UK - JPMorgan Asset Management (JPMAM) has acquired Bishops Square in London for £557m (€657m) for two of its institutional funds, highlighting continued demand for prime real estate in the capital.
Hammerson and the Oman Investment Fund (OIF) sold Bishops Square Holdings, the principal asset of which is the 817,500 square foot mixed-use estate in the City, including the headquarters of law firm Allen & Overy.
The rally in capital values in the UK appears to have reached a plateau with Investment Property Databank (IPD) this week revealing that capital growth was 0.1% in November, following four consecutive months of modest climbs.
But with income returns remaining more stable (it was 0.6% in November and 6.5% over the past 11 months), the core end of the market is likely to still be attractive for institutional investors looking for alternatives to bonds.
"We remain bullish on investing in high-quality, well-tenanted office properties located throughout Europe's most important cities and this acquisition represents a further expansion of our funds' core property portfolio in Europe," said Peter Reilly, head of JPMAM's European real estate group.
Bishops Square was valued at £510m at 30 June 2010, with net passing rents at the time of £35m, and JPMAM said the deal represented a net initial yield of more than 6%.
"Hammerson's development of Bishops Square is an excellent, modern headquarters with a long-lease to a single blue-chip tenant so fits our criteria perfectly," Reilly said.
Hammerson completed the development of Bishops Square in 2005 and sovereign wealth fund OIF acquired a 75% stake in the asset in June 2009.
"While OIF remains focused on medium to long term investments in real estate and private equity in association with quality partners, we adapt to market dynamics in an efficient manner to bring value to our shareholders," said Hassan Al Nabhani, chief executive at OIF.
"The acquisition and disposal of Bishops Square reflect this investment approach. We have worked well with Hammerson on this successful joint venture and hope to have the opportunity to work together on future projects."
Hammerson said net proceeds from the sale of its 25% interest, including the receipt of performance payments due from OIF and after taking account of the joint venture's debt and interest rate swap, were £79m, representing a surplus of £34m over the book value at 30 June 2010.
"This disposal fits with our strategy of creating value through portfolio management," said David Atkins, chief executive at Hammerson.
"We retained a stake in Bishops Square after the sale to OIF and have worked well together on the joint venture."
He added: "We are capitalising on the market recovery over the last 15 months and Hammerson has released funds for investment into other office and retail developments and acquisitions."