CIC, Qatar Holdings to invest in £500m London office

Land Securities, the UK’s largest real estate developer, and Canary Wharf Group, owner of assets in Canary Wharf, today announced a joint venture to build a 690,000 square foot office in the City of London. The Financial Times reported the building would be backed by sovereign wealth from China Investment Council and Qatar Holdings.

Sovereign wealth funds, China Investment Corporation (CIC) and the Qatar Investment Authority (QIA), are expected to become significant investors in the development of a 690,000 square foot office development in the City of London.

In a further sign that investors are favouring core real estate assets in mature markets, The Financial Times reported that each investor, QIA via its investment subsidiary Qatar Holdings, would take stakes of more than 10 percent in the development.

Nicknamed the ‘Walkie Talkie’ after its architectural resemblance to a mobile phone, the office is one of the more anticipated additions to London's skyline.

It is expected cost approximately £500 million (€568 million; $787 million) to develop and is expected to complete in the second quarter of 2014.

Both soverign investors control stakes in Canary Wharf Group, a London-based real estate company and one half of a 50:50 joint venture with the UK’s largest developer, Land Securities which is shortly to buy the development. Morgan Stanley Real Estate Investing, another investor in Canary Wharf Group, is also expected to invest in the development.

The development was previously on the books of Land Securities but the firm announced today that it would sell it into the joint venture for £90.2 million in line with its March valuation. 

While investment in development is typically seen as a more opportunistic play, The City of London’s tight occupational market and subsequent rising rents is likely to mitigate such risk.

Qatar has been particularly bullish on the London development front recently. Earlier this month, QIA’s real estate arm, Qatari Diar said it planned to fund the development of Chelsea Barracks in West London.  The 12.8 acre site was the most expensive development land sale in the world when it was sold to Qatari Diar for £959 million in 2007.