Posted Sep 26, 2010, 2:31 PM
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Join Date: Sep 2009
Location: New York City
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Quote:
Songbird sees profit in Walkie-Talkie skyscraper deal
Canary Wharf owner expects City move will exploit shortage of rental space
Songbird, the owner of Canary Wharf, is close to expanding into the City, with talks about a joint venture with Land Securities to develop the "Walkie-Talkie" skyscraper to be concluded soon.
Plans to build the 160-metre tower at 20 Fenchurch Street, designed by the award-winning architect Rafael Viñoly, were put on hold at the start of the financial crisis but Land Securities is now keen to get it off the ground. Dubbed the Walkie-Talkie due to its shape and sloping sides, it is expected to be completed in 2014, when many leases expire in the City, exacerbating the shortage of modern office space.
John Garwood, Songbird's company secretary, said: "We're in the advanced stages of discussions and would expect this to be concluded near-term." If a 50-50 joint venture is agreed with Land Securities, the group wants to cut its stake to 15% "to spread the development liability".
It is likely to sell the remaining 35% to its main shareholders, which include the China Investment Corporation and Qatar Holding, as well as Morgan Stanley Real Estate Fund and the New York investor Simon Glick.
Garwood was optimistic about the outlook for the London office market. "There is a slew of leases expiring from 2012 onwards and people will be looking for high-specification buildings. There will be a shortage of supply and this will push up rents," he said.
He noted that just over a year ago, there was 560,000 sq metres of office space available in London, but this has now halved to 280,000 sq metres.
Songbird's major investors have underwritten a £140m share-placing that will enable the company to pay back a £135m loan to the same investors, taken out a year ago to raise its stake in Canary Wharf Group (CWG) to nearly 70%. The loan was part of an emergency £1bn debt restructuring, which was backed by the Qatari and Chinese sovereign wealth funds.
Songbird took a £50.1m write-down after the administrators of the failed US investment bank Lehman Brothers stopped paying rent on its former headquarters at 25 Bank Street in Canary Wharf. This contributed to an 85% drop in underlying first-half profits, to £13.1m. But the group pointed out that it is covered for future loss of rent for four years under an insurance deal with AIG. Garwood said the company was unlikely to start drawing down the rental guarantee before the New Year.
JP Morgan has yet to decide about whether it will go ahead with plans for a new 185,000 sq metre headquarters at Riverside South in Canary Wharf, where it has already spent more than £300m buying land from CWG and laying the foundations, with CWG doing construction and design work.
Michael Burt at Execution Noble said: "With the Lehman Brothers lease now terminated at 25-30 Bank Street and Nomura ending its sub-let of 40% of the building on 30 September, there is an opportunity to offer JP Morgan the alternative of the old Lehman building and use the AIG rental guarantee to help fund a rent-free incentive/fit-out."
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ffice block at 20 Fenchurch Street is to be replaced by the 'Walkie-Talkie' building, designed by Rafael Viñoly. Photograph: David Levene for the Guardian
http://www.guardian.co.uk/business/2...nchurch-street
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