Monday, 26 September 2011

For Sale: Landmark City of London Tower - Recently Reduced. BlackRock and Hermes put Tower 42 Estate back on Market

The Tower 42 Estate, which includes the landmark City of London tower of the same name, has been offered for sale for the second time in as many years by its joint-owners, The BlackRock UK Property Fund (BUKPF) and Hermes Real Estate (HRE) who are confident that they can achieve upwards of £290m for the site, which sits at the very heart of the square mile. The 600ft tower itself is rightly considered to be the jewel in the crown of the 2.2 acre estate and offers buyers the opportunity to acquire one of the City’s undoubted trophy assets, however that doesn’t tell the full story as despite its iconic status, both the 47-storey tower and the broader area is in need of major redevelopment in the face of ever-increasing competition from a host of similarly sized multi-let office schemes that include both Heron Tower and the recently-refurbished 125 Old Broad Street.

The estate was last placed on the market in April 2010, at that time with a £300m price tag attached, however despite reported interest from the like of Gerald Ronson’s Heron International and the Chinese Estates Group, the sale was eventually withdrawn just four months later in August with BUKPF and HRE claiming that they would pursue a new ‘value-add’ strategy. Fast forward 12 months and that strategy has resulted in neither any development or letting activity, whilst the two property funds have had to reduce the asking price by a not-insignificant £10m. Whilst the global economic uncertainty will not have helped the sale price, the estate has several key areas that need to be addressed, which BUKPF and HRE have now decided is a job for somebody else.

The fundamental issue for the Richard Seifert-designed tower – formally opened by Her Majesty the Queen, Elizabeth II on 11th June 1981 as The National Westminster Tower – lies in its inherent design and the fact that it was built around a huge concrete core. Seifert designed the tower around the then-innovative concept of three hexagonal chevrons, which when viewed from above appears to show the NatWest corporate logo, whilst providing each of the main office floors with three distinct areas, or ‘leafs’ as they are now referred to. After NatWest vacated the building in the late-90’s, this leaf concept proved to be ideal for a multi-let approach with each leaf providing approximately 3,000 sq ft with a typical floor therefore of around 9,000 sq ft. Given the recent advances in the design of tall buildings, however - driven by the requirements of modern occupiers - the tower’s internal layout now compares unfavourably with the typical floor plan of 11,099 sq ft at nearby 125 Old Broad Street and up to 13,509 sq ft on the high rise floors of the Heron Tower, which has also now stolen the title of the City’s tallest building from Tower 42.

Internally, the building is also in need of a major refresh, despite the fact that some floors have now been refurbished with the rollout of LED lighting, among other initiatives. Only last week it was announced that City Credit Capital will vacate the 20th floor of Tower 42 for space in the Heron Tower, a situation that any new owner will be keen to halt. One option could be to carry out an extensive refurbishment of the tower as Hammerson did with the former London Stock Exchange, stripping it back to its concrete core and then recladding it in glass. This option would offer a cost effective solution to full-scale demolition and redevelopment, however whilst the NatWest tower is not listed, it is perhaps iconic enough for heritage groups to object to any refurbishment that would significantly alter the buildings external profile on the City’s skyline.

With ever greater emphasis placed on the public realm, recent City additions such as the Heron and Broadgate Towers have sought to maximise their interaction with the immediate streetscape, which only serves to highlight Tower 42’s fundamental weakness in this area. Despite an impressive all-glass entrance to the main building that fronts onto Old Broad Street, the estate, which also includes both 20 and 30 Old Broad Street, the plaza restaurant – currently let to the noodle bar chain, wagamama – 15 Bishopsgate and the lavish Grade I-listed Gibson Hall, is linked by a hopelessly outdated maze of dark and secluded steps and 60’s-style raised walkways.

In 2008, the London-based architects Studio Egret West worked up plans for the redevelopment of the estate, which saw an imaginative honeycomb structure replacing the lower-level elements of the existing site and opening up the currently underutilised Bishopsgate side, which is acknowledged as being key to any planned redevelopment given the arrival of several new towers in the not-too-distant future, with Bishopsgate viewed as a strategic artery between Liverpool Street and the Monument. That scheme was not taken forward, however and so the priority for any future owner remains to address the public realm around the tower – it was reported earlier this year that new plans were being worked up, yet with the sale announcement, this can be assumed to be on hold.

Given the current turmoil in the global economic markets, it is questionable whether BUKPF and HRE have chosen the best time to sell the estate, however they may well also have more than an inkling that they need to get shot of an asset that despite its trophy status, has something of an uncertain future given the recent slow-down in the City office market and a wave of new, high-profile rival buildings, all set to complete within the next three years and certain to provide the Tower 42 Estate with intense competition for occupiers, whilst bringing new destination restaurants and retail to the City. There can be no doubt that for some, the allure of one of the City’s trophy towers – the one that many say really kicked off the London skyscraper boom – will be simply too much to resist, however the question remains of whether or not it turns out to be something of a poisoned chalice.

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