GIC buys Merrill Lynch's London HQ for EUR 710m

Financial services group Merrill Lynch has sold its European headquarters in the City of London to GIC, the investment arm of the government of Singapore, for £480 mln (EUR 710 mln). Merrill Lynch said it will rent back the property on a 15-year lease. The financial terms of the lease were not disclosed.

The building, known as the Merrill Lynch Financial Centre, is located at 2 King Edward Street, near St Paul's Cathedral in London's financial district. The 77,000 m² building incorporates a portion of the original city wall and partly covers Roman ruins.

GIC Real Estate's president Seek Ngee Huat described the property as 'a strategic acquisition which meets our investment objective of maintaining a diversified portfolio of long-term assets across all property sectors in gateway cities around the world'. GIC Real Estate owns 200 properties in 30 countries.

Merrill Lynch is the latest financial institution to cash in on strong investor demand - and the resulting high prices - for prime office space in London.

Property advisor Knight Frank has estimated investment turnover in central London offices totalled EUR 22.7 bn in 2006. DTZ, the property advisor that acted for GIC in the Merrill Lynch deal, said in a report that EUR 5.4 bn was invested in London offices during the first quarter of 2007 - much of this made up by a few large deals. Although the figure is down on the EUR 6.2 bn invested in the last quarter of 2006, the level is still much higher than the long-term quarterly average of EUR 3.3 bn.

Last April HSBC, the second largest bank in the world by assets, secured the largest single property deal in UK history when it sold its headquarters in Canary Wharf for EUR 1.6 bn in a sale-and-leaseback deal. The previous record was set in February this year when insurer Swiss Re sold its eye-catching headquarters at 30 St Mary Axe, dubbed the Gherkin, to Evans Randall and German fund manager IVG for EUR 906 mln.