Citigroup tower sold in £1bn deal

By Sophie Brodie

Last Updated: 12:06am BST 02/07/2007

Royal Bank of Scotland has sold one of its tower blocks in London's Canary Wharf for £1bn to a joint venture between Quinlan Private and PropInvest.


	Citigroup has leased the tower for a further 20 years and will pay £46.5m a year in rent

Quinlan Private is owned by Irish property magnate Derek Quinlan, whose portfolio includes London's Claridges Hotel and, more recently, Jurys Inns. PropInvest is run by investor Glenn Maud and was one of the bidders for London's landmark Swiss Re building, known as the Gherkin, earlier this year.

Together they have bought 25 Canada Square, currently occupied by US banking giant Citigroup.

RBS was advised on the sale by investment bank Lazard and contracts were exchanged over the weekend. Citigroup has leased the building for a further 20 years and will pay £46.5m a year in rent for the tower, generating a yield of 4.6pc.

RBS's decision to sell the Citigroup tower and a second building in Canary Wharf sub-let to Bank of America was first disclosed by The Daily Telegraph six weeks ago.

It followed the record-breaking price achieved for HSBC's tower block in Canary Wharf in May.

HSBC's building was sold for £1.1bn to Metrovacesa, a Spanish property company run by the Sanahuja family, in the UK's biggest single property deal. Under the terms of the lease, HSBC pays £43.5m in annual rent to Metrovacesa, generating an average yield of 4pc. However, HSBC's lease structure differs from Citigroup's in being linked to inflation. Citigroup's lease has an upward-only rent review.

RBS bought the two properties from Canary Wharf Group more than three years ago, paying £1.12bn for them both. At the time, the sale was put to a shareholder vote as former owner Canary Wharf Group was in the middle of a fierce takeover battle.

Canary Wharf reportedly took £64.6m in combined annual rental income from both buildings in 2003. The price then included certain enterprise tax allowances which are not part of the sale to Quinlan and PropInvest.The Citigroup tower encompasses 1.2m sq ft, while the building that houses Bank of America has over 500,000 sq ft of space. Together the buildings are thought to be worth almost £1.5bn. Credit Suisse currently rents the Bank of America building from RBS and sub-lets it to the US bank.

It is understood that bidding for the Bank of America building continues, despite reports that Brookfield, which lost out in the battle for the Canary Wharf Group, was close to a deal.

Other City buildings have sold for enormous sums in the last few months.

Merrill Lynch recently closed a £600m deal with GIC, the investment arm of the government of Singapore, to buy its headquarters near St Paul's Cathedral, while One Exchange Square, which houses the European Bank for Reconstruction and Development, was bought by German fund KanAm Grund for £406m.