Instead, the bank has confirmed that it will acquire the 1 million sq ft Lehman tower in the centre of Canary Wharf in addition to committing itself to continue building the £1.5 billion Riverside South project that it acquired as its long-term home in 2008.
Jamie Dimon, chairman and chief executive of JPMorgan, said: “Even during the recession, we have continued to invest and grow our businesses internationally. This acquisition is a long-term investment and represents part of our continued commitment to London as one of the world’s most important financial centres.”
The former home of Lehman at 25 Bank Street, which is considered by many as the best of its type in London for investment banking with trading floors of 70,000 sq ft, has been standing mostly empty since the demise of the bank in 2008. It was built for the US group in 2003 to house its European headquarters, and is likely to require only minor refurbishment before it can be occupied by JPMorgan.
The building will become the European headquarters of the investment bank in 2012. JPMorgan employs 11,000 staff housed in various buildings across London. It has also bought a building in the City of London at 60 Victoria Embankment from Carlyle, the private equity group, that is occupied by the firm’s treasury and securities services division.
JPMorgan has moved from owning no UK office real estate to controlling more than 3m sq ft of existing and future office supply for its occupational needs.
George Iacobescu, chief executive of Canary Wharf Group, described the acquisition as a “totemic decision for UK plc”.
“This is a major strategic decision for the bank. This secures London as the European headquarters for JPMorgan and is a huge boost for the UK as the economic recovery starts,” he said. “The move into 25 Bank Street and the continuation of investment in the Riverside South project will deliver considerable economic benefits including new jobs and local business.”
The decision is also positive for the future of Canary Wharf as a financial district, given that the bank’s relocation in 2012 will lift the number of office workers on the development above 100,000 for the first time.
The estate is owned by Canary Wharf Group, which will be paid £495 million for the building by JPMorgan in addition to £144.5 million from the termination of a rental cover facility in place with AIG that insured lost rent from Lehman for four years.
In total, Canary Wharf Group will recoup about £640m from the sale of the site and the end of the rental guarantee, which means the building has a value reflecting a yield of about 5.5 per cent. The proceeds would be used by the company in part to further its own plans for new developments in London outside its core estate.
Canary Wharf will also continue as construction and development manager to develop the Riverside South site at Canary Wharf for future use. The development agreement has been extended until October 2016.