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Palm-Oil Billionaires Acquire London Tower for $473 Million

Wilmar International CEO Kuok Khoon Hong
Kuok Khoon Hong, chairman and chief executive officer of Wilmar International Ltd. Photographer: Munshi Ahmed /Bloomberg

Kuok Khoon Hong and Martua Sitorus, the billionaire founders of the world’s largest palm oil processor, bought Aviva Plc’s headquarters building in London for 288 million pounds ($473 million).

The purchase is a private investment and separate from Singapore-based Wilmar International Ltd., the $27.5 billion agricultural business Kuok and Sitorus founded 20 years ago, Elaine Lim, managing director at Wilmar’s external public relations firm, Citigate Dewe Rogerson, said by e-mail.

The property occupied by Britain’s second-largest insurer is the last office tower out of nine in the City of London financial district formerly owned by Simon Halabi. CB Richard Ellis Group Inc., acting as the special servicer of the debt secured against the properties, announced the sale today without identifying the purchaser.

The pound’s weakness has attracted international investors to prime real estate in central London, where a shortage of new developments is lifting office rents. Overseas buyers accounted for 55 percent of the 2.43 billion pounds of office building sales in central London in the first three months of this year, according to figures compiled by Stafford-based Property Data.

Kuok, the 61-year-old chairman and chief executive officer of Wilmar, is Singapore’s second-richest individual with a personal wealth estimated by Forbes in March of $3.2 billion. He is the nephew of Robert Kuok, the Malaysia-based billionaire. Sitorus, 51, is Wilmar’s chief operating officer and Indonesia’s fourth richest person with $2.7 billion.

$1.1 Billion Raised

The building occupied by Aviva generates a net annual rental income equivalent to 5.42 percent of the purchase price, according to CB Richard Ellis. A total of 1.1 billion pounds excluding expenses was raised from the sale of nine buildings owned by Halabi before a June 2009 default, the broker said by e-mail.

The nine-building selloff may provide a blueprint for recovering money in other property loan defaults, CB Richard Ellis said. Moody’s Investors Service said 92 collateralized mortgage-backed securities in Europe were in special servicing at the end of April, worth 13.8 billion euros ($19.9 billion). The most, by value, were backed by properties in the U.K., including the Halabi loans.

The sale “will hopefully become a benchmark to what can be achieved,” said Stephen Hubbard, CB Richard Ellis’s chairman of real estate finance. Sales of the nine buildings show “how important a successful real estate recovery strategy is to the value and risk of the debt instruments.”

Loan Default

A slump in U.K. property values triggered a default on Halabi’s loans two years ago. In August 2009, CB Richard Ellis was given the task of returning as much money as it could to holders of the five classes of notes sold by Halabi’s White Tower 2006-03 Plc and junior lenders.

The office towers owned by Halabi were valued at 1.83 billion pounds October 2006 after the loans were packaged into 1.15 billion pounds of CMBS. An additional 300 million pounds of junior loans weren’t securitized.

The value of the towers sank to 929 million pounds in June 2009 after credit markets froze following the bankruptcy of Lehman Brothers Holdings Inc. nine months earlier.

Paul Lewis, a director at CB Richard Ellis’s loan servicing arm, said it was too soon to say how much of the recovered funds can be returned to note holders and junior creditors.

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