Cheesegrater to sell for £1bn

By James Buckley - Monday, February 27, 2017 18:18

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British Land and Oxford Properties are tying up a deal to sell their respective stakes in the Leadenhall Building, otherwise known as the Cheesegrater, for around £1bn, CoStar News can reveal, in what will be one of the UK's largest ever property sales.

British Land instructed Eastdil Secured and Cushman & Wakefield in November to sell its 50% stake in the Leadenhall Building for around £500m before first round bids were called on 16 December.

However, a trio of bids to buy out joint venture partner Oxford Properties’ remaining 50% share alongside BL's stake prompted the pair to agree to sell the City tower in its entirety.

CC Land, an investment vehicle of property magnate Cheung Chung Kiu, is understood to have placed the whole building under offer for around £1.02bn.

CC Land beat other rival bidders to secure the deal, including sovereign wealth giant Korea Investment Corporation, which bid £965m; and Temasek Holdings, a sovereign wealth fund owned by the Government of Singapore, which bid around £950m.

The deal will be the largest single asset to trade in the UK since December 2014, when Qatar’s sovereign wealth fund QIA bought the 1.1m sq ft HSBC Tower in Canary Wharf for £1.175bn. CC Land’s acquisition of the Leadenhall Building will be the third largest single asset purchase ever, behind the 2007 sale of the HSBC tower for £1.07bn.

Bloomberg reported earlier this month that CC Land had agreed terms to buy British Land’s stake in the tower.  

Beijing-based insurance giant China Life Insurance was another investor to have run the rule over British Land’s stake, having already amassed hundreds of millions of pounds of commercial real estate in London over the last two years.

US investor Madison International Realty is also understood to have considered buying British Land’s stake and, like Temasek, would have been a natural joint venture partner for Oxford Properties, having exchanged contracts in December to buy a 50% stake in Oxford’s Paternoster Square office assets for £200m.

The sale is in line with British Land’s strategy to sell fully let assets that do not form part of its London campuses, and will mark an attractive return for both the REIT and Oxford.

Oxford Properties is understood to have a pre-emption right to acquire BL’s share but did not put in a bid to take ownership of the whole tower.

British Land and Oxford Properties completed their leasing campaign of The Leadenhall Building, the landmark City tower, last July with Kames Capital, which occupies Level 26, completing an 11-year lease over 7,000 sq ft on Level 43. MS Amlin separately took expansion space on Level 27, which provides 13,000 sq ft of offices.

The Leadenhall Building, which earned the nickname ‘The Cheesegrater’ due to its distinctive sloping profile, designed to protects sight lines to St Paul’s Cathedral, smashed the all time record rent in the City of London when independent shipping broker Affinity leased the second highest floor in a deal which broke the previous record also set by the tower. Affinity signed a 10-year lease on the 6,584 sq ft 44th floor of 122 Leadenhall Street at a rent of £90 per sq ft.

When British Land took the decision in 2010 to begin looking for a joint venture partner to help build out the Leadenhall Building, the world was a very different place, emerging from one of the most crippling financial downturns ever seen.

Developers that survived the crisis were humbled, and even for an organisation the size of British Land, a development cost of £340m for a single project was a significant outlay, particularly given’s the REIT’s plans to embark on a wider 2.3m sq ft development pipeline at that time. At the point of mothballing, BL had already spent £90m on the site, so an agreement was reached with Oxford to inject the next £90m, and a 50:50 partnership was born.

All parties declined to comment.

jbuckley@costar.co.uk  

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