What do The Clink prison, a UK government HQ and the Omani government’s St Paul's office have in common? They’re all for sale in the £1.1bn post-summer London sell-off

By James Buckley - Friday, September 14, 2018 14:33

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More than £1.1bn of commercial property has been put up for sale in central London since the summer slow-down. CoStar News takes a look at what has formally been brought to market this month.

The private Thai owner of 272 High Holborn in London’s Midtown, WC1, has instructed BNP Paribas Real Estate to sell the freehold interest in the building for £84m, reflecting a yield of 4.28%, CoStar News can reveal. The building is let to University of the Arts for a further 11 years.

Elsewhere, The State General Reserve Fund (SGRS), a sovereign wealth fund set up in 1980 by the Sultanate of Oman, has instructed Cushman & Wakefield to sell its 99 Queen Victoria Street, an office property near St Paul’s Cathedral, EC4, CoStar News has learned. SGRS, which was created to manage the investments of Oman’s oil reserves, is guiding a price of £65m for the property, reflecting a net initial yield of 7%, or circa £700 per sq ft.

The building is single let to Sumitomo Mitsui Banking Corporation, which has a lease break in 2021 to line up with its move to 100 Liverpool Street, for which an agreement for lease on 161,000 sq ft of office space was signed in February. The 91,000 sq ft 99 Queen Victoria Street was developed in 2004.

In Southwark, 1 Clink Street, SE1, the former home of The Clink, a prison which operated from the 12th century until 1780, now home to the Clink Museum and offices above, has been put up for sale, CoStar News can reveal. Allsop has been instructed to sell the 23,000 sq ft Victorian warehouse building for £22.63m, reflecting a 5% yield and a capital value of £931 per sq ft.

The total passing rent over the commercial element - including vendor rental guarantees - is £1.01m per annum, or £49.75 per sq ft. The building was comprehensively refurbished in 2017 and also comprises three flats. The office space is let to three tenants with the second floor let and first floor under offer. The retail space is let to two tenants, Gourmet Burger Kitchen and The Clink Museum until July and June 2029 respectively.

Also in Southwark, Zoopla’s global headquarters campus in Shad Thames, SE1, has been put up for sale for £89m. Columbia Threadneedle has instructed JLL to sell the freehold interest in Courage Yard, next to Tower Bridge, for a net initial yield of 5%. The aset, which is to be sold for only the second time in 30 years, has been comprehensively refurbished and comprises seven buildings on a 2.2-acre freehold site on London’s Southbank. It has 67,900 sq ft of offices and 17,900 sq ft of retail space, as well as 160 flats. The office space was pre-let to Zoopla Property Group as its global HQ campus until 2031, providing 13 years of income, with guaranteed rental performance in 2021 and 2022.

Also to be launched to market this week was 1 Bartholomew Lane, which Hines and Korea Investment Corporation have instructed CBRE to sell for £104m, reflecting a yield of just over 4%, or a capital value of £1,303 per sq ft. The freehold building opposite the Bank of England completed in 2010 and comprises 79,838 sq ft of office space with floorplates ranging from 2,215 sq ft to 8,161 sq ft. The building is 100% let to 11 tenants with a WAULT of five years to the lease expiries and let off an overall rent of £55.74 per sq ft.

In King’s Cross, Cushman & Wakefield has been instructed to sell 330 Grays Inn Road for £75m, or £551 per sq ft for the 255-year lease. The development opportunity sites on a 1.5-acresite and is let to University College London Hospital’s NHS Foundation Trust until September 2020 at a rent of £2.63m per annum.

In the West End, Topland and Enstar Capital have appointed JLL and Michael Elliott on the sale of the long leasehold investment of 1-3 Upper James Street, Soho, W1, seeking offer of £38.5m, reflecting a net initial yield of 4.2%. 1-3 Upper James Street is home to fashionable restaurant, Bob Bob Ricard at ground floor and basement level, totaling 7,309 sq ft. The five upper floors, comprising 18,930 sq ft, are occupied by a single tenant, Phonographic Performance Limited – a UK based music licensing company. The total passing rent for 1-3 Upper James Street is £1.73m per annum, with a weighted unexpired lease term in excess of 12 years.

Elsewhere, Blackstone is set to launch the sale of its government-let offices in London’s Victoria for around £285m. The US private equity giant has instructed CBRE and Savills to bring its  Sanctuary Buildings to market for a net initial yield of around 4.2%. While the Department for Education previously made public its intention to vacate the building when its lease was due to expire last year - and relocate to a government-owned freehold building as part of a cost saving exercise - the department has since committed to a new 15-year lease on the building at open market reviews.

Blackstone bought the building at 16-20 Great Smith Street, SW1, in November 2014 for £175m, reflecting a 5.75% yield.

In Clerkenwell, BNP Paribas Real Estate has been appointed to sell 8 Baltic Street on behalf of a private UK investor for £9.75m, reflecting a net initial yield of 4.25%.

In Docklands, Evans Randall has instructed CBRE to sell Sovereign House, at 227 Marsh Wall. The 71,843 sq ft data centre has been put up for sale for £38.8m, representing yield of 5% and a capital value of £540 per sq ft.

The building is securely let for in excess of eight years to Digital London Limited, a wholly owned subsidiary of Digital Realty Trust, one of the largest publicly traded U.S REITs. The property has an overall passing rent of £1,975,683 per annum, reflecting £27.25 per sq ft overall.

Completing the line-up of new sales instructions is the 1.5m sq ft office and residential opportunity opposite St Thomas’ Hospital on Royal Street in London's Waterloo, which Savills has been instructed to sell on behalf of the 500-year-old Guy’s and St Thomas’ Charity. The Charity – a foundation independent from the NHS – is seeking proposals for the long leasehold interests in the 5.4 acre (2.2 hectare) site, on a subject to planning basis. The site is not public land. While a price has not been attached it is expected to fetch in excess of £200m.

However, while the £1.1bn of new sales instructions are significant, the volume is below the circa £2bn of central London assets that were put up for sale last September.

Aidan Meynell, joint head of London markets and head of City investment at BNP Paribas Real Estate, said: “Central London continues to attract significant global capital despite the headwinds of Brexit. Geopolitical risks, foreign exchange rates and the lower available returns from other investment asset classes are helping to sustain pricing levels across London real estate for all risk profiles.

“There remains limited choice for investors searching for secure, long income product and at the other end of the scale, a severe shortage of future development pipeline is underwriting appetite for development and refurbishment opportunities.

“Some areas of London are outperforming others but there is still value out there.”

jbuckley@costar.co.uk

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