Ronson mulls £800m Heron Tower sale

By James Buckley - Thursday, July 02, 2015 14:15

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The consortium behind the Heron Tower in the City of London is weighing up a sale of the iconic building following unsolicited bids to buy it for around £800m, CoStar News can reveal.

While no agents have been instructed to handle a sale, interest from investors from the Middle East and Asia looking to pounce on a rare opportunity to buy a prime City tower for a near-unprecedented price in the Square Mile has prompted Gerald Ronson’s Heron International to consider a sale of the 467,585 sq ft skyscraper.

Click here for CoStar's database of information on the Heron Tower.

The building, now formally called 110 Bishopsgate, is owned by a trust in which Gerald Ronson’s Heron International participates together with the State General Reserve Fund (SGRF), the Oman sovereign wealth fund and Saudi Arabia’s Prince Abdul Aziz bin Fahd.

Heron Tower, currently the tallest building in the City, is the vision and ambition of veteran property developer Ronson, who steered the project through the global financial crisis.

While Heron declined to comment on its future plans for the building, a spokesman for the firm confirmed this week that the tower is now around 95% let with further space under offer.

A sale at £800m would set a new benchmark for pricing City towers, reflecting a net initial yield of around 3.5% based on an annual rent roll of £29m. A transaction at that level would equate to a capital value of c.£1,750 per sq ft, higher than last year’s £720m sale of The Gherkin at 30 St Mary Axe to Safra Group, which reflected a capital value of £1,406.98 per sq ft, and would be indicative of the downward pressure on prime City yields over the last six months, and the premium price tower buildings can potentially command.

Rumours that CBRE has been instructed on the sale of the building have been denied by the agent, and there is understood to be varying appetite among the controlling stakeholders over whether to sell.

Obvious buyers for the building include some of the world’s largest investors currently eyeing real estate in London, including Beijing-based AnBang Insurance, China Life, Nan Fung, Cathay Life and Taikang Life.

Last month’s letting of part of level 15 in the Heron Tower to Survey Monkey means that just two floors – 32 and 33 - totalling almost 26,000 sq ft remain vacant.

Following a much-trailed ‘shareholder row’ in 2013, JPMorgan emerged as the original majority provider of the £288m five-year senior loan which refinanced the Heron Tower. Starwood Property Trust, the US mortgage REIT, provided a £270m five-year loan of which £210m was provided by JPMorgan in a LIBOR-based collateralised term financing facility, reflecting Starwood’s first non-dollar based and non-US based property funding facility.

In addition, Starwood European Real Estate Finance (SWEF) extended an additional £18m, taking the aggregate to £288m. Starwood Property Trust retained a £60m junior investment. JPMorgan effectively provided a corporate funding line for Starwood’s financing of the 46-story tower , reflecting 77.7% of the principal £270m financing loan, which finally funded on 1 October 2013.

jbuckley@costar.co.uk

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