HSBC agrees to buy back Canary Wharf's HQ for £838m

HSBC said on Friday it has agreed to buy back its global headquarters in London's Canary Wharf from Spain's troubled property company Metrovacesa for a total of £838 mln (EUR 968 mln). The bank said it is booking a gain of approximately £250 mln in its second-half results.

The bank sold the 45-storey trophy building at the end of May last year for £1.09 bn and leased it back from Metrovacesa for 20 years at an initial annual rent of £43.5 mln, representing a net initial yield of 3.8%. The purchase was funded by Metrovacesa via a cash equity injection of £280 mln and a bridge loan of £810 mln provided by HSBC. The transaction value today is 25% less than 12 months ago.

'As a result of the significant market disruption that has impacted the availability of term funding, syndication of the bridging loan has not been possible and the parties have come to an agreement that the building will be handed back to HSBC,' the bank said in a statement. It added that the existing bridging loan will be extinguished as a result of this transaction.

The new agreement sees HSBC acquire 100% of Dutch investment vehicle Project Maple II BV, whose main asset is the tower, through wholly-owned subsidiary HSBC Property Holdings BV. CB Richard Ellis Capital Markets team, together with Global Corporate Services, advised HSBC on the transaction.

David Hodgkinson, the Group's Chief Operating Officer, said: 'Clearly the market has deteriorated significantly since we agreed the sale in spring 2007. It was important to work with our client, Metrovacesa, to resolve the funding issue which had arisen. 8 Canada Square is a landmark building and this transaction is in the best interests of both parties and HSBC shareholders.'

Metrovacesa said it would book a EUR 98 mln loss from the sale of the HSBC building, denting NAV by EUR 1.4 per share.

On Thursday the company also announced that its indebted majority shareholder, the Sanahuja family, has reached a debt-for-equity agreement with creditor banks who will take a 65% stake in the company. The bank syndicate consists of BBVA, Banco Español de Crédito, Banco Popular Español, Banco de Sabadell, and Banco Santander.