London mayor Boris Johnson travelled to MIPIM in Cannes, in the south of France, last month with the intention of enticing businesses to relocate their operations to the UK capital. To help, he even offered firms free office space and facilities for 12 months.
His help comes at a key time. Commercial property landlords, particularly office landlords, in the UK are having a tough time of it. According to the latest monthly IPD UK index, office rents fell by 1.74 percent compared to the previous month – one of the sharpest monthly declines of the recession so far. Johnson doesn't need to be told how bad things are, though. The owner of the egg-shaped building on the River Thames where the mayor and London's City Hall has offices is in technical default.
The building is part of a 13-acre development near London Bridge owned by developer More London. According to a regulatory filing, the Royal Bank of Scotland packaged £670 million of loans against the building and three other properties in the complex into bonds in 2006.
In January this year, loan-to-value covenants were breached when the property's value fell to £754 million pounds – 21 percent below the October 2006 valuation of £955 million. The loan is now deemed a “specially serviced loan”. More London told Bloomberg the property had sufficient cash to cover debt payments, thanks in part to the 25-year lease it has with the Johnson-led Greater London Authority.
When asked about the issue by reporters, though, Johnson apparently had other things on his mind: “My profound thought about More London is it would be a wonderful thing if someone could organise the windows so they could be cleaned more efficiently.”