Hammerson jv buys London office from Union Investment for EUR 211m

UK REIT Hammerson has established a joint venture with the Canada Pension Plan Investment Board (CPPIB) to acquire a prime office property in the City of London. The investment volume is £175 mln (EUR 211 mln), plus £8 mln in costs.

The vendor is Union Investment. As PropertyEU reported in May this year, the German find manager put the trophy office asset in the City of London up for sale within a year of acquiring it. Property adviser Savills was instructed to bring 10 Gresham Street, London EC2 to the market for about £180 mln, reflecting a net initial yield of 5.65%.

Hammerson said on Wednesday that it will have a 30% interest in the joint venture with the Canadian pension plan and will manage the asset on its behalf. Hammerson's total commitment is £55 mln. This is the second joint venture between the parties. In December last year they teamed up in a 50-50 joint venture to acquire Silverburn shopping centre in Glasgow for £297 mln.

10 Gresham Street comprises 24,125 m² of high quality offices, retail and ancillary accommodation over eight floors. The building was designed by Foster + Partners and completed in 2003. The principal occupier is Lloyds TSB Bank, with the remainder of the building let to seven other tenants including Milbank Tweed Hadley & McCloy and JC Flowers.

Total rents passing, net of head rent payable, are £10.7 mln per annum. The average unexpired lease term is around 11 years, or nine years when tenant break options are factored in.

Hammerson CEO David Atkins said: 'We are very pleased to again be partnering with CPPIB. This acquisition is in line with our strategy to capitalise on attractive opportunities in the London office market. Given the existing lease profile and relatively low rental base this offers an excellent opportunity for us to increase value by using our asset management skills.'

Union Investment said it had acquired 10 Gresham Street in 2009 'at a time considerable uncertainly' from British insurance company Standard Life for £141.5 mln on behalf of its open-ended real estate fund UniImmo: Europa.

'This sale allows us to take profits in the London property market,' explains Volker Noack, a member of the management team at Union Investment Real Estate.

The German fund manager said the proceeds will be reinvested in other European office and retail properties. London remains of interest to Union Investment as an investment location. The company's portfolio includes properties such as 33 Holborn and One Coleman Street.