UK property company, Landsec, has announced the exchange of contracts for the sale of 21 Moorfields in London’s financial district to an investment vehicle managed by global real estate and investments group, Lendlease.
The total consideration for the sale amounts to £809 mln (€925 mln) which, after outstanding development-related items results in a net cash receipt to Landsec of £733 mln. Rothesay is providing financing for the acquisition with a 10-year senior term loan. Rothesay Life is a UK insurance company. Originally founded by Goldman Sachs, it’s current shareholders are GIC Singapore, Blackstone and Mass Mutual.
21 Moorfields is a 568,500 ft2 London office development fully pre-let to Deutsche Bank on a 25 year lease, with an annualised net rent of £38 mln. Built directly above Moorgate station, the asset is targeting sustainability ratings of BREEAM Excellent and LEED v3 Gold.
Landsec will retain the responsibility for completing the development, with practical completion expected in Q1 2023. Lendlease will manage the investment vehicle, on behalf of its investment partners including Australia’s TCorp and its own minority interest.
The parties revealed ow the total consideration of the disposal represented an effective 9% discount to the March 2022 value, yet crystallises an anticipated development profit of £145 mln representing 25% profit on cost.
The sale is in line with Landsec’s strategy to recycle capital out of mature London offices and reduces the company’s loan to value from 34% to 30% based on a pro-forma March 2022 balance sheet, further strengthening its strong financial base. Following its strategic review in late 2020, Landsec has now sold £1.8 bn of London offices at an average yield of 4.35%.
Completion of the transaction is expected to take place in the coming week and the net proceeds of the disposal will initially be used to pay down debt. Landsec’s low financial leverage post the sale of this profitable development provides the company with significant flexibility to invest in future opportunities with a higher forward return. The company maintains its guidance on earnings growth provided in the full year results statement in May.
Neil Martin, CEO of Lendlease in Europe said: ‘This significant acquisition adds size and weight to our European investments platform and contributes to our global funds under management target of AU$70 billion by FY26. In addition to converting our AU$117 billion development pipeline, our team will continue to scope on-market opportunities across Europe as we seek to add further scale to our investments platform in the region.’
Stewart Brentnall, CIO at TCorp (NSW Treasury Corporation) said: “This is TCorp’s first direct investment into the London office market and our second UK transaction after acquiring a large scale, high quality logistics asset earlier this year.’
Harish Haridas, head of commercial real estate Debt at Rothesay, said: ‘These types of high quality, secured commercial real estate loans are attractive to us and play an important part in our investment portfolio, providing long-term security for the pensions we protect.’
