IVG Seeks Investor in London’s Gherkin Tower to Reduce DebtNeil Callanan and Dalia Fahmy
IVG Immobilien AG is seeking an investor in the fund that owns half of the London tower known as the Gherkin after the lenders demanded that it reduce debt used to finance the building’s purchase.
IVG’s Euroselect 14 fund is exploring the sale of shares in the property at 30 St. Mary Axe, Oliver Stumm, a spokesman at Bonn-based IVG, said by phone. He didn’t disclose the amount. IVG last week won approval from the fund’s investors to convert a Swiss-franc loan secured against the building into one denominated in pounds, fulfilling another demand by its lenders, he said.
Office buildings in the City of London financial district lost about 45 percent of their value in the two years through September 2009 and were about 25 percent off their peak through the third quarter of last year, according to Investment Property Databank. That puts pressure on owners that borrowed against properties at the top of the market.
IVG and Evans Randall Ltd. bought the Gherkin from insurance group Swiss Re Ltd. for about 600 million pounds ($902 million) in 2007. The building was valued at 473 million pounds to 510 million pounds last year, according to IVG’s website. Part of the fund’s loan was in francs and the Swiss currency’s 65 percent increase against the pound over the last six years caused a breach in its loan-to-value threshold for the tower, it said.
“The bank consortium is willing to forgo its right to extraordinary termination for another nine months,” Stumm said by e-mail.
Bayerische Landesbank and its Real I.S. AG unit provided the financing for the Gherkin’s purchase, according to the German bank’s 2007 annual report.
The aim of the share sale would be to bring the building’s loan-to-value ratio closer to the 67 percent required by the loan covenant, Stumm said.
“We have no current plan to increase our stake in the Gherkin,” Kent Gardner, chief executive officer of Evans Randall, said in an interview at the MIPIM property conference in Cannes last week. “It’s actually a long-term financing. The building itself is performing very well.”
Investments in the City of London and Canary Wharf financial districts reached 9.4 billion pounds in 2012, the most in five years, broker Cushman & Wakefield Inc. said in February. Yields, annual rent expressed as a percentage of the purchase price, amounted to 5 percent in the fourth quarter, unchanged from the previous three months.
British Land sold Ropemaker Place to clients of Axa Real Estate for 472 million pounds, the equivalent of a 5 percent yield, in the third-largest deal in the City of London in five years, it said last week.
Euroselect 14 investors were told last September that they may have to put an additional 75 million pounds into the IVG fund because of the franc’s appreciation, the London-based Times reported at the time.
IVG manages about 21.4 billion euros of assets including 3.3 billion euros of offices, according to the company’s website. It also builds and operates underground caverns for oil and gas storage in northern Germany. The shares have dropped about 31 percent in the last 12 months.