Metrovacesa to pay for £240m London deal in instalments

Spanish real estate giant Metrovacesa is to pay for its £240 mln (EUR 296 mln) acquisition of a City of London complex from UK financial services group Legal & General in quarterly amounts.

The parties announced on Friday that they had reached agreement on the payment programme for the acquisition of Walbrook Square complex in the City of London financial district. Metrovacesa has already made the first payment of £42 mln.

The Walbrook Square complex acquisition was originally agreed in September 2007, a few months after Metrovacesa launched its foray into the UK market with the record-breaking acquisition of HSBC's 210-metre high tower in Canary Wharf. The acquisition of the HSBC tower for £1.09 bn (now EUR 1.3 bn) was the largest single asset property deal in the UK.

Metrovacesa's ambitious strategy for London included a further EUR 1.4 bn deal for the Walbrook Square complex to develop more offices, with access to the London Underground. But the collapse of the Spanish real estate sector and the turmoil in the financial markets has stymied Metrovacesa's ability to finance its plans, giving rise to the possibility that the acquisition would collapse.

The cash-strapped Spanish company said on Friday that the current climate for securing real estate finance was 'challenging', but under the new agreement Legal & General will receive quarterly instalments’ until paid in full by 31 October 2010.

'The contract to acquire the Walbrook site is now unconditional and Metrovacesa and Legal & General have confirmed their commitment to the development of this prime site, one of the top offices developments in the City of London,' the Spanish company said.

Metrovacesa was the largest listed largest property company in Europe prior to the formation of French-Dutch combo Unibail-Rodamco. Metrovacesa now describes itself as the leading property company in Spain and the fifth largest in Europe with around EUR 13 bn in assets at end-June this year.