Kennedy Wilson Europe has confirmed the purchase of a portfolio of nine south-east offices for £211m from Apollo Global Management.
The offices cover 814,700sq ft of space and are almost fully let. The only office with vacant space is Bartley Wood Park in Hook with an occupancy rate of 87.5% on 109,700 sq ft of lettable space.
The company will asset manage the offices, including regearing, extending lease lengths, refurbishments and rent reviews.
The company hopes by doing this it will capture the estimated rental values of 5% higher than the current passing rent. Current total net operating income across the portfolio is £17m from 14 tenants.
Mary Ricks, president and chief executive of Kennedy Wilson Europe, said: “This is a high-quality portfolio which we have acquired at an attractive entry basis with it trading at substantial discounts to both historic 15-year average and market peak capital values, yields and rental values.
“The portfolio provides a good balance between security of income – with strong tenant covenants and high occupancy – along with sufficient medium-term lease events to capture today’s ERVs, which are 5% ahead of passing rent, and future market rental growth.
“This, along with the material yield and rental gaps against prime central London offices of 400bps and more than £80 per sq ft, respectively, will contribute to growing our day one cash-on-cash of 14.8%.”
