Construction of what will become the tallest skyscraper in London's financial district has stalled after builders downed tools over funding concerns, a source close to the matter told Reuters.
Canadian firm Brookfield Construction restarted building work on the Pinnacle tower late last year after it slowed to a virtual standstill as developer Arab Investments tried to secure the next stage of funding for the 945-feet tower.
A deal was struck that included a 500 million pounds debt facility from a group of lenders including HSBC and HSH Nordbank, plus the injection of new equity from Saudi Arabia-based investor consortium Sedco.
It was reliant on the developer pre-letting a chunk of the tower to lower the scheme's risk, which it has not yet done. The tower is currently at an early stage of construction, appearing as a stump in the ground.
About a week ago building work stopped, the source said. The bottom line is that the Pinnacle will need looking at from a funding point of view or a sizeable pre-let which is difficult in this market.
A Brookfield spokesman declined to comment and Arab Investments was not immediately available for comment.
The 64-storey skyscraper is one of several under construction in central London. HSH has already provided 140 million pounds of debt to help buy and prepare the site for the main construction work while Sedco has put in several hundred million pounds to date.
Although developers had hoped to exploit a shortage of high quality office space over the next several years, the financial crisis has meant many companies are reluctant to sign pre-let deals that make such speculative schemes viable.
London skyscrapers the Shard, the Pinnacle, the Walkie Talkie, the Cheesegrater and the tower at 100 Bishopsgate are at varying stages of build and have only signed one office deal between them.
The story was reported earlier today by UK trade magazine Construction News.
(Reporting by Tom Bill; Editing by Helen Massy-Beresford)