Evans Randall has brought to market 5 Canada Square in Canary Wharf, E14, for around £380m, two years after a Lloyds Banking Group restructuring effectively reset the original purchase price to circa £365m.
The asking price represents a net yield of 5.25%.
The Mayfair-based private equity firm bought the building in July 2007 – at the very inflexion point in the UK property market – from Royal Bank of Scotland for £452m financed with a £354m senior loan from Halifax Bank of Scotland, writes Paul Norman and James Wallace.
The subsequent two years saw an unprecedented collapse in office values, falling by as much as 50% to summer 2009 in the City. Evans Randall sought a restructuring the following year when values began to recover for prime UK offices.
Evans Randall negotiated with the corporate successor to HBOS, Lloyds Banking Group, to restructure senior debt over five years with four syndicated banks – Bayerische Landesbank (BLB), Aareal Bank, Santander and DG Hyp at a margin of 200 basis points over three-month LIBOR – alongside a new £40m junior loan from Partners Group, the private equity firm.
The August 2010 restructuring – together with new equity from Evans Randall and its underlying investors – effectively re-priced the entry point to £360m, CoStar News understands.
With more than two-and-a-half years left to run on the existing financing package, the relatively cheap margin compared to current pricing could be an attractive feature for a leveraged income-seeking investor.
In March, Evans Randall, which sources, arranges, underwrites and manages large-scale commercial property investments on behalf of itself and its investor clients, sold a 5% equity stake in 5 Canada Square to Amundi Real Estate’s OPCI’s real estate collective investment scheme.
The building is likely to attract significant interest as it is a rare freehold acquisition opportunity on the Canary Wharf estate.
Equally the building is leased to a triple A covenant on what remains a reversionary rent.
The 14-storey building is let to Credit Suisse International on a 25-year lease ending in October 2027. Ten floors are sublet to Bank of America.
Evans Randall has carried out a rent review with Credit Suisse that increased annual income from £19.7m to £20.125m, or £37.50 per sq ft overall.
Most significantly, the building sits close to the proposed new Crossrail station at Canary Wharf and has the potential to be doubled in height taking the size from 515,000 sq ft of offices to over 1m sq ft. The Canary Wharf estate plan permits a 1m sq ft tower development.
CBRE is advising Evans Randall on the sale of 5 Canada Square.
All parties declined to comment.