Qatar Fund Buys HSBC's London Headquarters

By Ed Ballard and Art Patnaude 

Qatar's sovereign-wealth fund has completed the purchase of the London headquarters of HSBC Holdings PLC, in the U.K.'s largest ever real estate deal, giving Qatar a huge slice of the Canary Wharf business district even if a high-profile bid to take control of the estate founders.

The Qatar Investment Authority, which manages around $300 billion, bought 8 Canada Square--which at over a million square feet is London's largest office building--from the National Pension Service of Korea, or NPS, according to a statement from J.P. Morgan Asset Management, which advised NPS on the deal.

This is the fourth time the tower has changed hands in seven years. HSBC sold it to Metrovacesa SA for GBP1.09 billion ($1.71 billion) in 2007, at the height of the U.K.'s previous property boom and bought it back less than two years later for around GBP250 million less before selling it to NPS in 2009.

The latest sale price wasn't disclosed but the building fetched more than its GBP1.1 billion marketing price, according to people familiar with the situation. The sale represents a windfall for the Korean seller, which acquired the tower for just GBP772 million and is yet another indicator of the depth of overseas demand for office space in the U.K. capital.

"NPS capitalized on the cyclicality of the global real estate capital market by timing their entry into the London market at or near its nadir...NPS has been rewarded with an outstanding risk-adjusted return," said Bradley Larsen, co-head of European acquisitions for J.P. Morgan Asset Management.

The sale could be the final trophy asset to change hands in a big year for London office deals. Last month, a Brazilian firm bought the Gherkin, one of the most recognizable towers in London's skyline, while Chinese investors have scooped up eight London properties for a combined $4 billion this year, with another Canary Wharf skyscraper among them.

The conclusion of the widely-trailed deal comes at a critical moment in Qatar's bid to take control of the company that began developing the wider Canary Wharf district in former dockyards two decades ago and still owns around half of its 16 million square feet of office space.

Songbird Estates PLC, which owns 69% of Canary Wharf Group, has yet to respond formally to the GBP2.6 billion offer tabled by QIA and Canada's Brookfield Property Partners, but said it undervalues the portfolio.

Write to Ed Ballard at [e-mail] and Art Patnaude at [e-mail]

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