7 Deals That Could Tip London Investment Into A Record Year
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Earlier this year it seemed a good bet that the Central London investment market would have a record year in 2017.
Uncertainty about Brexit was being offset by continued interest from Asian investors in trophy London offices, with the decline in the value of the pound and long-term belief in the city the main factors. Savills predicted a record £20B of investment for London.
Now things do not seem so sure. The potential returns from London could be hit by a change in the tax rules for overseas investors. And clarity over Brexit is reducing by the day, with talks between the EU and U.K. stalled.
Here are six deals totalling more than £3.5B (and one key debt deal) which if completed would see London break previous records. But their path will be far from easy.
UBS headquarters — £1.1B
Owners British Land and GIC are attempting to cash in on the potential profit from redeveloping part of the Broadgate Estate and creating a new 710K SF HQ for investment bank UBS, which has an 18-year lease on the building. JLL and CBRE have been appointed to lead a sale. The purchase will be a litmus test of whether the new tax regulations being put in place will have a chilling effect on the London investment market — it is almost certainly an overseas company that would buy the building. The price would represent a yield of around 3.4%.
Plantation Place — £700M
Plantation Place is an example of how even good quality offices let to tenants on long leases are not certain to sell in the current market. Plantation Place in the City was put on the market in April with CBRE and Knight Frank appointed to find a buyer at a 4% yield, but no deal has yet closed. The building was bought by Moise Safra in 2012 for £470M. He died in 2014.
London Executive Offices — £600M
Owner Queensgate relaunched the sales process for serviced office business LEO after failing to find a buyer at a price of £700M. Investment bank Lazard was replaced by Citi and HSBC to manage the process, and provide debt finance for the deal. Bidders indicated a price of closer to £550M was more likely, but no buyer has yet been announced for the company, which operates 32 sites across London, some of which it owns freehold.
Credit Suisse HQ — £450M
The Qatar Investment Authority is having a second crack at selling the 546K SF Canary Wharf HQ of investment bank Credit Suisse for £450M, having pulled the sale of the building for a similar price in 2016. The deal is a test of interest for older buildings that require refurbishment but have long leases — Credit Suisse has a lease running another 17 years.
Linklaters HQ — £400M
The sale of £590M of London assets by Malaysian pension fund PNB shows again that not every asset is finding a buyer in this market. It put two assets up for sale over the summer, the £400M 1 Silk St. in the City, home of law firm Linklaters, and the £190M 90 High Holborn in Midtown. The yield on both was 4.75%, but PNB has opted to pull the sale of the High Holborn assets after bids were received. The Linklaters building remains up for sale.
Burlington Arcade — £350M
After failing to find a buyer at £400M, owners Meyer Bergman and Thor Equities in August dropped the price of the West End luxury retail arcade by £50M and appointed new agents. The price would still represent a big profit on the £104M paid in 2010, when a big refurbishment was undertaken.
Aldgate spec debt — £150M
Not so much a deal as a financing that will say a lot about the London market. Aldgate Developments appointed Eastdil Secured in September to source £150M of speculative development finance to fund the construction of its 318K SF, £350M One Braham office development to the east of the City. If lenders are willing to provide speculative development finance it would be a signal there is confidence in the London office leasing market.