UK Landsec sells its share of the Walkie Talkie to HK’s LKK for £641m

Landsec has exchanged contracts to sell its 50% stake in 20 Fenchurch Street, EC3M to LKK Health Products Group Limited (LKKHPG) for a headline price of £641.3 million. LKKHPG will also acquire Canary Wharf Group’s 50% stake in the building, bringing the total headline price to £1,282.5 million, reflecting a net initial yield to the purchaser of 3.4%. Completion is expected to take place at the end of August and is unconditional.
20 Fenchurch Street was developed by a joint venture between Landsec and Canary Wharf Group in 2010, completed in 2014 and comprises 671,000 sq ft of office space on 34 floors in the City of London’s insurance district. Its innovative and efficient design makes it an attractive location for insurance companies and brokers alike, and it was fully let just a few months after completion to customers including Markel, RSA and Liberty Mutual. It’s also home to 17,000 sq ft of retail space on the ground floor and within the three-storey Sky Garden, which has spectacular views across London.
After costs of sale, the top up of unexpired rent free periods and other commitments, Landsec expects to receive £634.5 million in net proceeds. Landsec intends to return approximately £475 million to shareholders in the form of a payment of 60 pence per share, which would be accompanied by a share consolidation. The payment and share consolidation is subject to shareholder approval, which is expected to be sought in late September 2017. The balance of the proceeds will initially be used to repay short term debt, pending redeployment. As a result, Landsec’s current gearing is expected to remain unchanged. Landsec’s 50% share in 20 Fenchurch Street was last valued on 31 March 2017 at £567.5m. The annualised net rental income (on an accounting basis) attributable to Landsec’s 50% share is currently £18.8 million.
Robert Noel, Chief Executive of Landsec, said: “Our decision to sell 20 Fenchurch Street at an exceptional price and return cash to shareholders reflects our disciplined approach to the use of capital. The building has been an immensely successful project for Landsec and our partners. Its development in 2010 was part of Landsec’s major speculative development programme in the capital, which has seen the completion of 3.1 million sq ft of office and retail space, thousands of jobs sustained in the construction industry, and considerable improvements to public spaces. This sale crystallises the significant value we have created at 20 Fenchurch Street.
“While we will be returning cash to shareholders as a result of the sale, our gearing will remain unchanged from current levels, ensuring we retain our significant firepower. This will allow us to move quickly to capitalise on opportunities whenever they might arise.”