The Safra Group, a Brazilian conglomerate controlled by billionaire Joseph Safra, has bought 30 St Mary Axe, one of the most recognized office buildings in the world, for a sum reported to be more than £700 million (€894 million; $1.1 billion).
The purchase brings to a close a troubled period for the Norman Foster-designed office, after its previous owners, the private equity real estate firm Evans Randall and the German property company IVG Immobolien, failed to address the building’s debt obligations.
The 516,000 square foot, 41-story building, was bought by the two companies in 2006 for £600 million from Swiss group Swiss Re. The purchase price included a £400 million loan underwritten by five banks. IVG opted to denominate its share in Swiss Francs.
But as the building’s value sank in the wake of the global financial crisis, the Swiss currency also appreciated against the pound, the combination of which pushed the Gherkin into a breach of its loan-to-value ratio covenant of 67 percent in 2009. The owners remained in breach of that covenant ever since.
To compound matters, IVG encountered financial difficulties of its own, slipping into insolvency last year. To help its cause, it sold off its fund management business to Zech Group subsidiary Deutsche Fonds. Despite attempts made by partner Evans Randall to retain ownership of the office, its inability to reach an accord with the faltering IVG led to receivers Deloitte to seek a sale to resolve the situation.
When alerted to the sale, some 200 parties reportedly expressed interest in buying the trophy asset, including a number of institutional bidders. However, ultimately it would be an ultra high net worth individual, Joseph Safra, who prevailed with a winning bid. Syrian-born Safra is reputed to be Brazil’s second richest man with more than $15 billion having built up an investment and banking empire operating in South America and also North America and Europe.
The group said in an announcement on the sale that the acquisition of the skyline-defining property was “consistent with our real estate strategy of investment in properties that are truly special – at the best locations within great cities.”
“While only ten years old, this building is already a London icon that is distinguished from others in the market, with excellent value growth potential. We intend to make the building even better and more desirable through active ownership that will lead to a range of enhancements that will benefit tenants.”
The purchase by Safra is the latest in a long string of large buys in London by international buyers since the global financial crisis. According to Real Capital Analytics, the real estate transactions research house, sovereign wealth funds, for example, have ploughed almost four times the amount of capital into London property than they have into New York property in the last 12 months.