Feb. 12, 2002 -- TrizecHahn is seeking to sell its 38.9 percent stake in Global Switch, saying its investment in the chain of data centers and carrier hotels lost 82 percent of its value in 2001.
The Financial Times reported this week that British investment firm Chelsfield Plc, which also owns 38.9 percent of Global Switch, is in talks to purchase TrizecHahn's stake.
However, the two partners appear to be far apart in judging the value of their equivalent investments. In its most recent reports Chelsfield accounted for its Global Switch stake at about $191 million.
In announcing its fourth-quarter earnings Tuesday, TrizecHahn valued its Global Switch investment at $38 million at year-end 2001, compared to $216 million a year earlier. The company took a $178 million charge to its annual earnings to reflect the depreciation.
"In the fourth quarter of 2001, (TrizecHahn) commenced discussions to sell its Global Switch investment," the company said in a statement. "While there is no definitive agreement for the sale of the Global Switch investment and discussions are ongoing, management believes that the Global Switch investment is impaired."
Later in the day, Chelsfield issued a brief statement in which it publicly challenged TrizecHahn's assessment.
"The external valuation of the Global Switch properties is expected to exceed the figure implied by the TrizecHahn provision referred to in their announcement," Chelsfield said.
The contrasting statements suggest it will be difficult for the two firms to agree on a sale price for TrizecHahn's stake. Apparently anticipating this, TrizecHahn noted that it may take additional impairment charges if it is unable to sell its position.
Global Switch was founded in 1999 by entrepreneurial brothers Andy and Gabriel Ruhan along with Simon Cooper. Its first facility in London's Docklands was a runaway success, leading the company to plan a portfolio to include 12 facilities in European gateway cities, totaling 3.7 million square feet of space.
While noting a number of loans it has made to Global Switch and its investors, TrizecHahn said it was insulated from financial challenges that might affect Global Switch, saying the risk was spread among the major investors and that some of the debts were secured by Global Switch properties.
TrizecHahn also operates a major carrier hotel at 151 Front Street in Toronto. This 257,000 square foot mission-critical facility has direct connectivity to the 1,815 foot tall CN Tower, a renowned transmission platform. Its tenant mix includes more than 150 telecommunications and technology companies.