London's Gherkin enters receivership

London's landmark Gherkin office tower has been placed into receivership by its creditors, with accountancy firm Deloitte appointed as receivers.

The landmark asset on 30 St Mary Axe - an icon of London's financial district - is co-owned by Evans Randall and IVG, which bought the building in early 2007 for €950 mln. The building is currently valued at £530 mln (€640 mln), giving it a loan-to-value of 96% against a 67% covenant on the loan.

'The senior lenders were reluctant to appoint a receiver but felt they had no choice due to the ongoing defaults, which have remained uncured for over five years, and concerns that the borrowers’ lack of equity in the transaction had caused their incentives to become misaligned with the lenders,' joint receiver and Deloitte partner Neville Kahn said.

Deloitte said the building has been 'well leased' since the initial default in 2009 and 'remains in trophy condition', but added that 'the asset’s complex, multicurrency capital structure' as well as 'adverse interest rate and currency movements have caused the total senior liabilities secured by the property to increase materially since closing'.

The move paves the way for a potential sale of the skyscraper which is the headquarters of reinsurer Swiss Re and a host of other financial and professional services firms including US law firm Kirkland and Ellis and financial technology company ION Trading. The 48,000 m2, 40-storey building was designed by world-renowned architect Foster and Partners and reached practical completion in December 2003, officially opening in April 2004.

The asset is half-owned by a private closed-end fund of IVG, which last year sought protection from its creditors after failing to reach an agreement over the restructuring of its debt. It has since agreed a debt-for-equity swap with its creditors.

IVG has recently also agreed a sale of its €3.4 bn private funds business to Germany's Deutche Immobilien Holding, resulting in growing uncertainty over the future of the iconic tower.

According to a statement released by co-owner Evans Randall on Thursday, 'The default has arisen largely as a consequence of the IVG tranche of the loan being denominated in Swiss francs and has been exacerbated by the insolvency at IVG. These factors have so far impeded Evans Randall’s ability to restructure the financing on the asset, including the injection of new equity'.

It added: 'Evans Randall has equity ready to invest and has been unable to do so because of the inability to agree a consensual solution with IVG, given these uncertainties. We will be continuing the constructive discussions to date on a new financial structure. The Gherkin is a strong, well-let asset and one that we are firmly minded to continue our involvement in.'