AEW fund acquires UK office property at 10% yield

AEW Europe announced on Wednesday that one of its funds has acquired a core office building in the west London suburb of Wimbledon, at a net initial yield of 10%.

The European Property Investors Special Opportunities (EPISO) Fund purchased Wimbledon Bridge House from Prupim for £40 mln (EUR 45 mln), representing a capital value of £237 per square foot.

AEW Europe said the transaction was the latest example of EPISO, a value-added fund, continuing to invest in the UK, the market that has seen the fastest re-pricing in the current downturn of any major European real estate market.

This is the sixth purchase in the UK by the EPISO fund, which has now made total investments of EUR 600 mln. The fund was closed in 2008 with EUR 788 mln of equity, providing approximately EUR 2 bn of spending power.

Wimbledon Bridge House was completed in 1989 by Speyhawk for Standard Life. The building comprises 15,600 m² of office space which is let to six office tenants. There is retail space with four retailers, including WH Smith and Next. The weighted average remaining lease term on the property is six years.

Rob Reiskin, AEW Europe’s Head of Investments said: 'We feel very comfortable with the pricing on this transaction given its high initial yield and significant discount to replacement cost.'

Ric Lewis, CEO of Tristan Capital Partners, the EPISO fund portfolio manager and adviser, added: 'The historically low pricing in the UK, combined with our access to equity and senior debt, means we are well placed to take advantage of the large number of attractive opportunities in this market. We will continue to look for further strategic investments in the UK to meet the return targets of our funds.'

AEW Europe is working with Bellhouse Joseph to implement the asset management strategy for Wimbledon Bridge House. Strutt & Parker advised AEW Europe on the purchase.