Telereal Trillium has appointed CBRE to sell a £280 mln (€315 mln) portfolio of regional offices that are let to the UK government.
The UK-wide portfolio, named The Hayhill Portfolio, comprises 98 regional offices let to the Department for Work and Pensions (DWP) on new 10 year, FRI leases, commencing on 1 April 2018. The properties are let at newly agreed market rents, which are subject to CPI-linked rent reviews.
Comprising 2.6 million square foot (241,000 m2), the portfolio has a combined annual rent of £23.36 mln. This reflects a net initial yield of 7.81% and a low capital value of £109 per square foot.
Telereal Trillium has owned and managed the Department for Work and Pensions estate for 20 years through the PRIME property outsourcing contract, which concludes on 31 March 2018. DWP's delivery of services has changed significantly over recent years and, following a comprehensive review of its estate, through which the DWP has secured new leases across its UK portfolio to provide operational and occupational stability into the future.
Some 85% of the portfolio's properties are located in town centre locations, with the majority incorporating an on-site Job Centre Plus.
Graham Edwards, CEO at Telereal Trillium said: 'With the undoubted covenant of the DWP taking new 10 year leases on these 98 assets at current market rents, it is a good time to rebalance our portfolio. We continue to invest across the UK in the office, industrial, and strategic land sectors, where we deploy our asset management capabilities to create value. Over the last year we have invested in excess of £100m in new investment property, land, and residential development schemes.'
Peter Arduino, Capital Markets Executive Director at CBRE, said: 'The Hayhill Portfolio offers attractive government income with an opportunity to capture the arbitrage between low UK government gilts and the portfolio running yield. The assets are spread nationally, providing a strong regional network for DWP’s operations, as well as geographical diversification on a portfolio level.
There is no doubt this portfolio will attract significant interest from the UK and global markets, which are currently lacking a supply of interesting stock.
Telereal Trillium describes itself as one of the largest property companies in the UK. The company owns and manages 8,000 properties, providing a total of 86 million square feet and housing 1% of the UK's workforce.
