The long, expensive saga of 25 Canada Square is nearing its end, following an announcement that the building is expected to be brought formally to market this week for more than £1 billion. The 1.2m sq ft tower’s owners, Glenn Maud and Derek Quinlan, have instructed Jones Lang LaSalle to sell the asset.
This history of this building over the last few years is a classic story of the last boom and bust. It was bought in 2007 for £1bn from Royal Bank of Scotland, in a joint venture between Irish investor Derek Quinlan and PropInvest. At the time it was the second-largest transaction ever seen in the UK after the HSBC tower, which Metrovacesa bought for £1.1bn in April.
But then things started to go wrong. The joint venture was up to its eyeballs in cheap debt. But the recession exposed its assets as being wildly overvalued, and by as early as August 2008 it had breached the 80% loan-to-value covenant on its £920 million loan deal with Barclays Capital, leading to long discussions about re-financing with various lenders.
By summer 2010 the joint venture was given less than six months to arrange refinancing of more than £1 billion of debts secured again 25 Canada Square. Now that’s a pretty hefty mortgage! But the building hadn’t been revalued since November 2007, when it was given a value of £1.2 billion - before the crash in property prices.
Jones Lang LaSalle was then appointed to arrange marketing for the building in July 2010, as the owners and their creditors, Santander, Allied Irish and the Royal Bank of Scotland, were hoping to capitalise on the resurgence of property values after the recession. And there was plenty of interest from overseas investors.
So now it’s almost available, but still with a price tag below its value way back in 2007. But will the banks learn the lesson next time round?