Long-income specialist Alpha Real Capital has inked a deal for a government office in Bristol, UK for £73.35 mln (€80.22 mln).
The deal for the 154,000 ft2 (14,300 m2) Temple Quay House building represents a 4.03% net initial yield and a 5.04% reversionary yield, Alpha said.
The BREEAM excellent building is let to the secretary of state, communities and local government for more than 18 years on a recently signed full repairing and insuring (FRI) lease. The tenant has been in occupancy since the asset's construction in 2001 and recently committed some £15 mln to refurbishments.
'The length of the UK government’s lease, approaching two decades, the strength of the government’s commitment to the building together with the significant under-renting of the building and 5% reversionary yield strongly underpin the property’s income security,' said Phillip Rose, CEO, Alpha Real Capital.
The lease has a fixed 16% rental increase in 2026 and then an open market review in 2031. The passing rent is significantly under rented reflecting £22 per ft2, Alpha said, while prime rents in Bristol have recently achieved £35 per ft2. Even after the fixed 16% uplift in 2026, the property is expected to be significantly under rented.
Alpha acquired the property for one its long-lease property funds. The firm has over £3 bn of assets under management, primarily focussed on long-lease property and freehold ground rents.
The transaction was completed within 12 working days of the property being put under offer and funded 100% with equity.
