JP Morgan eyes Lehman tower in potential snub to Government
Friday 17 September 2010
JP Morgan, the US investment bank, is set to ditch plans to build a new European headquarters at London's Canary Wharf, and instead move into Lehman Brothers' old skyscraper in the Docklands financial district.
Property sources say the bank is ready to abandon its stalled £1.5bn project and relocate into the huge building that was occupied by Lehman, until its spectacular demise two years ago.
The bank agreed a deal with Canary Wharf Group (CWG) in late 2008 for the development of new purpose-built offices, but has still not committed to the project. Sources close to JP Morgan, which employs Tony Blair, the former prime minister, as an adviser, admit that the delay is largely down to senior officials being furious at the UK Government's portrayal of the financial sector as the villain of the recession.
It is understood that JP Morgan is also irritated that the criticism of the banking system has not abated since the Coalition came into office. Last year, sources warned it was considering scrapping the project over tax increases and an orchestrated campaign of "banker-bashing" before the election.
In an email sent to staff last month, the bank said, "we have no immediate plans for any significant changes impacting our presence in the UK". The new plan would allow the bank to move to a new site without being seen to be investing heavily in the UK.
A deal has not yet been signed, and the bank is viewing the move as one of a number of options. A spokesman for CWG, the property company that manages much the district that has rivalled the City as a home for the financial services industry for the last 20 years, declined to comment yesterday. A JP Morgan spokesman also refused to comment on a move, but said: "We have designed options and flexibility into our real estate portfolio."
Property analysts argue that the move would be sensible for both companies. The building, at 25 Bank Street, is purpose built for an investment bank and has, according to experts, impressive facilities. The cost of moving into an existing site would be much lower and would allow the bank to leave its outdated City headquarters on London Wall ahead of schedule.
The building has now been practically vacated by Nomura, the Japanese investment bank that bought up much of what remained of Lehman, and PricewaterhouseCoopers, the administrators to the failed bank. That has left CWG without a tenant in one of the most impressive office complexes in Europe.
A person familiar with the situation said: "There is certainly lots of speculation that JP Morgan will move into the old Lehman building – it is one of the most sophisticated offices around and is crying out for an investment banking tenant. Given its wish to move, JP Morgan must be the front runner."
CWG is thought to be keen to attract a single investment banking tenant. Few other banks big enough to fill the office are considering a move.
The move would also avoid the need for expensive financing. Ironically, financing for new commercial property deals has spiked in the past two years after the collapse of Lehman sent shock waves through the financial system.
A move by JP Morgan would also quell worries about large financial institutions moving abroad to avoid higher tax regimes and greater regulation.
Other European countries have courted London's financial community. After blaming the credit crisis on "freewheeling Anglo-Saxon financiers", French President Nicolas Sarkozy has reportedly begun a charm offensive, offering tax breaks to bankers in the City if they agree to move to Paris.
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