London's Walkie Talkie building sold for record-breaking £1.3bn

This article titled “London’s Walkie Talkie building sold for record-breaking £1.3bn” was written by Sarah Butler, for The Guardian on Thursday 27th July 2017 16.22 UTC

It damaged cars with scorching reflected sunlight, has been accused of creating a wind tunnel that can topple pedestrians and has split the capital into lovers and haters. Now, London’s landmark Walkie Talkie building has broken records with its £1.3bn sale to a Hong Kong firm best known for making oyster sauce.

The controversial skyscraper, officially called 20 Fenchurch Street, is being bought by the property arm of Lee Kum Kee Health Products Group, a conglomerate that makes condiments and healthcare products and also develops property. The price tag is the highest ever paid for a single UK building.

The deal easily surpasses the previous record price for a single building in the UK. The Qatar Investment Authority paid £1.17bn to acquire the HSBC tower in Canary Wharf in December 2014.

Property company Land Securities, whose other investments range from Brighton Marina to the Lakeside shopping park in Thurrock, Essex, said it had exchanged contracts to sell its 50% stake in the City of London building. Lee Kum Kee is buying the other 50% from Canary Wharf Group. The deal is expected to be completed by the end of August.

The 37-storey Walkie Talkie, nicknamed for its distinctive top-heavy shape, has been dividing opinion since before its completion in 2014.

In 2013, the building’s south-facing glass facade channelled the sun’s rays into a beam of heat, which melted the bumper of a Jaguar, blistered painted shopfronts and singed carpets. The heat was so intense that a journalist on a City newspaper managed to fry an egg on the pavement.

The incidents earned the building new nicknames, including the Walkie Scorchie and Fryscraper, and the builders were forced to apply sun shading to resolve the issue.

The architect, Rafael Viñoly, said he had predicted the building might reflect the sun’s rays on to the street below, but “didn’t realise it was going to be so hot”. He admitted that “a lot of mistakes” had been made with the Walkie Talkie that needed to be put right.

On the top of the building is the three-storey Sky Garden visitor attraction, offering bars and restaurants, and the larger floors at the top of the structure make the most of views over London.

But its bulbous shape, which looms over nearby buildings, is not universally appreciated. In 2015 it won the Carbuncle Cup, an annual award for the ugliest building of the year presented by architecture magazine Building Design. One judge called it “a gratuitous glass gargoyle graffitied on to the skyline of London”, while another described it as a “Bond villain tower”.

The Walkie Talkie is the latest trophy London building to be bought by investors from China, South Korea, Singapore and Hong Kong, who, despite Brexit, are taking advantage of the low value of the pound to snap up property bargains in the capital. Chinese investors have spent £3.5bn on property in the City and the West End so far this year.

The nearby “Cheesegrater” tower, officially called the Leadenhall Building, was sold to China’s CC Land for £1.15bn in March, while Beijing Capital Development Holdings, a state-owned group, bought a 15-storey block on the edge of the City for £210m late last year.

Lee Kum Kee purchased the glass-fronted 3 Harbour Exchange building in Docklands in December for £37m, and earlier this year the group tried and failed to buy the Gherkin. LKK is a 129-year-old family business that specialises in oyster sauce, shrimp paste and Chinese herbal medicine, and is controlled by 88-year-old billionaire Lee Man Tat.

James Beckham, head of London capital markets at property advisory firm Cushman & Wakefield, said: “This record-breaking deal demonstrates the enormous investor appetite in London, and in the City’s reputation as the global place to do business.

“Since the vote to leave the EU, capital targeting London from the Asia-Pacific region has increased to record levels. This is partly due to currency fluctuations, but is more indicative of longer-term confidence in London and investment strategies which are not derailed by short-term political uncertainty.”

Beckham described London as the “number one destination” for Asian investors who want to invest abroad.

The Walkie Talkie is thought have been a commercial success for its developers. The 17,000 sq ft ground floor (about the same size as a small supermarket) is occupied by retail outlets, while the office space above, which is especially popular with insurance firms, is fully let.

Robert Noel, chief executive of Land Securities, said the property company had achieved “an exceptional price” for the building, which had been “an immensely successful project”.

Sammy Lee, chairman of LKK Health Products Group, which includes the Infinitus Property Investment division, said: “We are delighted to acquire 20 Fenchurch Street in central London to expand our global presence through strategic investments.”

The group also owns and manages office and retail space in Guangzhou and Shanghai in China, as well as in central Hong Kong.