London-listed Great Portland Estates has expanded its holdings in the City of London business district through two transactions totalling £111 mln (EUR 128 mln).
London-listed Great Portland Estates has expanded its holdings in the City of London business district through two transactions totalling £111 mln (EUR 128 mln).
This is a significant strategy change for the London-listed company as 77% of its EUR 1.4 bn portfolio is located in the West End. The City of London and Southwark represents 7% of the portfolio, with development making up the rest.
GPE said it has entered into a 50:50 joint venture with an affiliate of Starwood Capital Group Global for the 20-storey City Tower, 40 Basinghall Street, EC2, valued at £35 mln. The partnership is called The Great Star Partnership (GSP).
City Tower is a 133,000 square foot (12,300-m2) office building in a prime City location, immediately south of London Wall. It is held on a 100-year unexpired leasehold interest from the City Corporation.
GPE has signed an agreement with Starwood Capital to acquire a 50% share in the limited partnership which owns City Tower, for a cash sum representing a valuation of £263 per sq ft. and generating a net initial yield of 8.3%. The building is multi-let to over 30 tenants with an average passing rent of £31 per sq ft., and with 16% by area vacant, the yield would rise to 10% if this space was let.
GPE has simultaneously acquired a neighbouring building, City Place House, 55 Basinghall Street, EC2 for £94 mln in cash from AEW Europe's EPISO fund. The 16,400-m2 property is to be contributed to GSP. The investment volume reflects a net initial yield of 7.2%.
Ric Lewis, CEO Tristan Capital Partners which co-manages EPISO, said: 'There has been significant interest in recent months in the UK and the market has attracted stellar buyers. We are pleased to be able to take this opportunity to exercise our strong sales discipline and lock in gains for our clients. We remain interested in the UK because quality assets are still available if you know where to find them.'
Toby Courtauld, GPE Chief Executive added: 'We have acquired assets in a first class City pitch which provide numerous opportunities for us to drive returns through lease re-structuring, refurbishment and in the longer term, a possible wholesale redevelopment.'