The City of London’s defining tower has been placed under receivership with Deloitte acting as creditors. This will pave the way for the building to be put up for sale, which will be in about 6 months.
A statement published by Deloitte this afternoon said the building has been “well leased” since the initial default in 2009 and “remains in trophy condition”. Tenants include Swiss Reinsurance, Standard Life, Kirkland and Ellis amongst many others.
Neville Kahn, joint receiver and restructuring services partner at Deloitte, said: “The senior lenders were reluctant to appoint a receiver but felt they had no choice due to the ongoing defaults, which have remained uncured for over five years, and concerns that the borrowers’ lack of equity in the transaction had caused their incentives to become misaligned with the lenders’.” Adding that their priority is to preserve the value of the asset.
The Gherkin is jointly owned by Germany’s IVG Immobilien and Evans Randall who bought the building in 2006 for £630m. However the former has faced debt problems over the past few years. The Financial Times reported that IVG chose to denominate its share of the partnership’s loan finance used to buy the building in Swiss francs without a currency hedge. But that currency has risen 63% against the Pound since 2007 and as a result the building breached its loan-to-value ratio cap of 67% in 2009 and has remained in breach ever since. Its current LTV ratio is above 90 %. The lenders were fed up.
A spokesperson for Evans Randall said: “As widely reported previously, the default has arisen largely as a consequence of the IVG tranche of the loan being denominated in Swiss Francs and has been exacerbated by the insolvency at IVG. These factors have so far impeded Evans Randall’s ability to restructure the financing on the asset, including the injection of new equity.
Despite the shocking revelation, the architectural masterpiece will not have any problems being sold.