Oyster sauce maker makes £1.2bn call on Walkie Talkie

3rd July 2017

Hong Kong oyster sauce maker Lee Kum Kee has emerged as the preferred bidder to buy the Walkie Talkie tower in the City of London for around £1.2bn.

LKK is nearing a deal to buy the building, formally known as 20 Fenchurch Street, according to Bloomberg.It is understood that while Canary Wharf Group and Land Securities, which jointly own the building, are yet to agree terms with LKK and other investors remain in the mix, the Hong Kong-based firm is the favourite to clinch the deal.A sales price of £1.2bn would reflect a net initial yield of around 3.7% and a capital value of £1,744 per sq ft.Last month, Lee Kum Kee made a £900m off market bid to buy the Gherkin at 30 St Mary Axe. However, the building’s owner, Safra Group, turned down the offer, with a spokesperson for J Safra Real Estate, saying: “The Gherkin is a unique real estate asset and is not for sale.” The £900m bid reflected a yield of 3.25% and a capital value of around £1,700 per sq ft.In March, CoStar News reported that Canary Wharf Group had instructed Eastdil Secured and CBRE to sell the 50% stake that it manages and part-owns in the Walkie Talkie, one of the iconic buildings of the City of London, for around £600m.The agents were mandated to sell the half share in the building at 20 Fenchurch Street, EC3, at a level which valued the whole tower at around £1.2bn.Canary’s joint venture partner Land Securities has not been actively marketing its stake but was persuaded to sell given the price achieved and because most of the investor interest has been focused on buying the tower outright

The sales process mirrors that of the Leadenhall Building, which sold to CC Land in March for £1.15bn. British Land opted to sell its stake in the Cheesegrater, otherwise known as the Leadenhall Building, last year for £500m before interest from CC Land, as well as Korea Investment Corporation and Temasek prompted JV partner Oxford Properties to sell its share as well in a move which commanded a premium price for the whole asset.Canary Wharf Group controls a 50% interest in the building at 20 Fenchurch Street and manages it on behalf of investors including Qatar Investment Authority, China Investment Corporation, Morgan Stanley Real Estate Investing and Brookfield.The 688,000 sq ft office building is fully let. The first office tenant took occupation in May 2014 and the Sky Garden opened in January 2015. Construction on the Walkie Talkie began at the start of 2011 before completing in 2014. Floor plates in the building range from 14,000 – 28,000 sq ftLand Securities sold a 50% stake in the Walkie Talkie to Canary Wharf Group in 2010, whose principal shareholders were China Investment Corporation, MSREI, Brookfield and Qatar Investment Authority.CWG retained a 15% stake in 20 Fenchurch Street before selling on three 11.7% stakes to MSREI, CIC and QIA respectively. CWG continued to manage the 50% interest in the building on behalf of the investors.Morgan Stanley Real Estate has already been trying to sell its stake of almost 12% in the London skyscraper for around £120m. The stake forms part of the overall 50% interest that is controlled by Canary Wharf Group.