Metrovacesa has paid Legal & General a £100m ‘compensation penalty’ payment to pull out of the Walbrook Square scheme in the City of London.

The Spanish property company, advised by CB Richard Ellis, told the Spanish Stock Exchange today that it had reached an agreement with Legal & General to pay this one-off sum and cancel its involvement in the Walbrook project.

The Spanish agreed to buy the 1m sq ft development site in July 2007 for £240m and undertook a commitment to develop a scheme, designed by Lord Foster and Jean Nouvel, which took its total liability at the site to more than £600m.

As tipped by Property Week (Cityview 26.06.09) the Spanish have been seeking a settlement for some time that would allow it to walk away from the scheme.

Metrovacesa is restructuring its company and is exploring a range of options including seeking creditor agreement to set up a new vehicle in Spain which will hold its residential land assets and around €700m of syndicated debt.

It is thought the heavy financial commitment it had at Walbrook Square was causing difficulties for its wider restructuring. The company, which is more than 55% owned by six creditor banks, is thought to have agreed to pay the hefty exit fee to allow it to walk away from the Walbrook Square scheme, which it was not likely to be able to develop for the foreseeable future, and complete its restructuring programme.

Metrovacesa has been trying to find another equity investor, a process it began months ago, but there was little interest.

It will be a blow to Legal & General which agreed to sell the site for £240m and has so far only received payment of around £140m. It was also to have received a 7.5% interest in the future redevelopment income from the scheme. Jones Lang LaSalle advises L&G.