Canary Wharf office to be sold at £160m discount as values tumble

A CANARY Wharf office once occupied by a casualty of the 2008 banking crisis is to be sold at a £160m discount in the latest blow to London’s beleaguered financial district.

An Israeli businessman has bought 5 Churchill Place in a £110m deal, seven years after it was acquired by Cheung Kei Group, a Chinese investor, for £270m. The building, which was occupied by US investment bank Bear Stearns before its demise, was placed in receivership last year after Cheung Kei Group defaulted on loans backed by the property. Haim Taib’s Menomadin Group has now bought the lease at a 60pc discount in a deal brokered by Savills, React News reported.

This sale marks one of the largest distressed sales in London so far.

The Chinese investor had previously tried to offload 5 Churchill Place in 2022 for around £400m but was unsuccessful. The building is primarily let to JP Morgan on a long-term lease. The Chinese company bought 5 Churchill Place with £196m of debt, approximately 70pc of the building’s worth, with around £175m provided by Lloyds Banking Group. It comes as Britain’s offices have faced a severe reckoning as stubbornly high interest rates sent values tumbling.

Meanwhile, downsizing because of the rise in hybrid working has piled additional pressure on owners. Although not yet confirmed, the sale of 5 Churchill Place is likely to set a precedent for financial district values. Canary Wharf has suffered a number of high-profile exits, with HSBC’S decision to leave its global headquarters in July to move to the City its largest blow.

Other companies including Clifford Chance and Credit Suisse have also said they will leave. Empty office space in the Docklands now stands at 16pc – the highest level in years.

Also, the property which housed the Financial Conduct Authority is on the market by Blackstone, having been bought in 2014 for around £165m.

A second Cheung Kei Group building, 20 Canada Square, will likely be on the market later this year. The company has already defaulted on its £265.5m loan against the building.

Matthew Pointon, senior property economist at Capital Economics said: “As businesses look to downsize, many will take the opportunity to move to central, prime areas in a bid to attract staff into the office.”

Canary Wharf Group, which owns swathes of land across the district, secured a £400m cash injection from shareholders last year. That included cash from private equity group Brookfield and the Qatar Investment Authority.

Cheung Kei Group was contacted for comment. Savills declined to comment.