Bidders for an upmarket portfolio of serviced offices in London have balked at the £700m asking price, sounding a potential alarm bell about the level of demand from wealthy international investors.
Sky News has learnt that the owners of London Executive Offices (LEO), which operates 32 sites across the capital, have parted company with Lazard, the investment bank hired last year to find a buyer for the business.
Queensgate Investments, LEO’s controlling shareholder, has now hired bankers from Citi and HSBC to replace Lazard, property industry sources said on Friday.
Insiders said that Queensgate had initially hoped to attract bids of £700m for the portfolio of what it describes as “iconic” properties in Mayfair, Belgravia and the City.
One banker said that LEO was instead expected to secure offers worth between £550m and £600m – although higher bids remained a possibility while a source close to Queensgate said it was still confident of achieving its original price tag.
The insiders added that HSBC’s involvement was designed to help exploit the bank’s deep links with potential buyers in Asia.The attempt to start a fresh auction of LEO comes 10 months after Lazard’s appointment in the wake of Britain’s vote to leave the European Union.
Since then, a number of trophy real estate assets in London – including buildings nicknamed the Cheesegrater and Walkie-Talkie – have changed hands for higher-than-expected prices.
In June, The Office Group, a UK-based provider of flexible workspace, was sold to Blackstone, the world’s biggest property investor, in a £500m deal.
Those transactions reassured property companies about the prospects for the London and wider UK markets in the lead-up to Brexit.
However, a recent spate of announcements from big City employers such as Morgan Stanley and Bank of America Merrill Lynch about the relocation of jobs from London have cast those prospects in a different light.
LEO is the largest 5-star serviced office company of scale in the UK, charging premium prices because of the locations it owns and the add-on services it provides.
It trades from locations such as Pall Mall, St James’s Square and Bishopsgate, home to some of the most expensive property in London.
The company, which has just changed its chief executive, says it has more than 3,000 customers ranging from blue-chip multinationals to start-ups.
In accounts filed at Companies House, LEO said it made a profit last year of £9.1m, against a loss in 2015 of £2.6m.
A Queensgate spokeswoman declined to comment on the change of advisers or the likely asking price for LEO.