Neville Kahn and Phil Bowers appointed joint receivers of 30 St Mary Axe, as multi-currency lending arrangement hits its owners
ICONIC City landmark The Gherkin (30 St Mary Axe) has been placed into receivership, with Deloitte partners Phil Bowers and Neville Kahn taking control of its future.
Bowers and Kahn have been appointed joint fixed charge receivers of the property, after its owners IVG Immobilien AG have consistently struggled to pay back its consortium of lenders, defaulting on debt since 2009.
Kahn 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.”
Purchased for £630m in 2007, its owners have struggled to manage the multi-currency nature of the loan, with adverse interest rates and currency movements effectively increasing the liability.
Housing the likes of Sky News and Sir Norman Foster’s business, demand for space is still strong and tenants are not expected to be affected by the receivership. A sale of The Gherkin is expected in the near future.
“The Gherkin is a truly exceptional building, a landmark recognised around the globe,” Kahn added. “Our priority is to preserve the value of this asset. We are in the process of communicating with all tenants and working with the property manager to ensure the continuation of all property management services with no interruption to tenants.”
Other restructuring advisers warned that the fate that has befallen The Gherkin’s owners is likely to be replicated.
“We expect similar crunch times ahead for overseas investors who have misjudged their currency arrangements for servicing debts on UK property and other assets given the recent strengthening of sterling over a basket of foreign currencies, notwithstanding the recent surge in London commercial property values,” said Glyn Mummery, partner at FRP Advisory.
Rising property values, purchases made on initial low yields, will also be problematic if interest rates rise and property values fall, Mummery added.