HSBC's London HQ in Canary Wharf on sale for record $2.3b

20140426-st-hsbc-london-hq-record-sale-pic LONDON - London's largest and most expensive office building, HSBC Holding's global headquarters, is on sale and could fetch over £1.1 billion pounds (S$2.3 billion), a record price for the British market.

The 44-storey building in Canary Wharf in east London is being marketed by JLL and GM Real Estate for offers above that price, the Financial Times reported, citing sources with knowledge of the property.

Its fate contrasts sharply with the Gherkin tower in the City of London, which called in the receivers on Thursday after its owners defaulted on bank loans, said the newspaper.

The sale of the HSBC tower indicates that investors' appetite for commercial property is growing fast, according to the report.

The HSBC tower became the most expensive building in London when it sold for £1.09 billion at the height of the property boom in 2007.

The Financial Times, quoting sources familiar with the tenancy arrangements, said HSBC had a 13-year lease on the building and is committed to annual upward-only inflation-linked rent reviews.

This would make it an attractive proposition for investors seeking a hedge against inflation.

Last year, HSBC ruled out the possibility of relocating its headquarters to Hong Kong, opting to stay in the UK despite stricter European restrictions on bankers' bonuses, said the report.

The building was designed by Foster + Partners and built in 2002, and HSBC raised almost £1.1 billion by selling it to the Spanish property company Metrovacesa, only to take ownership back in-house in late 2008 when Metrovacesa hit financial difficulties.

The South Korean national pension fund NPS then bought the building from HSBC the following year for nearly £800 million.

NPS, which is being advised by JPMorgan, is seeking to sell in order to free up funds to take advantage of other opportunities across Europe, the newspaper quoted sources as saying.

NPS is the world's third-largest pension fund, with a market capitalisation equivalent to 33 per cent of South Korea's gross domestic product.

Unlike other institutional investors and sovereign wealth funds which buy and hold assets for periods of up to 50 years, NPS tends to hold its assets over shorter periods of time and trades them more often.

The London market has seen just two deals at higher prices than NPS' £1.1 billion target and both involved multiple-building estates rather than single assets, said the newspaper.

Late last year, Blackstone sold its 50 per cent stake in the City's Broadgate office complex to Singapore sovereign wealth fund GIC, and Armenian billionaire Dikran Izmirlian sold the More London estate to the Kuwait state property company St Martins.

Both deals were reportedly priced at about £1.7 billion.

Source: Straits Times, 26 Apr 2014