The famous Gherkin Building at 30 St. Mary Axe in London has reportedly been placed into a receivership after VG Immobilien, owners of the building defaulted on a loan they took to purchase the building.
Receivership in the U.K. is the same as bankruptcy protection in the U.S. When a firm files for receivership, the property is transferred to a creditor or receiver by a bankruptcy court. The receiver has all the decision-making rights regarding the assets. Its duty is to recoup the loans as much as possible. In most cases receivers liquidate the assets to pay back the loan.
VG Immobilien purchased the building in 2007 from architects Norman + Foster for $1 billion. The Germany-based realty firm financed the deal through a loan, part of which was in Swiss Francs. The currency has gained about 63 percent on the dollar in the last seven years, which ballooned the debt price to a point that it breached levels of debt allowed to be held in the country, reports Bloomberg.
Deloitte has been appointed the receiver of the building.
"The continuing defaults are due to the asset's complex, multicurrency capital structure. Adverse interest rate and currency movements have caused the total senior liabilities secured by the property to increase materially since closing," Neville Kahn, joint receiver and Deloitte partner stated.
"The senior lenders were reluctant to appoint a receiver but felt they had no choice due to the ongoing defaults, which have remained uncured for over five years and concerns that the borrowers' lack of equity in the transaction had caused their incentives to become misaligned with the lenders," he added.
VG Immobilien has been struggling with debts the past few years. More recently, the company also agreed to do away with its Private Funds Management business, reports The Telegraph. The move to transfer the Gherkin Building to receivership could pave way for the sale of the tower.
Deloitte officials say they would work toward preserving the value of the building.
"The Gherkin is a truly exceptional building, a landmark recognized around the globe. Our priority is to preserve the value of this asset. We are in the process of communicating with all tenants and working with the property manager to ensure the continuation of all property management services with no interruption to tenants," he added.
The Gherkin Building
The Gherkin Building is one of the most famous buildings of London. It is the third tallest tower of the city shooting up to 590 feet. The building plaza measures an area of about 21,527 square feet, equal to the size of eight tennis courts. Some of its tenants include Ion Trading, Kirkland and Ellis and Standard Life Investments.
When the Gherkin building opened 10 years ago, it was both admired and ridiculed. It has often been the butt of architectural mockery for its "phallus-like" structure.
