Monday 28 July 2014 9:25 pm

City’s Gherkin skyscraper to be sold off with £640m starting price tag

Kasmira Jefford covers retail, consumer and property news at City A.M.

Kasmira Jefford covers retail, consumer and property news at City A.M.

The City’s iconic Gherkin has been put up for sale on the open market after it collapsed into receivership earlier this year, with a price tag of around £640m.
Receivers at Deloitte have appointed their real estate arm and Savills to sell 30 St Mary’s Axe, which will be advertised to buyers across the world in a marketing push starting today. 
Offers for the building are expected to start at around that £640m mark, although strong dem­and from buyers keen to get a slice of one of London’s trophy buildings could see the Gherkin go for more. 
The tower’s lenders called in Deloitte in April after losing pati­ence with owners Evans Randall and German firm IVG, which had failed to strike a restructuring deal over its mounting debt-pile.
The pair said at the time that the problem was largely due to a tranche of the debt secured against the building, which had soared as the Swiss franc strengthened against the pound.
IVG and Evans Randall bought the tower in early 2007 for £600m from insurer Swiss Re, which set a record at the time for a building in the City and was considered overpriced. The acquisition was funded by a £500m loan from a consortium of five banks led by Bayerische Landesbank and first defaulted in 2009.
Based on the £600m paid in 2006, it would now be worth around £742m acc­ounting for inflation. And its value has not kept pace with other soaring London property sectors.

The Gherkin
Gherkin tenants pay £55 per sq ft. in rent on average (Source: Getty Images)

Deloitte partner Julian Stocks, handling the sale for Deloitte, told City A.M.: “There is nothing wrong with the building. It’s a great asset. The issue is with the capital structure and finan­cing. If [buyers] want an interesting piece of London, this is as good as it gets”. 
The tower, designed by Lord Foster – who was also behind City Hall and Wembley Stadium – is 99 per cent let to companies, including Swiss Re, which occupies around half of the building. Tenants pay an average rent of £55 per sq ft. 
The London commercial property market has seen insatiable demand from overseas investors and a growing number of UK institutions on the back of the economic recovery.  According to Savills, £71.1bn has been invested into the office and retail markets over the last five and a half years, with overseas investors accounting for £47.7bn.
The Gherkin is in the heart of the insurance district, which has seen a flurry of leasing activity led by insurers moving into new developments such as the Walkie Talkie.