One of the UK’s most acquisitive funds has set a new yield benchmark for London’s Midtown.
UBS Global Asset Management has beaten competition from ING Real Estate and Scottish Widows to buy 1 New Fetter Lane, EC4, at a sub-4.5% yield.
UBS is paying Close Brothers £68m, a 4.48% yield, for the 97,000 sq ft office. Developed in 2002 by Delancey, the building is let to law firm Sullivan & Cromwell at £42.50 per sq ft.
Richard Tanner, managing director of the UBS property team, said: “We are not fixed down by short-term yields, because we’re driven by the capital value per sq ft.
“Other investors are buying City buildings at £1,100 per sq ft, so we are looking at blocks closer to the mid-£600 mark.
“And because the building is rack-rented now, there is a chance of an increase in rent at the review in six months.”
The purchase came as UBS made its first South Bank acquisition. On Wednesday, the fund announced that it had bought Great Portland Estates’ proposed 200,000 sq ft office scheme at 154/172 Tooley Street, SE1, for £93.3m.
“We are open to buy more in Midtown and the South Bank. When you look at occupiers, tenants are looking at the South Bank and City interchangeably,” said Tanner.
The Tooley Street deal represents a surplus of £17.5m to the March 2006 book value. GPE will complete the construction work, but all letting and void risk has been transferred to UBS.
UBS was advised by CB Richard Ellis on 1 New Fetter Lane and Tudor Toone on Tooley Street. Allsop advised Close Brothers.
References: EGi News 26/06/06
