure income.
Although consensual, many in the market will regard the sale of Citigroup Centre as the latest bank-led sale in a market where lenders are looking to exit over-leveraged property deals.
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