A Lipton Rogers-led consortium including Canadian, Singaporean and European investors has completed the £300m acquisition of 22 Bishopsgate, EC2, home of the failed Pinnacle skyscraper.
British Colombia Investment Management Corporation, PSP, Temasek and a pair of Axa Real Estate managed funds will take 25% stakes in the site and will jointly fund a new 1m sq ft skyscraper, which is likely to be valued at more than £1.5bn once completed and let.
The total equity commitment for the scheme will depend on various factors, including the revised construction cost, which has yet to be determined, and the level of section 106 and Crossrail contributions which will be levied as part of the new planning application.
However, it is expected that the all-in development costs, including site acquisition, will comfortably exceed £700m.
The consortium structure replicates that behind 6 Pancras Square, NW1, a new office building in King’s Cross that will be occupied by Google and which was forward purchased by Axa and PSP.
Axa will act as fund and asset manager, while Lipton Rogers will work alongside it as development manager.
It is British Columbia Investment Management Corporation’s first major property deal in the UK and follows the appointment of Gordon Fyfe as chief executive, who joined from rival Canadian institution PSP last summer.
The £60bn pension fund manager was part of a consortium which attempted a hostile takeover of Canary Wharf Group in 2003.
The completed building, which will be called 22 Bishopsgate, is expected to be transferred into a tax-efficient Jersey-registered REIT structure akin to that deployed by Axa for its acquisition of Ropemaker Place, EC2, on behalf of a Chinese and Korean consortium in 2013.
The site vendors – Sedco, Wafra and Arab Investments – will receive an overage payment from the consortium and will retain a long leasehold interest in the top floors of the building.
The revised scheme will include a publicly accessible viewing gallery on the top floors, together with restaurants, in order to help it secure a new planning permission from the City of London Corporation.
The £300m price for the City site far exceeds expectations for how much investors would be prepared to pay for the famously troubled development.
The Arab Investments-led consortium paid £220m for it at close to the peak of the last cycle in 2007 and the project has since suffered a damaging period of financing problems and speculation, which some had expected to deter investors from reviving a tower scheme on the site.
However, with City rents now rising rapidly and forecast to rise further for at least two more years, the sale of the scheme attracted widespread interest from bidders in the US, Middle East and Asia.
Having netted £300m for the site sale and secured overage payments, the performance of the viewing gallery will determine whether Sedco, Wafra and Arab Investments come out of the experience at a profit or a loss.
In total they sunk somewhere close to £500m into the failed project, but with viewing gallery at the Shard, SE1, accruing £5m in visitor fees in its first year of operation, it remains possible they will recoup their investment.
For Sir Stuart Lipton, 72, the deal represents a remarkable return to City of London development after a long hiatus, taking on the most challenging and high-profile project in the Square Mile.
The veteran developer, together with partners Peter Rodgers, co-founder of Stanhope, and Rupert Clarke, former chief executive of Hermes, played a significant role in assembling the successful bid team.
Working with PLP Architecture partner and co-founder Karen Cook, who worked on the original Pinnacle design while at KPF, he developed plans for a cheaper design which won the backing of Axa.
The revised scheme will see contractor Brookfield Multiplex demolish the notorious seven-storey stump of the twin cores of the Pinnacle design but retain the existing basement, saving significant cost and time compared with an entirely new development.
A new single core will then be built which will capitalise on advances in lifting technology and allow access directly to the top floor of the building.
However, the scheme will retain its twin entrances to take advantage of both the EC2 and EC3 postcodes the site offers, in an attempt to appeal to both financial and insurance industry occupiers.
The revised design, an early iteration of which was leaked by website SkyscraperCity last week, will feature more efficient and stepped floorplates.
The larger lower floors are designed to appeal to large corporates looking for highly efficient space, such as banks with trading floors, while the smaller higher floors will be more suitable for boutique occupiers.
The projected rent roll for the 1m sq ft tower is around £75m.
On that basis, assuming a 5% yield, the fully let completed building would be valued at around £1.5bn.
If City yields remain at their current lows of around 4.5% – or compress further by 2018 – it could be valued at more than £1.7bn.
Announcing the exchange of contracts last week, Axa said it would submit a new planning application within “the next few months” targeting a start on site by the end of 2015 and completion by the end of 2018.
In a written statement issued on exchange, Anne Kavanagh, global head of asset management and transactions at Axa Real Estate, said: “The acquisition of 22 Bishopsgate represents a significant opportunity to purchase a prime office development site at one of the most desirable office locations in the City of London.”
Lipton added: “We have developed an innovative design for an exceptional office tower with art and character, shaped to respect views of the City and designed to be more than an office building with social amenity spaces, restaurants, bars and retail units as a new vertical City campus reflecting the City’s ever changing consumer base.”
CBRE advised the vendors.
All parties declined to comment on the detail of the consortium and the deal.
