Foreign Investors Eye the Gherkin

By Simon Morris On Thursday, September 11 th, 2014 · no Comments · In , ,

Recent news suggesting that foreign investors are eyeing the Gherkin, has illustrated to Simon Morris the continuing strength of the prime central London market.

Simon Morris Knows the Prime Central London Market

A property specialist, Simon Morris advises UK property investment funds on how to maximise revenue potential for their property-based investment portfolios. As a London-based specialist, Simon Morris has an intimate knowledge of the prime Central London market.

Considering the fact that it is the centre of one of the busiest finance hubs in the world, property in prime central London is always lucrative, and has always drawn international investment. That is why it is no surprise that news sources have reported in recent days, that a Malaysian firm has shown interest in acquiring the iconic Gherkin building – a centre of London commerce, finance and business.

International Bidders Wish to Acquire the Gherkin

According to the Star, one company from Malaysia, as well as potential bidders from other international markets such as the US, China and Singapore, have shown interest in buying the building.

Sitting at 30 St Mary Axe, the 40 storey commercial building went into receivership this year, when co-owners Deutsche Fonds’ IVG Euro Select 14 fund and Evans Randall, a private equity firm, defaulted on a loan worth £400 million. They took on the loan to buy the building for £600 million from Swiss Re in 2006.

Gherkin Goes on Sale for £650 Million

As such, the Gherkin has now been put on sale for a staggering £650 million – more than its price the last time it as put on the block. According to one anonymous Kuala-Lumpur consultant, one Malaysian based firm at least is likely to put in a high bid for the iconic structure.

The consultant said that “it is a trophy building. The agents have flown in to meet potential bidders from Malaysia. The tenders will close in the second half of the month.”

London Property is Lucrative in the Long Term

Another Kuala-Lumpur source showed the long-term viability of such a purchase, saying that “if a building is giving a yield of 4.5% today and the lease is reaching its five-year renewal deadline, then the possibility of a rental increase would push up yields if the building transacts at that price.”

The interest the sale is generating, as well as the observations on the long term viability of central London commercial property, shows why UK property investment funds should always look to enter this market. In Simon Morris’ experience, yes, it costs a lot to enter, but it always proves profitable in the long term, because London is so pivotal to the global economy.

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