UK - Union Investment has sold a prime London City office building to Hammerson and the Canada Pension Plan Investment Board (CPPIB) after buying it only 12 months ago, netting more than £34m (€41m) in capital appreciation in the process.
The German open-ended fund manager acquired 10 Gresham Street in the summer of 2009 from UK insurance company Standard Life for £141.5m and has since taken advantage of the recent market rally to offload it for £175m.
German open-ended funds are normally associated with a focus on income returns and a buy-to-hold approach to real estate, but Union Investment said it capitalised on buoyant demand and rising market rents in the London lettings market.
A company spokesperson said: "Union Investment is an active asset manager and is increasingly leveraging the opportunities that arise from different property cycles around the world."
The building was acquired for Union Investment's Unilimmo: Europa fund, and the proceeds will be reinvested in other European office and retail properties.
Volker Noack, a member of the management team at Union Investment, said: "This sale allows us to take profits in the London property market.
"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."
UK property company Hammerson set up a joint venture with CPPIB to acquire the long leasehold interest in 10 Gresham Street, whereby the Canadian fund holds the majority 70% of the asset, while Hammerson holds the balance and will manage the asset.
The parties entered into a similar arrangement toward the end of 2009 when they acquired the Silverburn shopping centre in Scotland from Lloyds TSB for close to £300m.
Graeme Eadie, senior vice-president of real estate investments at CPPIB, said:
"Following the creation of our successful joint venture in late 2009 to acquire a company that owns the Silverburn shopping centre in Glasgow, we are delighted to be working once again with Hammerson to buy this highly attractive office investment in the City of London."
David Atkins, chief executive of Hammerson, added: "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."
10 Gresham Street comprises 24,125 square metres of prime office, 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.