Norway's massive oil-fuelled pension fund has acquired the freehold of a mixed-use asset on London's Oxford Street for £267.5 mln (€322 mln), reflecting a net initial yield of 3.2%.
The transaction was carried out by Norges Bank Real Estate Management (NBREM) on behalf of Norway Government Pension fund, a €800 bn sovereign wealth fund.
The under-construction office and retail scheme, located on the corner of 73/89 Oxford Street and 1 Dean Street, in London W1, was sold by Great Portland Estates (GPE).
'Oxford Street has been an exceptional project for us and this sale continues our strategy of recycling capital out of assets where we have created significant value,' commented Toby Courtauld, GPE's chief executive. 'Having secured an attractive planning permission, pre-let the building and enhanced our interest through the purchase of the freehold earlier this year, this sale crystallises a whole life capital return of 75% and an annualised unlevered IRR of 28.4%.'
Expected to complete in Q2 2017, the property is pre-let to New Look Retailers Ltd, Benetton Group and Moneysupermarket.com Group with a weighted average unexpired lease term of 17.0 years. The rent on completion will be £9.74 mln per annum.
NBREM have paid £205.2 mln to date, with the balance of the purchase price payable on completion of the leases following the scheme's delivery. Based on the current cost and programme, GPE will receive two further payments on completion of £46.2 mln in deferred consideration and £25.1 mln for reimbursement of the development costs to complete the project.
CBRE advised GPE.
