Bust-Up Erupts Over Ronson's City Skyscraper

By Mark Kleinman, City Editor

One of the tallest buildings in the City of London is at the centre of a titanic power struggle following a bust-up between its shareholders.

Sky News can reveal that bankers to the 46-storey Heron Tower on Bishopsgate, which briefly became the financial district's biggest skyscraper, are contemplating calling in receivers in the coming days as a consequence of the row.

The move, which would result in the Tower being put up for sale, would come despite last-ditch talks between its three investors, who are led by Heron International, the developer headed by Gerald Ronson, the property entrepreneur.

The other shareholders are the State General Reserve of Oman and undisclosed members of the Saudi Royal Family. The three are said to be in dispute over the management of the building as well as the circumstances in which they can realise value from their investments.

The appointment of receivers would underline a remarkable failure for a skyscraper hailed as a symbol of the City's efforts to shed the legacy of the 2008 financial crisis when it opened three years later.

Although lauded by property critics, the Heron Tower has rented out just 60% of its available space since opening in March 2011. When fully let, it is expected to command total annual rent of in excess of £25m, according to previous reports.

Mr Ronson developed the skyscraper with a £370m loan - of which only £300m was drawn down – led by two German banks, Hypothekenbank and Landesbank Hessen-Thüringen. Under the terms of the loans a deadline was set by which the developer had to secure tenants for an agreed proportion of the building.

Home to companies including Partnership Assurance, the annuities provider that recently floated on the London Stock Exchange, the trio of shareholders have been discussing since January how to replace a £315m loan from a group of banks now led by Wells Fargo, the American lender.

Wells Fargo took on the loan after acquiring the UK commercial real estate portfolio of Hypothekenbank – also known as Eurohypo – in July, while the other members of the syndicate include Nationwide, the UK's biggest mutual.

A source admitted that there had been "some letting covenant issues" to resolve with the lenders but insisted that the building remained financially viable and that it continued to be more valuable than its outstanding debts.

Starwood Capital, a real estate investment firm, has offered to provide nearly £300m of new debt to assist with the refinancing and is understood to still be in discussions about a possible deal.

One source said that a solvent refinancing by Starwood, rather than a sale or receivership, remained the likeliest outcome of the dispute.

However, people close to the situation said that the Heron Tower also required roughly £120m in fresh equity and that talks between the shareholders had broken down "recently" over the terms and structure of that new financial investment.

One insider said that Heron required under the terms of the new agreement to retain the ability to sell its investment in the building in future, a demand which was resisted by the other shareholders. The shareholder discussions are said to have been made more complex by the myriad advisers surrounding the interested parties.

Mr Ronson is one of the British property sector's most prominent figures, having staged a remarkable comeback from the Guinness share-trading affair of the late 1980s.

Heron International counts some of the world's wealthiest business people, including Steve Wynn, the casinos magnate, and Larry Ellison, the software tycoon, among its investors.

In addition to Mr Ronson's real estate interests, he has also become one of the biggest owners of petrol stations in the UK through Snax 24, a separate venture.

The battle over Heron Tower's future underlines one of the perils of the flood of overseas money to have entered London's commercial property market since the banking crisis.

None of the parties involved were available for comment.

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