China fund pushes for Walkie-Talkie stake
Sovereign wealth company seeks to join Land Securities and Canary Wharf Group with a 25% stake in City skyscraper
Sunday 05 September 2010
China's biggest sovereign wealth fund is in talks to buy a stake in one of London's tallest skyscrapers being developed by Britain's largest property company.
The $200bn China Investment Corporation (CIC) has approached Land Securities about taking an equity stake of up to 25 per cent in the proposed "Walkie-Talkie", the 500 ft tower at 20 Fenchurch Street designed by Rafael Vinoly.
Land Securities won planning consent for the Square Mile site two years ago after a public inquiry sparked when English Heritage and others objected to its impact on the sight lines to St Paul's Cathedral. The 36-storey building (down nine floors from the original plan) will cost an estimated £300m to build and is scheduled for completion in 2014.
It is nicknamed the Walkie-Talkie because of its top-heavy shape, designed to maximise high-rent floor space on the upper stories.
The FTSE-100 company entered into exclusive discussions with Canary Wharf Group to jointly develop the site in June. As part of the proposed deal, Canary Wharf would build the tower. These talks are still ongoing but it is thought that CIC, a wholly owned state company based in Beijing, has entered the negotiations.
The sovereign fund already has an indirect exposure to the Walkie-Talkie development through its 19 per cent shareholding in Songbird, the AIM-listed company that owns 60 per cent of Canary Wharf.
However, CIC has been looking to increase its direct investment in property and is thought to be keen to become a partner in the project. For this to happen, though, either Land Securities or Canary Wharf would have to give up part of their share in the building.
A deal with CIC would further lessen the development's risk for Land Securities, which was forced to put its plans to build the tower on hold in 2008 after the severe downturn in the property market. An additional equity injection in the project would also make it easier to secure bank development finance.
However, property analysts said that Land Securities' London business head, Robert Noel, may not be willing to reduce the company's stake in the scheme, which would leave it in a minority position. A spokeswoman for Land Securities, which is advised by GM Real Estate, said: "We are in talks with a potential partner and these talks are progressing well."
If a deal between Land Securities, Canary Wharf and CIC did kick-start the Walkie-Talkie development it would be a boon for the City's office market, which is facing a shortage of new space. The Walkie-Talkie would provide 660,000 sq ft of office space and 23,000 sq ft of retail space.
CIC keeps a low profile but is an extremely active investor and has bought up stakes in some of the world's biggest companies including Apple, Visa and Coca-Cola. It also has investments in major banking and private equity companies including Citigroup and Blackstone.
Its interest in the Walkie-Talkie is yet another sign of sovereign wealth funds looking to directly invest in London's property market.
A Canadian pension fund, Oxford Properties, and Norway's sovereign wealth fund, were among a number of parties vying last week to buy a £400m stake in the Crown Estate's £1.6bn Regent Street estate in London's West End.
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