Feldberg Capital is taking advantage of the growing bifurcation in the office sector by launching a value-add fund looking to transform older, less energy-efficient offices into vibrant and green workplaces.
The Frankfurt-based investment firm, which earlier this year incorporated UK investor Brunswick Property Partners, says such properties, highly-amenitised and centrally-located, can achieve record rents where others are struggling to keep their tenants.
‘The office market has been in a state of confusion after the pandemic but there is massive demand for green offices and occupiers are prepared to pay premium rent for the right asset,’ Will Amies, head of business development at Feldberg Capital, tells PropertyEU. ‘Occupiers are learning that they need to have great premises to ensure staff returning to the office and what we see is that the sector is more and more split into brown, commoditised offices which are struggling, and fun, vibrant locations with a full range of services similar to hotels.’
Called ReForm, the group’s new fund has secured major backing from a UK blue-chip investor and is looking to carry out a second close over the next 12 months. The vehicle will be targeting total equity of £300 mln to give it final spending power of £500 mln including leverage. It will be focusing on amenity-rich central London zone 1 locations with excellent connectivity and strong growth characteristics, such as Soho, Fitzrovia and Marylebone.
‘The location is extremely important and in particular the arrival of the Elizabeth line has been a game changer for London,’ Amies explains. ‘We are focusing on locations near the Elizabeth line stations in Soho and Fitzrovia where it is easier to get to work and there are plenty of restaurants and other fun things to do.’
Feldberg targets historic buildings between £20 and £50 mln in value, which have not been recently refurbished. ‘Before signing a purchase, we have to look at the ESG’s credentials to see if we can get the asset to A or B EPC levels. We generally like to redesign the ground floor to include an attractive F&B reception as well as fitness areas so that the office becomes a place where you’d want to spend the day.’
This type of refurbishment generally requires substantial capex so the assets need to be bought at the right price. However, Amies says he has ‘never seen a better opportunity to buy these assets than today’. ‘These central properties are very hard to get, but these days we are one of the few buyers out there and the current prices make them really attractive.’ While many investors are still trying to understand when values will be reaching the bottom, Amies is happy with the current prices. ‘We have a great pipeline of acquisitions and we have to be disciplined about only buying the better buildings,’ he notes. The fund is targeting returns between 10 and 12%.
Feldberg’s knack for investing in ‘fun’ offices goes back to 2017 when the company was founded by Amies together with his colleague David Turner. Amies: ‘We started looking at potential investment themes and already pre-pandemic we set up a London neighbourhood workplace strategy in partnership with a global sovereign wealth fund focusing on sustainability, occupier wellbeing and local community. Offices were
uninspiring and this strategy was aimed at making them more engaging and more sustainable.’ Comprising 750,000 ft2 and 160 tenants, the Akoya platform currently encompasses nine buildings in central areas of London.
Now that the group has gained a German platform through its partnership with Feldberg, Aimes says he will be looking at new potential investment themes in Germany and overall in Europe. ‘We are considering several options,’ he admits. ‘We are looking at life science real estate in Germany quite closely because there is strong occupational demand from this sector. We are also interested in micro living particularly in the UK where there is a real shortage of rental stock. Finally, we might also consider to roll out our green, workplace investment strategy into Europe in the future.’
