Citigroup London HQ To Sell for $2B

LONDON-One of two Canary Wharf office buildings said to be on the market by the Royal Bank of Scotland has found a taker, as Irish investment group Quinlan Private and partner Propinvest have agreed to buy 25 Canada Sq., a 42-story, 1.2-million-sf tower 100% leased to Citigroup. The $2-billion sale is considered the second largest single-asset deal ever in the United Kingdom, trailing only the $2.2-billion sale and leaseback of HSBC’s headquarters at neighboring 8 Canada Sq. in April.

“This is a long-term personal investment in a prime property in the heart of London’s new financial center,” Quinlan Private founder Derek Quinlan offered in a release unveiling the 25 Canada Sq. deal. Having the world’s largest bank as the sole tenant was a major draw, according to Quinlan, and will generate a greater rental rate than that commanded at the HSBC headquarters. Rental income there is estimated by one report at $87 million, compared to $93 million in the Citigroup deal, which runs through 2026. Citigroup has had a presence in the building since 2000.

While outpacing the income stream to Metrovacesa, the Spanish-based buyers of the HSBC tower, 25 Canada Sq. is trading at a yield of just 4.5%, well below the average for similar investments in the district. Quinlan and Propinvest, which are 50/50 partners, explain that returns will improve over time due to periodic rental escalations. Designed by Cesar Pelli & Associates and Adamson Associates, 25 Canada Sq. has an impressive architectural pedigree, adds Quinlan, who cited the efficiency and condition of the tower as other attributes. Cesar Pelli designed several Canary Wharf buildings, including 1 Canada Sq. and 25 and 40 Bank St.