Kuwaiti Real Estate Fund to Acquire BofA’s London HQ

on Dec 7, 2012

**Kuwait in Negotiations for BofA’s London HQ**

St Martins Property, the real estate fund of the Kuwaiti government, is closing in on a £400 million deal to purchase Bank of America’s (BofA) London headquarter, marking what would be one of the most valuable commercial property transactions in the UK capital since the start of the global financial crisis, The Financial Times reported on 7 December 2012, citing people familiar with the matter.

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According to the paper, on Thursday evening, St Martins Property entered exclusive negotiations with private equity firm Evans Randall to acquire the Canary Wharf Office Tower in London. Under the proposed terms of the deal, the sale would represent a loss for the current owner Evans Randall, which bought the 14-storey building in 2007 from Royal Bank of Scotland in a £452 million transaction. The 536,000 sq ft office tower is let to Credit Suisse (NYSE:CRP) on a 25-year lease ending in 2027. The Swiss bank, however, has sublet 10 floors of the property to BofA.

The FT report further states that Evans Randall and its advisers from real estate services firm CBRE (NYSE:CBG), declined to discuss the negotiation process, while Kuwait’s St Martins Property could not be reached for comment.
**Canary Wharf Office Tower’s Attraction**
This year, the Canary Wharf business district surpassed the City of London as Europe’s preeminent financial centre, providing offices for the largest number of bankers in Europe. Part of the attraction of the Canary Wharf Office Tower is its proximity to the Crossrail line currently under construction which will link the banking hub with Heathrow airport. Potential buyers may also be attracted to the possibility of seeking planning permission from Canary Wharf Estate to increase the building’s height. Recent income increase is also a factor causing investors’ interest. Last year, Evans Randall carried out a rent review that increased the income from the glass-clad building from £19.7 million to £20.1 million, or £37.50 per sq ft.

**Sovereign Wealth Funds’ Appetite for London Commercial Property**
!m[](/uploads/story/990/thumbs/pic1_inline.png)St Martins Property is amongst the most active Middle Eastern investors in the London commercial property market and its recently-revealed talks about the Canary Warf Office Tower acquisition once again highlight the increasing appetite of sovereign wealth funds’ for high-quality London commercial property.

Since the start of the year, sovereign wealth funds from Asia and the Middle East have shown soaring interest in London’s commercial property market. In fact, according to a recent survey by real estate services firm Jones Lang LaSalle (NYSE:JLL), London is the primary destination of choice for Middle Eastern investors, who have purchased a total of $2.3 billion (£1.4 billion) in the UK over the first 9 months of 2012, more than twice the $1.2 billion (£748,083) invested during the same period in 2011.
The recent investment wave has also fuelled a development boom across the UK capital’s top business areas and has ignited hopes of a recovery in commercial property values, which have been hit by the recession. The demand for London commercial properties has been so strong that the UK capital now accounts for about a third of the value of all commercial real estate deals in Europe, with the bulk of investment focused around the City, the West End and Canary Wharf business districts.


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