Monday, February 01, 2010

RBS Considering £500 Million Sale Leaseback of HQ Near Edinburgh

Telegraph - February 1, 2010

Royal Bank of Scotland is considering a sale and leaseback of Gogarburn, its flagship Scottish headquarters, as part of a strategic review of its £4bn property portfolio.

A sale of the 1 million square foot office complex on the outskirts of Edinburgh would be the clearest example yet of the new management's break with the past.

Gogarburn was Sir Fred Goodwin's pet project as chief executive of the bank, which is now 84pc-owned by the state after being bailed out with £53.5bn of taxpayer money. The executive wing became known as "Fred's folly" and his involvement is said to have stretched right down to choosing the wallpaper.

The site, set in 100 acres of woodland on the site of a former psychiatric institution, cost £350m to build and was opened in 2005.

Although a strategic review of the group's £4bn own-premises portfolio has begun, Stephen Hester, the new chief executive, has stressed there is no question of moving the 3,200 staff.

However, insiders said a sale and leaseback could be a more efficient use of the bank's resources. One said: "Stephen Hester and the new finance director have every area of cost under challenge and review. There are lots of feasibility studies on every aspect of the operation. This sounds like one of them. Like all these things, some will fly, some won't."

RBS has a further £4bn of investment properties, currently rented out, that could also be put up for disposal. Should it be sold, Gogarburn alone would be expected to raise more than £500m.

Property experts said Gogarburn would make an attractive acquisition for a large property group, such as British Land or Land Securities, due to its unique attributes. Mr Hester is a former chief executive of British Land.

"Goodwin may have made some bad decisions, but Gogarburn was not one of them," a source said. "If RBS ever did decide to leave, a developer could easily arrange the premises for a number of different companies."

The complex is famous for the "street", a glass-ceilinged concourse lined with shops and restaurants. There is also an on-site nursery and a shuttle bus service direct to Edinburgh centre.
Gogarburn is the jewel in RBS's property crown but the bank is also reviewing its London properties. Some 20,000 staff are spread across 18 sites in London and teams are assessing whether they should be consolidated.

RBS is not averse to sale and leasebacks. Two years ago it raised £800m in property sales, including its landmark Coutts building. HSBC recently sold its Canary Wharf headquarters in a £773m sale and leaseback transaction.

A decision is not thought to be imminent as the strategic review is in its early stages.

The bank is in the process of selling off assets, including its RBS Sempra commodity trading joint venture. An outline £2.5bn deal had been agreed with JP Morgan but it has been jeopardised by US plans to ban banks from conducting proprietary trading.

RBS is now negotiating to sell JP Morgan just the international operation, which accounts for roughly half the business. Its partner, Sempra Energy, may attempt a buy-out of the rest. As a trading firm, Sempra Energy is exempt from the planned US rule. Sphere: Related Content

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