Lloyds Chambers returns to market in resi conversion play

Lloyds Chambers, the City of London office building owned by the estate of deceased Irish property investor Patrick Rocca, has come back to market for £76.7m with potential for conversion into a major residential scheme, CoStar News can reveal.

CBRE logoCBRE and Savills have been instructed to sell the 193,450 sq ft office building at 1 Portsoken Street, E1, reflecting a net initial yield of 8.75% and a capital value of £396 per sq ft.

Rocca bought Lloyds Chambers in 2006 for £104m from Robert and Vincent Tchenguiz’s Consensus Business Group, financed by a £110.3m Credit Suisse senior loan, which was securitised that July by Credit Suisse, in the Cornerstone Titan 2006 CMBS, under which was a £12m B-loan.

The outstanding securitised balance was £75.4m at the October 2012 interest payment date, while the B-loan has £10.3m remaining.

A sale at the guide price would imply that bondholders in Cornerstone Titan CMBS would be covered, while the junior lender would be largely out of the money.

During 2012, CBRELS has worked through a series of potential alternative uses to revive life in the 30-year old asset.

Lloyds Chambers imageA team comprising CBRE, PLP Architects, Gordon Ingram Associates and Miller Hare have undertaken preliminary development feasibility studies which support the potential for the site to support a substantial residential scheme of a minimum 222 residential units (pictured), which in principle has the support of the City of London’s planning department.

Alternatively, there is scope to carry out a major office refurbishment with the potential to increase the net internal floor area by 65,000 sq ft.

The 1983-built Lloyd’s Chambers is leased until 23 June 2018 to Aon at a passing rent of £7.1m per annum, equating to £36.61 per sq ft overall with no break clauses.

The site has considerable redevelopment and change of use potential in the short to medium term. Aon is not in occupation of the whole and there is an opportunity to negotiate an early surrender with Aon, which would consider disposing of its lease and dilapidations liability.

Aon, which is relocating its global headquarters and is consolidating its London presence to British Land and Oxford Properties’ Leadenhall building from the second half of 2014 – sublet its space to Hermes Pensions Management when the insurance company relocated to Devonshire Square.

This is the second time in less than two years that Lloyds Chambers has been attempted to be offloaded.

The building was previously brought to market in May 2011 for £94m, reflecting a 7.4% yield, by former loan servicer, Capita Asset Services and Gresham Down in the knowledge that the estate of Rocca was unable to repay the then total £89.2m outstanding securitised balance at maturity.

The loan transferred into special servicing in autumn 2011 and was subsequently taken off the market when the CMBS loan was transferred from Capita Asset Services to CBRELS.

jwallace@costar.co.uk and jbuckley@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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