Canary Wharf office takes 60% hit in distressed sale

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A Canary Wharf office building that fell into receivership last year is to be sold at a 60 per cent discount to its last sale price, in a sign of how sharply the value of some London offices has fallen. 

5 Churchill Place, a former Bear Stearns office owned by Chinese investor Cheung Kei Group, was put up for sale last year after being placed into receivership by a syndicate of lenders. 

Israeli businessman Haim Taib’s Menomadin Group has agreed to buy the building for £110mn, React News first reported, in a sale brokered by Savills. Savills, and the receivers FTI, declined to comment. Menomadin Group did not immediately reply to a request for comment. 

The deal marks one of the largest distressed sales in London so far as high interest rates squeeze real estate investors globally. 

Cheung Kei Group, led by Hong Kong billionaire Chen Hongtian, bought the building in 2017 for £270mn. The decline in value since then testifies to the extent of the price correction across commercial real estate — and particularly office buildings — as rising interest rates and working from home hit the market. 

The sale, which has not been finalised, will also set a significant benchmark for pricing buildings in Canary Wharf, the iconic east London office district. 5 Churchill Place is one of at least three Canary Wharf buildings that are likely to be sold. 

Blackstone is marketing the BP and BCG office known as “Cargo”, formerly home to the Financial Conduct Authority, which it bought in 2014 for about £165mn. 

A second Cheung Kei Group building, 20 Canada Square, is also due to be sold by receivers, and is expected to be marketed this year. 

However, the pricing for the buildings depends on their individual condition. 5 Churchill Place is mostly let to blue-chip tenants including JPMorgan, with long-term leases. Agents said Blackstone’s Cargo building was in better condition and considered “best in class”, whereas 20 Canada Square had significant vacancies and may command an even steeper discount. 

The purchase of 5 Churchill Place was initially financed with at least £196mn in debt, roughly 70 per cent of the value of the building at the time, with a tranche provided by Lloyds Banking Group. The bank now holds only a “small, minority position” in the debt, according to a person familiar with the matter. 

Rising debt costs and falling property values across the commercial real estate market have inflicted losses on some lenders, particularly on buildings that were highly leveraged during years of low interest rates and high property values.

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