By Tom Bill
LONDON, Nov 22 (Reuters) – The developer of the tallest
skyscraper in London’s financial district faces a legal
challenge that could force it out of business after a dispute
with the tower’s builder, a source close to the process told
Reuters.
Contractor Brookfield Multiplex launched a legal claim for
about 16 million pounds ($25 million) against the owners of the
63-storey Pinnacle skyscraper this summer for payments relating
to a 593 million pound construction contract.
The 1 billion pound scheme on Bishopsgate in the UK capital
is stalled as a stump in the ground after the developers failed
to agree a major letting that would have freed up bank finance
to complete the building. Brookfield downed tools late last year
as part of the payment dispute.
The scheme is majority-owned by SEDCO, a Saudi Arabian
investment manager, alongside fund manager Pramerica Real Estate
Investors, a subsidiary of U.S. insurer Prudential Financial Inc
, and is being developed by Arab Investments.
After failing to file a defence, the developers were last
month ordered by the judge to pay Brookfield Multiplex the 16
million pound sum, which includes interest and court costs, UK
trade magazine Building reported on Thursday.
If Brookfield Multiplex, the construction arm of
Canadian-American developer Brookfield, receives no
payment within the next week or two, it will apply for the
developer to be wound up, the source told Reuters on condition
of anonymity.
A spokesman for the developers was unavailable for comment.
The legal threat is the latest in a string of setbacks for
the Pinnacle. The motionless tower cranes and empty building
site have been a stark reminder of the crash in the office
market in London’s financial district since work stopped late
last year.
DEBT DEAL
German bank HSH Nordbank lent about 140 million
pounds to help buy and prepare the site, while the developers
have put in several hundred million pounds of equity.
As well as sporadic construction, there has also been a
series of talks to agree a fresh 500 million pound debt deal
with an HSBC-led consortium of banks, which failed to
come to fruition because they hinged on a significant pre-let
and the investors putting in more equity.
Several developers have circled the project in recent months
in preparation for a potential sale by HSH should it run out of
patience in trying to kickstart the development.
“It’s an architectural wonder but it’s not a developer’s
dream,” said one developer who has worked up an alternative plan
for the site. “There are several plans out there to simplify the
exterior and cut a third off the height.”
The Pinnacle is one of several London skyscrapers planned to
open over the next several years as developers bet on a shortage
of high-quality new office space and a wave of leases expiring
across the UK capital.
The bet has gone sour for some as the financial crisis means
companies, especially in banking and financial services, won’t
move to new offices or sign large the pre-let deals that make
such speculative schemes viable.
The Shard, the European Union’s tallest skyscraper, has
failed to find an office tenant since opening in July and a
skyscraper at 100 Bishopsgate is still hunting for its first
letting deal to trigger construction. Lettings at other London
towers have also been slow.
