Canary Wharf’s office building, which fell into receivership in 2013, will be sold for 60 percent less than its previous sale price. This is a clear indication of the sharp decline in value of commercial property in London.
Five Churchill Place was placed up for auction last year by a group of lenders after it had been placed in receivership. The building is a former Bear Stearns Office that belonged to Chinese investor Cheung Kei Group.
According to sources familiar with the transaction, Israeli real estate investment Ariomori agreed to purchase the building at £110mn as part of a deal brokered by Savills. Savills and the receivers FTI, as well as Ariomori, declined to comment.
React News was the first to report on this deal. It is one of the biggest distressed sales that has taken place in London as high interest rates are putting pressure on real estate investors worldwide.
The building was purchased by the Cheung Kei Group in 2017 for £270mn. The value has dropped since then, a testament to the correction in prices across commercial real-estate — particularly office buildings.
The sale is not finalised but will set a benchmark for the pricing of buildings in Canary Wharf – an iconic office district in east London. Five Churchill Place, one of three Canary Wharf properties that is likely to be sold, is located in the iconic east London office district.
Blackstone has begun marketing the former Financial Conduct Authority office, formerly known as the BP-BCG “Cargo” office. It was purchased in 2014 by Blackstone for approximately £165mn.
The receivers are also expected to sell a second building of the Cheung Kei Group, 20 Canada Square. This is due to happen this year.
The price of the building depends on its condition.
Five Churchill Place has long-term leases with many blue-chip tenants, including JPMorgan. Blackstone’s Cargo Building was deemed “best in class” and in better condition by agents, while 20 Canada Square has significant vacancies that may lead to a higher discount.
Five Churchill Place’s purchase was initially financed by a debt of at least £196mn, or roughly 70% of its value at the time. A tranche of this amount was provided by Lloyds Banking Group.
A person with knowledge of the situation said that the bank only holds a “small minority position” on the debt.
Some lenders have suffered losses due to rising debt costs and falling values in the commercial real estate sector, especially on buildings that had been heavily leveraged during low-interest rate years.