Citigroup’s European headquarters in London’s Canary Wharf was bought by Derek Quinlan, an Irish investor, and Propinvest Holdings for about £1 billio

Citigroup’s European headquarters in London’s Canary Wharf was bought by Derek Quinlan, an Irish investor, and Propinvest Holdings for about £1 billion (S$3.06 billion) in the UK’s second-largest commercial property transaction.

The 42-storey building at 25 Canada Square was sold by Royal Bank of Scotland Group, said Carolyn McAdam, a spokeswoman for the bank. Royal Bank acquired the property at the end of 2003 for more than £700 million.

‘This is a long-term personal investment in a prime property in the heart of London’s new financial centre,’ Mr Quinlan, a 59-year-old former tax inspector, said yesterday.

An increase in central London office rents, fuelled by a shortage of space, is prompting investors to pay record amounts for commercial real estate. HSBC Holdings, Europe’s largest bank by market value, in April sold its London base at 8 Canada Square to Metrovacesa SA for £1.09 billion, the UK’s biggest commercial property deal.

Citigroup, the largest US bank, is the only occupier of the tower at 25 Canada Square, a building with 1.2 million square feet of space. The 25-year lease expires in 2026, with upward-only rent reviews every five years.

The yield, defined as rental income divided by value, is about 4.5 per cent, according to Mr Quinlan. That implies an annual rent of about £45 million, ’significantly’ less than the average for the City of London and Canary Wharf financial districts, Mr Quinlan said. The yield will probably increase to reflect the market rate, he said.

Mr Quinlan controls Quinlan Private, a real estate and private equity firm that oversees assets of more than 10 billion euros (S$20.7 billion). Quinlan Private and a group of investors last month paid 1.16 billion euros for a chain of budget hotels owned by Jurys Doyle Hotel Group.

Mr Quinlan was the main investor in the £1.1 billion purchase from Royal Bank of 47 UK hotels operated by Marriott International.

Mr Quinlan and Propinvest, which is wholly owned by Glenn Maud, were on the shortlist to buy HSBC’s London headquarters, Property Week said in April.

Propinvest lost out to IVG Immobilien and investment bank Evans Randall over the £600 million sale in February of the London office tower dubbed ‘the Gherkin’.

Quinlan Private and General Electric’s real estate unit yesterday agreed to buy the Mall of Plovdiv shopping centre in Bulgaria’s second-biggest city, the companies said. The mall is due be completed in the fourth quarter of 2008. The companies acquired a shopping centre in the capital, Sofia, last year.

Source: The Business Times, 03 July 2007