The deal reflects a 6.8% initial yield and the 332,678-sf offices generate more than €11.8 million ($14.4 million) a year in income from tenants including Young & Rubicam and Bertelsmann Books & Magazines. The 1920s building was extensively refurbished in 1999.
"This purchase is consistent with Land Securities' strategy of focusing on London office investments with the potential for future income growth. Currently let at low rentals, averaging just over €34.80 per sf ($42.30), Greater London House offers extremely good opportunities for rental growth as the London office market recovers," says Land Securities chief executive Francis Salway.
Earlier this year, the company reported evidence of improving market conditions for London offices as it posted a rise of nearly 10% in year-end net asset value. At the same time, Salway, who formerly replaced Ian Henderson as chief executive on the July 14, announced plans to overhaul the company's portfolio and focus.
As part of the new strategy Land Securities is selling its entire industrial holdings, valued at €534.4 million ($650.8 million) and creating a Senior Management Committee to focus on three core sectors--retail, London offices and property outsourcing. The committee is distinct from the group board.
"We are confident that these moves will ensure that the group remains at the forefront of the UK property industry," says Salway. The Greater London House acquisition is the first major acquisition since Salway took over the reins. The vendors were advised by Franc Warwick and Clifford Chance. Jones Lang LaSalle and Nabarro Nathanson advised Land Securities.
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