Citigroup is close to agreeing a £1.2 billion deal to buy the skyscraper in Canary Wharf that houses its European headquarters.
In what would be a striking financial commitment to Britain only weeks before Brexit, and one of the largest UK commercial property transactions on record, Citi is in advanced talks to buy the 42-storey Citi Tower, or 25 Canada Square, according to EG, a property trade publication.
Banks are considering moving staff and assets out of the country amid concerns about Brexit, but the potential investment by one of the world’s largest banks underlines that they expect London to remain a global financial centre.
Citigroup is the fourth largest American bank and it employs about 9,000 people in the UK. These include 6,000 at its main European offices at Canary Wharf, east London, with 2,000 in 25 Canada Square and 4,000 in the neighbouring 33 Canada Square. It is understood that if the deal goes ahead, Citi staff will be moved gradually from 33 Canada Square back into 25 Canada Square, with space sublet to other businesses reclaimed. The bank also has a West End office in St James’s for its private bank.
Citi has said previously that it will create between 150 and 250 jobs in Europe as a result of Brexit, with roughly 60 staff members in London being relocated.
However, it also has said consistently that its Canary Wharf offices will remain its headquarters for Europe, the Middle East and Africa whatever the outcome of Brexit negotiations. More than 60 per cent of its workforce for the EMEA region is already outside the UK.
Stephen Clifton, head of the commercial at Knight Frank, the property advisory firm, told EG: “This is another great example of the breadth of international appeal of London office investments, where, for mainly political reasons, assets are offering great value compared with other global cities. When political stability returns, the arbitrage will disappear quickly and this is smart timing.”
It is understood that part of the motivation for buying the building are changes to accounting rules, known as IFRS 16. These mean that from the start of this year long-dated, index-linked leases must now be considered a liability and recorded on a company’s balance sheet. Once Citi has bought the building, it will be registered as an asset on its balance sheet. Citi bought its global headquarters in New York in 2016.
Citi has a leasing agreement on the entire 1.2 million sq ft building at 25 Canada Square that expires in 2037. However, it now occupies less than 40 per cent of the building, having agreed sublets to businesses including Boston Consulting Group, the management consultancy, according to Radius Data Exchange, the property database.
The building is being sold by AGC Equity Partners, a private equity firm. A £1.2 billion sale would make it one of the largest single asset real estate transactions in the UK. The record is the £1.3 billion sale of the Walkie Talkie at 20 Fenchurch Street in the City by Landsec and Canary Wharf Group to Lee Kum Kee, of Hong Kong, in 2017.
Citi declined to comment. CBRE, the property advisory firm advising on the sale, also declined to comment.
Sourced The Times 17th February 2019