Chinese check out tower42

Hong Kong billionaire's Chinese Estates leads £300m bid for trophy City of London skyscraper...

One of Hong Kong's biggest property companies is in talks to buy Tower 42 in the City of London with a knock-out all-cash bid of more than £300m.

Property Week understands that Chinese Estates Group, which is chaired by Hong Kong billionaire Joseph Lau, is in exclusive negotiations with Hermes Real Estate and Blackrock's UK fund to buy the 600 ft skyscraper.

If a deal takes place, it will be further evidence of the increasing interest of Far Eastern investors in prime London commercial and residential property.

Chinese Estates' chairman Joseph Lau has an estimated personal wealth of around $4.3bn and ranks 129th on the Forbes' list of the world's richest people. He also entered the Sunday Times Rich List for the first time this year. The paper estimated Lau's wealth at £3.8bn.

Deutsche Private Bank is thought to be advising Chinese Estates on its bid.

Tower 42, originally known as NatWest Tower, was brought to the market for sale through Jones Lang Lasalle in April this year. It has attracted a wide range of interest from opportunity funds to private equity groups.

It is thought that between three and five parties made it through to the second round of bidding, including Gerald Ronson's Heron and the Moorfield Group.

City sources told Property Week that almost within 24 hours of submitting second-round bids, the underbidders were informed that negotiations were closed because exclusive talks had begun with a single party.

Tower 42 is an interesting investment opportunity. It presents a high initial yield because of the short-term nature of the income. Many of the tenants, who provide a total of £20m a year in rent, have leases that expire within the next few years.

There is the potential for short-term asset management, but it is also a trophy asset that presents a prime future development opportunity at a large freehold site.

A sale would include the five low-rise buildings next to Tower 42, including the grade I-listed Gibson banking hall.

City experts say a sale now would also be a wise decision by the present owners because the building, which was developed in 1980, will require significant capital expenditure in the coming years.

German bank Eurohypo is the lead agent of a club of banks that have debt secured against the building. The £138m debt facility expires on 31 December 2011 with a total fixed cost of finance of 6.05% a year.

Completion of a sale of Tower 42 will further swell the City's investment tally in the second quarter, which is well over £1bn.

The vendors declined to comment. Chinese Estates was unavailable for comment.

Source: www.propertyweek.com