Great Portland buys Starwood out of London office JV

Listed UK property company Great Portland Estate (GPE) has bought Starwood Capital out of their London office joint venture for a total outlay of €186 mln.

GPE announced on 24 April that it had exchanged contracts to acquire the 50% interest held by the US private equity firm, Starwood Capital, in The Great Star Partnership (GSP), for £61.4 mln. On completion, GPE will redeem 100% of the £73.1 mln in outstanding debt secured against the JV's properties.

The transaction equates to a property price of £191 mln (€265 mln), broadly in line with the September 2014 valuation.

The acquisition gives GPE full ownership of the leasehold interests in the 16,600 m2 City Tower, 40 Basinghall Street, EC2 and the adjacent 12,450 m2 City Place House, 55 Basinghall Street, EC2 which together occupy a 0.5 hectare, core City of London site.

The buildings provide 313,000 sq ft (28,000 m2) of flexible office space and are let at a contracted rent roll of £10.2 mln which reflects £44.00 per sq ft. With 55,000 sq ft of vacant or imminently vacant space and a weighted average unexpired lease term of 3.7 years across the buildings' 32 tenants, there are numerous opportunities to enhance income and add value, GPE said.

The acquisition price equates to £608 per sq ft and a yield of 5.3% on contracted rent roll, or 4.8% after deducting current void costs on the vacant space. The running yield, GPE said, can be enhanced to 6.1% if the vacant accommodation is leased in its existing condition, 'preserving the opportunity for a larger scale refurbishment of City Place House in the medium term, in an area set to benefit from the introduction of Crossrail in 2018'.