Brockton Wastes No Time In Ramping New Business Up To £500M
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When UK fund manager Brockton Capital set up a new business with Israeli investor Alony Hetz last autumn, the pair said they planned to invest £300M of equity in London in 2019 and 2020. That target looks like it is going to be blown out of the water.
The Brockton Everlast business this week completed the purchase of Telephone House on Old Street in Shoreditch in a joint venture with Quoinstone for £106M. That takes its total investment to £516M across four deals since the venture started buying in September.
Financial results for Alony Hetz show that the first three deals had an average loan-to-value rate of about 50% to 55%, meaning it is likely to have already invested between £260M and £280M of that equity target before 2019 is done.
Brockton founders David Marks and Jason Blank last month told Israeli news site Calcalist that in spite of political uncertainty, London real estate remained resilient and lots of interesting opportunities continue to arise, particularly when institutional investors decided to sell assets that had been under-managed and needed improving.
The 124K SF Telephone House fits the pattern of Brockton’s purchases in its joint venture with Alony Hetz. The building is well-let, producing rent of £4.75M a year, but has low site coverage, which provides the opportunity to make it more densely occupied and improve the income.
Alony Hetz said in a presentation to investors that the venture’s first investment, the 117K SF 169 Union St. in Southwark, was under-rented compared to the local area. Brockton Everlast bought it for £100M and it produces rent of £5M a year, being 100% leased to the London Fire Brigade until 2027.
Its second purchase, the 122K SF Devonshire Quarter in the City, is 95% leased with average lease team of six years, but there is the option to terminate those leases in three years and create a new 410K SF office building.
The largest purchase made so far is the 238K SF Waterside House in Paddington, bought for £220M in April. The office building is 100% leased to M&S and produces rent of £11M, with rent reviews this year and in 2023.
Brockton Capital was set up by Blank and Marks as an opportunity fund manager, and it raised more than £2B in equity across three funds. The Brockton Everlast venture bought that management business for £40M, and Alony Hetz owns 90% of it.