German pension fund buys London office at 2% yield

Pramerica Real Estate Investors, acting on behalf of a German pension fund, has acquired a central London office and retail property that is scheduled for refurbishment.

The investment volume of £54.5 mln (€65 mln) reflects a net initial yield of 2.1% and a capital value of £982 per square foot for the leasehold interest. Completion is subject to the freeholder's consent.

The property was acquired from London-listed Great Portland Estates which sold the property on 20 St James's Street, SW1 to Pramerica on behalf of a single client account.

The 55,490 sq. ft. (5,155 m2) property is currently partially let to seven office tenants and one retail tenant, producing a net rent of £1.2 mln per annum. The office element has a current weighted average lease term of 1.75 years. The property is held on a long leasehold interest (98 years unexpired) geared to 15% of rents received, subject to a base rent of £223,000 per annum.

GPE purchased the property in 2010 for £42.5 mln and was planning a comprehensive refurbishment of the property in 2015.

Toby Courtauld, chief executive of GPE, said: 'After purchasing 20 St James's Street in 2010 we were planning to refurbish the building in 2015 when we expect there to be limited supply of space in the West End. However, as a consequence of a strong off-market approach, it made financial sense for us to sell the property now and invest the proceeds into other schemes in our exceptional development programme'.