Shelbourne Development pulls out of €365m deal

SHELBOURNE Development has pulled out the purchase of the Lloyds Building in London. The deal was worth €365 million.

Shelbourne decided to walk away from the deal following the discovery of cancer in the concrete structure of the building, technically known as Alkali Silica Reaction (ASR).

Shelbourne Development entered into exclusive negotiations over six months ago with Deka, a German investment company which bought the building from Lloyds in 1996.

Financial backing was secured from Goldman Sachs International.

Buro Happold, a leading firm of international structural engineers, was retained by Shelbourne to conduct a survey of the building.

Following their observation of map cracking, which is characteristic of ASR, laboratory tests were recommended. In April 2004, Shelbourne Development and Deka agreed to have St. Albans Testing Services (STATS) carry out tests. The results showed the presence of ASR in core samples examined.

Ove Arup, the engineers who originally designed the building, subsequently reported on the implications of ASR for the structure.

Their final report, studied by Shelbourne and its advisors in the past two days, stated that remedial action would result in the ASR not being "an issue". While Shelbourne Development does not in any way refute this statement, the company felt that as an investment the building was less attractive to them and the company was not comfortable to proceed any further.

Shelbourne Development said it informed Deka of its decision yesterday.

Earlier this week British reports suggested Shelbourne was pulling out of the deal for financial reasons.

That was denied by the company on Thursday.

It did confirm there were "due diligence issues" over the building and that a decision was pending on the future of the deal.