Difa is to sell a major ministry headquarters plus a 20-storey City tower for nearly £250m.
The German open-ended fund will bring Sanctuary Buildings on Great Smith Street, SW1, to the market next week, together with 6-8 Bishopsgate, EC2, for a combined price of £243m a 6.12% yield.
Both buildings are owned by Difa-Fonds Nr 1, which suffered the withdrawal of €450m (£309m) by private investors in the first two months of this year.
Across its funds, Difa saw a total net outflow of around £300m over the same period.
A source said: “Outflows are happening and Difa is being proactive in managing this before it becomes a problem.”
Savills will market Sanctuary Buildings and 6-8 Bishopsgate together, but said Difa would consider separate sales.
Director James Goldsmith, who is handling the sale, said Difa wanted to take advantage of the current “lack of investment grade product”.
The 227,100 sq ft Sanctuary Buildings is let to the government until September 2017, and is the head office of the Department for Education & Skills. It pays £38 per sq ft.
This is likely to rise at its next rent review in December 2007, said Savills, which is asking for bids from £135m a 6.07% yield.
Difa’s 6-8 Bishopsgate is at the centre of the tower cluster in the City core, close to the Bank of England and Lloyd’s of London.
The 143,000 sq ft building is leased in its entirety to Deutsche Bank AG until 2015 at £49 per sq ft. Savills has given a guide price of £108m a yield of 6.18%. The next rent review for the building is due in 2010.
Difa is still investing on behalf of its Difa Global fund, most notably in its recent purchase of Legal & General’s proposed new City headquarters Austral House, EC2 for £125m.
But private investors have been withdrawing capital from German open-ended funds in response to poor returns from German property.
The sector’s problems have been exacerbated by bribery investigations involving DB Real Estate and Deka Immobilien Investment.
References: EGi News 08/04/05
