IVG buys Gherkin office for EUR 950 mln

IVG has confirmed it acquired the London office building at 30 St Mary Axe for EUR 950 mln, in a 50/50 joint venture with Evans Randall. The statement by IVG follows market rumours last week about the German property fund's interest in the landmark office building known as the Gherkin.

IVG is planning to place its full 50% interest in a EuroSelect fund accessible to private and institutional investors by mid-2007, while Evans Randall will place the other half with institutional investors. IVG and Evans Randall will act as co-investors with a respective 10% share.

The 180-metre, 34-storey building, located in the city's financial district, has been sold by Swiss Re which continues to hold a lease contract for 50% of the building until at least 2031. The initial yield of this transaction amounts to 4.3%, and the Gherkin has an occupancy rate of 96%, researchers at merchant bank Kempen & Co said.

The property is currently under-rented, therefore IVG expects to benefit from the leasing potential. '30 St Mary Axe is a true landmark with a secure long-term tenancy. The property is an attractive investment for our funds investors, not only visually but also from an investment perspective', said IVG's ceo Wolfhard Leichnitz.

Designed for Swiss Re by the leading architects Foster & Partners, this prominent asset was developed by Skanska on the site of the old Baltic Exchange, damaged by an IRA bomb in 1992. It is the second highest building in the city of London, just shorter than Tower 42, and its construction signed an historic moment for London skyline. The sale-and-leaseback deal is estimated to be the largest office purchase ever in the UK. The 50/50 joint venture was set up to distribute the cost of the investments, as both investors were keen to acquire the prominent building but still reluctant to invest so much money on a single asset.