HSBC May Unwind £1.1 Billion Sale Leaseback of Canary Wharf HQ

This is Money - June 29, 2008

HSBC is believed to have approached potential buyers for its skyscraper head office in London's Canary Wharf amid fears it might have to repossess the building from the Spanish property group that paid a record £1.1bn for it last year.

Metrovacesa, Spain's largest property company, is trying to refinance the £810m of short-term debt it took out with HSBC to buy 8 Canada Square, in what was Britain's biggest single building sale. Although the loan runs until November, Metrovacesa and the banking giant are thought to have wanted to thrash out a refinancing by the end of this month.

However, with lenders having shut up shop in the credit crunch, borrowings are hard to find.

If Metrovacesa, controlled by the Sanahuja family, cannot refinance, HSBC may take back possession of the 42-storey tower - its global headquarters since 2002. In recent weeks it has made approaches to possible buyers, including sovereign wealth funds.

If HSBC, which has been under attack from investment company Knight Vinke over its troubled US business, repossesses the building, it will be keen to sell it on quickly.

However, the appetite for major property deals has dried up and the bank's advances have been snubbed by at least one potential buyer. A spokesman for HSBC declined to comment. Under the terms of the deal with Metrovacesa, HSBC agreed to lease back the building for 20 years at an annual rent of £43.5m with an option to extend for a further five years.

In Metrovacesa's accounts for last year it had written down the value of the building to £1bn. The Sanahujas, who started their property empire in the Seventies in Barcelona, fought a tough battle for control of Metrovacesa in 2006. Sphere: Related Content