British Land, Oxford Properties to sell ‘Cheesegrater’ for £1.15bn

British Land, the London-based property company, and Oxford Properties, the Toronto-based real estate business of Canadian pension Ontario Municipal Employees Retirement System, have exchanged contracts for the sale of The Leadenhall Building for £1.15 billion ($1.41 billion; €1.35 billion).

The buyer is Hong Kong-based real estate investor CC Land Holdings, run by billionaire Cheung Chung Kiu. The Leadenhall Building is the firm’s second acquisition in the UK capital in the last three months, following its December purchase of One Kingdom Place, a 264,000 square foot office building in West London, from TH Real Estate for £292 million.

Rumors circulated around the City of London yesterday that all parties were in advanced talks over a potential sale of the building. But CC Land poured cold water on the speculation stating it would not comment on “market rumors.” However, this morning, the two sellers announced that contracts had been exchanged and the sale would be officially completed by June.

The deal would be the biggest-ever real estate transaction in the City of London and the second highest in the UK behind Qatar’s sovereign-wealth fund’s acquisition of the London headquarters of HSBC Holdings, a skyscraper in the city’s Canary Wharf financial district, for over £1.1 billion in 2014.

British Land and Oxford Properties bought The Leadenhall Building, which at 736 feet is the tallest property in the City of London, in 2010 in a 50/50 joint venture. Construction of the asset started in early 2011 and was completed in just over three years.

The property is currently fully let, with an average remaining lease term of over 10 years and has achieved record rents for the City of more than £100 per square foot. It is occupied by high profile tenants including insurers Aon and MS Amlin. It provides 610,000 square feet of office space over 46 floors, in the heart of London’s financial district, and annual rent is approximately £12.7 million.

Its distinctive sloping shape, which was designed to protect views of St Paul's Cathedral, led to it being dubbed ‘The Cheesegrater’ – in a similar vein to the nicknames of ‘The Gherkin’ and ‘The Walkie Talkie’ for the City’s 30 St Mary Axe and 20 Fenchurch Street, respectively.

“British Land and Oxford Properties took a bold step at the early stages of the UK's economic recovery to develop The Leadenhall Building to generate a high quality, long term income stream,” said Tim Roberts, head of offices and residential at British Land. “It's a decision which has really paid off. Through a strong, collaborative partnership, we have delivered an iconic, award-winning building let to high caliber occupiers at record City rents. This sale shows continued investor appetite for best in class, well located property in London.”

“The Leadenhall Building has been a cornerstone of our London business and has propelled Oxford Properties to a leading position in European real estate development and investment,” said Paul Brundage, executive vice president and senior managing director – Europe at Oxford Properties. “We are fully committed to the UK and Europe for the long term and are looking forward to pursuing further investment opportunities going forward, either on our own or with like-minded partners such as British Land,” he added.