Sale of London’s landmark City buildings hit by market turmoil
THE CREDIT crunch has hit London’s commercial property market, stalling sales of landmark City buildings and halting new developments.
Lloyd’s of London, the centre of the world’s reinsurance market, the headquarters of Nomura, the Japanese bank, and the high-profile Shard of Glass development have been affected by the recent market turbulence. Private developers seeking to finance large projects or make significant purchases are finding it increasingly difficult to secure backing, despite earlier signs that well-located and let sites would escape the credit crunch. Several property sellers have withdrawn large buildings from the market to wait until they can secure a higher price.
It is understood that the sale of the landmark Lloyd’s of London insurance building, designed by Richard Rogers and recently put on the market for £317m ($635m, E466m), has been quietly shelved by CLI Group, the seller, a subsidiary of German investment bank Commerzbank, until the long-term effects of recent market turbulence becomes clearer.
The £625m sale of Plantation Place, EC3, by Invista Real Estate, the property fund manager, is also understood to have stalled. A spokeswoman for Invista said the building had never been on the market. A senior property source told The Business that the £100m sale of Plantation Place South, an adjacent building, by British Land, the property giant, was “struggling to get away”. The same is said of the £235m sale and leaseback of the headquarters of Nomura, the Japanese bank.
Paul Burgess, head of London leasing at British Land, the property giant, said: “People looking for financial backing are going to find it more difficult than before, which will reduce the supply coming into the market.”
The current climate favours listed property companies with large cash reserves as they won’t have to rely solely on debt to purchase new buildings. Developments that have already secured finance are also on surer ground. Heron Tower, Gerald Ronson’s high-profile debt-backed City office development, has already secured funding of £450m for the 246m-high building.
The £300m sale of Legal & General’s Walbrook Square scheme is also on track, with four shortlisted bidders including Helical Bar, the property developer, backed by Carlyle Group, the US private equity firm, and the Canary Wharf development group, backed by a Morgan Stanley real estate fund.
Separately, the high-profile Shard of Glass development, which is planned to be London’s tallest building, is under further pressure. Simon Halabi and Irvine Sellar, the entrepreneurs behind the Shard, and CLS, the property group, have been trying to raise £350m to finance the mixed-use development. But City sources say a number of potential investors have been spooked by the current debt climate.
Halabi bought Esporta, the fitness chain, for £470m at the beginning of the year. Earlier this month, Société Générale, the investment bank that was his main backer, put the company into administration. It is now on the market for around £300m and Halabi is unlikely to recoup his £150m investment. Property sources fear that the Shard, work on which is due to begin in November with the demolition of buildings on the site, may never now be built. One senior market source said: “I never thought it was going to be built and I’m not changing my mind.” (The Business)