20 Fenchurch Street, otherwise known as the Walkie Talkie, has been sold for £1,282.5m to LKK Health Products Group.
Contracts have been exchanged on the sale, which reflects a net initial yield of just 3.4% and is the UK’s largest ever single office deal.
Canary Wharf Group originally put its syndicated 50% stake in the building up for sale in the spring and Landsec subsequently agreed to dispose of its 50% stake as well.
Landsec’s £634.5m share of the sale proceeds is well above the latest valuation of the 50% stake from March of £567.5m. The company intends to return about £475m to shareholders in the form of a payment of 60p per share, which would be accompanied by a share consolidation.
Robert Noel, chief executive of Landsec, said: “Our decision to sell 20 Fenchurch Street at an exceptional price and return cash to shareholders reflects our disciplined approach to the use of capital.”
Canary Wharf Group put its 50% stake, which includes shares held on behalf of Qatar Investment Authority (QIA), China Investment Corporation and Morgan Stanley, back in March.
The purchaser Hong Kong-based LKK Health Products Group, advised by Cushman & Wakefield, proactively opened up talks with Landsec after the Canary Wharf Group’s stake hit the market in a bid to buy the whole building.
James Beckham, head of London capital markets at Cushman & Wakefield, said the bid from LKK, which is part of the wider Lee Kum Kee group that is best known for its oyster sauce, was based on a read-across from the sale of the Leadenhall Building, otherwise known as the Cheesegrater, in March.
The Cheesegrater sold for £1,150m, reflecting a yield of 3.45% - a fraction higher than the yield on the Walkie Talkie sale.
“This record-breaking deal demonstrates the enormous investor appetite in London, and in the City’s reputation as the global place to do business,” Beckham said. “Since the vote to leave the EU, capital targeting London from the Asia-Pacific region has increased to record levels. This is partly due to currency fluctuations but is more indicative of longer-term confidence in London and investment strategies which are not derailed by short-term political uncertainty.”
The Walkie Talkie, which was developed in a joint venture between Canary Wharf Group and Landsec, comprises 671,000 sq ft of office space and is fully let.
The sale is the biggest ever single office deal in the UK, trumping the £1,175m sale of 8 Canada Square, aka HSBC Tower, to QIA in 2014.
Eastdil and CBRE acted on the sale side.
The transaction is unconditional and is expected to complete by the end of August.
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