The property company Hammerson has paid £65m for a landmark building in London's financial district, following the collapse of a fund backed by the Syrian property tycoon Simon Halabi last year.
Hammerson has bought the Leadenhall Court building in the City – which was part of the tycoon's White Tower mortgage-backed securities vehicle, along with eight other properties – that had a lofty valuation of £1.8bn in 2006.
White Tower defaulted on £1.1bn of securitised debt in 2009 after the value of the portfolio tumbled to £929m during the commercial property crisis. Receivers at Ernst & Young were called in last September.
The accountancy firm is selling the remaining five properties, although the bulk of the package is being sold as a portfolio, the Thames Portfolio. The US private equity firm Carlyle is the front runner to buy this package, according to Property Week magazine.
Simon Halabi featured in Forbes magazine's list of global billionaires with a fortune of $2.8bn (£1.9bn) in 2009, but he was hit hard by the collapse in commercial property values during the recession.
In April, Mr Halabi did not show up at a High Court hearing in London, where he was declared bankrupt over a £56.3m loan that he had received from the collapsed Icelandic bank, Kaupthing Singer & Friedlander, to fund the acquisition of the Esporta fitness club in 2007.
However, given the reports of his huge wealth, the current state of his financial position is unclear.
Mr Halabi started his career as a director of the property investment company Property Trust in the 1980s. The bulk of his family wealth is thought to be held in trusts, which he advises. At the zenith of his powers, he had a multibillion-pound property and leisure portfolio that included the Esporta gym chain and the Buddha Bar in London.
Hammerson, the real-estate investment trust, said it had exchanged conditional contracts for the 129-year leasehold on the Leadenhall Court building, which is on the corner of Gracechurch Street and Leadenhall Street. The building is close to Leadenhall Market and situated between Bank and Liverpool Street stations.
The 109,000 sq ft building, which was constructed in 1988, is fully let until March 2014 to a subsidiary of the insurer RSA Insurance Group. Hammerson said that "passing rents" are £7.16m a year, meaning the deal represents an initial yield of 11 per cent.
David Atkins, the chief executive of Hammerson, said: "This acquisition is in line with our strategy to take advantage of attractive opportunities offered by current market conditions. The building will allow us to use our asset management skills to create value, while offering a high yield and an immediate contribution to earnings."
Hammerson said there was a "wide range" of opportunities to add value to the Leadenhall Court building, including the potential for refurbishment or full redevelopment of the property. Strutt & Parker advised Hammerson. The property specialist CB Richard Ellis and Knight Frank acted on behalf of Ernst & Young.
Hammerson has a real-estate portfolio in the UK and France of about £5.1bn, which includes investments in 16 major shopping centres and 16 retail parks. In a trading update for the period from 1 January to 29 April, Hammerson said the overall occupancy of its portfolio was maintained at 95.3 per cent at 31 March 2010, compared to 95.2 per cent three months earlier.
In April, Mr Atkins said: "We have made good progress with the acquisitions and projects that we announced around the year end."
From Halabi's portfolio
1 60 Victoria Embankment, London EC4
This building on the banks of the River Thames is steeped in history. It used to be the City of London School where the late novelist Sir Kingsley Amis was educated. It has been the home of the investment bank JP Morgan since the 1990s.
2. The 'In and out' club building, Piccadilly, London W1
Simon Halabi is thought to have wanted to turn 94 Piccadilly into a six-star hotel, but it is now up for sale. It was originally built as a royal residence and became the home of the Victorian prime minister Lord Palmerston. Following his death, for 130 years the building housed the Naval and Military Club, better known as the In and Out Club from the signs on the gates to guide taxi drivers. Mr Halabi bought the premises for £50m in 2007.
3. Mentmore Towers, Buckinghamshire
It is a Grade I-listed building that is said to hold emotional ties for Mr Halabi, given that his young son is buried there. After purchasing the building in 1997, he had plans to turn it into a luxury hotel, but the project ran into financial difficulties. The neo-renaissance English country house is located in the village of Mentmore.
4 St Helen's, London EC3
St Helen's is a 23-storey skyscraper built in 1969 and it is set to go on the block soon. It was formerly known as the Commercial Union building, which then became the Aviva Tower, after the insurer's name change. It now takes its name from a nearby church.