More than 200 prospective buyers have signaled their interest in the Gherkin, one of London’s most iconic and well-loved buildings, ahead of the first round of bids on Friday (17 October).
More than 200 prospective buyers have signaled their interest in the Gherkin, one of London’s most iconic and well-loved buildings, ahead of the first round of bids on Friday (17 October).
As a result, first bids for the office skyscraper at 30 St. Mary’s Axe in London’s Square Mile are expected to come from an ‘unprecedented’ range of international investors, according to those who track the market.
‘It’s one of the most iconic buildings in the world so I would expect it to sell at a premium, possibly well above the £650 mln target price,’ said one analyst, who asked not to be identified. ‘There aren’t many skyscrapers in London and they rarely get traded. It’s a one-off opportunity. If people are going to push the boat out on a building, this is the one,’ he said. (He is not advising on the sale.)
LONDON ICON
The Gherkin, so dubbed because of its distinctive shape, was designed by Sir Norman Foster of Foster & Partners and comprises 505,000 square feet. It is arguably the most recognizable building in the city, the analyst said. ‘It could end up being an emotional purchase for someone who simply has to have it,’ he added.
Deloitte Real Estate and Savills have been instructed to sell it. Having whittled down initial interest, Deloitte is expecting to get up to 20 bids on Friday, according to Julian Stocks, a senior partner at Deloitte Real Estate in London who is managing the sale. ‘There will be widespread interest from the US, Europe and the Middle East,’ he told PropertyEU. ‘It is not just about selling to the highest bidder – it is also about a would-be buyer’s track record and the due diligence. We are not only considering equity players as a lot of lenders would lend on an asset like this. However, if, at the end, it comes down to two players who are very similar and one has more equity, we’d probably pick them,’ Stocks added.
US & ASIAN BIDDERS
US investor the Blackstone Group was widely expected to bid, although a source close to the company told PropertyEU that the firm was not in the running. However, Asian sovereign wealth funds are expected to bid, as are US and Chinese investors. European institutional investors are also expected to be among the bidders. The Gherkin is likely to appeal to investors such as GIC, the real estate investment arm of the Government of Singapore and Malaysian state pension fund KWAP, which have both been active real estate investors in London in recent years.
‘A lot of new entrants to the market, including Chinese investors, could bid,’ the analyst said. ‘There has also been a resurgence of Middle Eastern buyers in the capital who are likely to be interested.’
Gulf investors already own Britain's biggest skyscraper, the Shard, which is owned by Qatar Holdings.
Pricing on the Gherkin is expected to be aggressive, likely setting a new benchmark initial yield of around 4%.
Despite its status, the office building has had a chequered history in recent years. Lenders forced the skyscraper into administration amid spiralling debts this summer. UK-based private equity group Evans Randall, which co-owns the building with German fund manager IVG Immobilien, has offered to buy IVG out in a bid to gain full control. However, it remains to be seen whether Evans Randall can fund the buyout. The company could not be reached for comment.
IVG and Evans Randall bought the Gherkin from its original owner, insurer Swiss Re, in 2006, for £600 mln, using £396 mln of debt from a five bank consortium led by BayernLB and including Deka, Helaba, ING and LBBW. IVG and Evans Randall were hit by the European financial crisis, which meant that by 2009 the Gherkin’s value had dropped to £480 mln. Swiss Re still occupies the lower half of the building.
Savills declined to comment.