Shelbourne Developments confirmed that the sale of the Lloyd's building had fallen through, as revealed by this week's Insurance Times.
It said the deal fell through after the discovery of Alkali Silica Reaction (ASR) in samples of concrete from the building.
On Wednesday a company spokesperson had said: “We have not pulled out and financing is not an issue. There are no negotiations currently but negotiations will resume once due diligence issues are clarified.”
Shelbourne has now clarified its position, saying that the negotiations were terminated because of ASR, also known as ‘concrete cancer'.
Despite assurances from the building's original engineers that remedial action would negate the effects of ASR, Shelbourne said it was no longer comfortable proceeding with the sale.
The company entered into exclusive negotiations with Deka, a German investment company, over six months ago. The deal was said to be worth £240m. Deka bought the building from Lloyd's in 1996.
Structural engineering firm Buro Happold 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 instruct St. Albans Testing Services (STATS), a specialist technical consultancy, to carry out the 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, said Shelbourne.
Their final report, studied by Shelbourne and its advisers in the past two days, stated that remedial action would result in the ASR not being ‘an issue'.
Shelbourne Development said that while it did not dispute this statement, it felt that as an investment the building was less attractive to them and the company was not comfortable to proceed any further with the acquisition.
