September 18, 2013 / 1:26 PM / 6 years ago

UPDATE 1-London's Heron Tower faces sale after refinancing row

By Tom Bill and Brenda Goh

LONDON, Sept 18 (Reuters) - The Heron Tower skyscraper, struggling to fill up with tenants in London’s weak office lettings market, could be sold by lenders who are frustrated by its owners’ inability to agree a refinancing deal, a source familiar with the talks said.

The 46-storey tower, whose office floors are almost half empty, is owned by a trust that includes developer Heron International, led by property entrepreneur Gerald Ronson, Oman’s largest sovereign wealth fund and Saudi investors.

The trio has been discussing the terms of a deal to refinance a 315 million pound ($501 million) loan for several months as part of an agreement that includes the injection of more than 100 million pounds of extra equity, the source said.

A deal is needed because the tower, close to Liverpool Street railway station in the City financial district, has not let as quickly as planned, with 41 percent of office space still unoccupied since it opened in 2011.

“This is not about anyone’s ability to write the cheque, this is a boardroom punch-up,” the source said. “If the shareholders can’t agree between themselves on how to take it forward, and the bank facility needs refinancing, then the bank will need to appoint receivers,” the person said.

Disagreements include the timing and circumstances that could trigger any future exits from the investment, the source said.

Heron International declined to comment and the State General Reserve of Oman was not immediately available for comment.

The refinancing talks - with a group of banks which include Wells Fargo and Landesbank Hessen-Thuringen - also include the possibility of new debt from private equity firm Starwood Capital but any deal depends on shareholder hostilities ending, the source said.

London has experienced a tough office lettings market since the financial crash with many companies forced to stay put or extend existing leases rather than sign for new space, particularly in the financial district.

The Heron is one of a series of towers in central London planned before the financial crisis that hoped to take advantage of a wave of lease expiries in the British capital and a shortage of high-quality new offices.

Despite a small number of recent deals, lettings have been largely stagnant outside the relatively resurgent insurance heartland, where developers like Land Securities, Canary Wharf Group and British Land have benefited from stronger interest.

The Shard, one of Europe’s tallest skyscrapers, is struggling to sign office tenants and work is stalled on two other proposed towers amid a fruitless searches for large tenants that would kickstart the schemes.

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