No cheques in the post as value of old GPO plunges

Published on Thursday 11 June 2009 10:14

THE value of Edinburgh's former GPO has been slashed by nearly two-thirds as the hunt continues to find buyers or tenants.

New documents posted by the administrator of Waverley Gate developer Castlemore (Edinburgh) show that the building has been revalued at only 32 million, compared to an original estimated value of nearly 90m.

The new valuation was provided in January – and it is thought to have further declined in value since then.

It also today emerged that Bank of Scotland is still owed 44.7m from Castlemore. But with Waverley Gate being the company's only asset, it is thought that even if it was sold now, the bank could still lose up to 20m.

Castlemore spent 100m on the revamp but has only attracted one tenant to a small part of the office in four years of marketing it.

BDO Stoy Hayward was appointed as Castlemore's administrator in March but it has not yet finalised a strategy of how to recoup the money owed to the bank, Castlemore's main creditor.

The firm is understood to have been in talks with Bank of Scotland, with one option to be to try to sell Waverley Gate immediately. However, that would mean the bank would have to write off much of what it is owed.

But it is also considering renting out the office space at vastly-reduced rates of around 16-20 per square feet, about a third less than the original rates.

In a report on Castlemore's plunge into administration, Mr Stephen, business restructuring partner at BDO, said two property firms have been appointed to prepare a "marketing and disposal strategy" for the building.

"The company has already received interest in letting space as well as acquiring the building outright," said Mr Stephen. "But we are unable to provide a estimate of the likely timing of any sale."

Any reduced rents would be likely to upset technology giant Microsoft, which is the only existing tenant of Waverley Gate.

It is locked into a 15-year lease with no clauses that allow it to break free. And it is paying an Edinburgh record rent of 31 per square feet for part of the top floor and 29.50 per sq ft for part of the second-top floor. It pays 362,000 a year.

Bank of Scotland is listed as the only "preferential" creditor of Castlemore (Edinburgh) – meaning that it is first in line to get its funds back. But a further 16.8m is still owed to "non-preferential" creditors, which administrators admit there is no chance of being paid back.

The city council, which has been linked with a bid for the building, today confirmed that it remains interested. Dave Anderson, its director of city development, said: "Waverley Gate is in a good strategic location and we are keen to explore the possibilities."