LONDON (BLOOMBERG) - Land Securities Group and Canary Wharf Group have agreed to sell the London tower known as the Walkie Talkie to Hong Kong-based LKK Health Products Group for £1.28 billion (US$1.7 billion or S$2.31 billion), according to a statement.
The price, which is the highest-ever paid for a single property in the United Kingdom, is remarkable given that the building will face ongoing maintenance costs, JPMorgan Chase analysts wrote in a client note. LKK, which sells Chinese herbal medicine, paid a 13 per cent premium to book value for the property even as Land Securities' shares trade at a 26 per cent discount, said one of the analysts, Mr Tim Leckie.
Asian investors have poured into London's office market in the year since the Brexit vote, capitalising on the weak pound to buy towers for record-high prices. Hong Kong real estate developer C C Land Holdings paid £1.15 billion for the Cheesegrater tower in May.
The Walkie Talkie sale, at a 3.4 per cent yield, "crystallises the significant value we have created", Land Securities chief executive officer Rob Noel said in a statement. The UK's largest real estate investment trust said it plans to return about £475 million to shareholders from the £641.3 million it expects to raise from the sale.
The 37-storey tower at 20, Fenchurch Street, cost £474 million to build and the sale price therefore reflects a "truly remarkable" 167 per cent profit on the development cost, Mr Leckie wrote.
Canary Wharf Group originally instructed CBRE Group and Eastdil Secured to sell a 50 per cent stake in the property in March. LKK, which was advised by broker Cushman & Wakefield, subsequently agreed to buy the entire building. Land Securities said it expects the deal, which is unconditional, to be completed in August.