Evans Randall has completed the sale of 5 Canada Square in Canary Wharf, E14 to St Martins Property, the real estate fund of the Kuwaiti government, for close to £385m, a yield of 5%, CoStar News understands.
The deal represents a premium to the asking price, which sought a 5.25% yield, writes Paul Norman.
Market sources said the price achieved reflected the continued fierce demand from overseas investors for London trophies as well as Evans Randall’s successful asset management of the complex despite continued tough occupier conditions.
St Martins has secured a rare freehold acquisition opportunity on the Canary Wharf estate leased to a triple A covenant on what remains a reversionary rent.
Equally attractive is its development potential. It 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.
Mayfair based private equity Evans Randall 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.
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.
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.
CBRE advised Evans Randall on the sale of 5 Canada Square. Evans Randall declined to comment.
CoStar Finance 