Starwood Capital Group has bought the St Vincent Plaza office development in Glasgow for more than £70m – a circa 6% yield.
It acquired the 172,307 sq ft asset through acquitting the entire share capital of Abstract (Glasgow) – the company that developed and owned the Scottish Grade-A office block.
The purchase is the first in Europe for the private equity firm’s Starwood Global Opportunity Fund XI which has raised more than $3bn of equity and has a mandate to invest in value-add as well as opportunistic assets, reflecting a relative shift down the risk curve and a broader scope to allow it to buy higher quality assets such as St Vincent Plaza.
The purchase comes shortly after Abstract agreed terms with Zurich Insurance to lease the entire seventh floor of the 12-storey property.
Zurich has agreed a 10-year lease for the 17,222 sq ft space and is understood to be paying in the region of £26 per sq ft.
The insurance giant will join tenants including KPMG, Whyte & Mackay, Scottish Ministers, Mott Macdonald and Wood Group.
Following the deal with Zurich, St Vincent Plaza generates in the region of £3.8m pa in rental income, which reflects 90% of its target rent of £4.6m pa.
Only the ground floor, 12,008 sq ft, and the 14,902 sq ft first floor remain to be let.
The building was completed in late 2015 and is located in a prominent position on St Vincent Street opposite the new Scottish Power headquarters.
Starwood’s investment in the Glasgow office market is the latest in a string of acquisitions by international investors into the Scottish city, which is on the cusp of reaching its highest investment levels in a decade.
Mark Glatman, chief executive of Abstract said: “St Vincent Plaza is the third of our ‘Uncompromising Value’ series of office buildings and it is always satisfying to see the outcome of a good project.”
James Fogarty, vice president for Starwood Capital Group, said: “We are excited about the acquisition of St Vincent Plaza, which is the first European acquisition for our recently established vehicle focused on value-add opportunities.
“St Vincent Plaza is a well-designed, high-quality asset in a strong location with good transportation links, all of which has helped to deliver the very strong tenant roster.
“Glasgow has very limited Grade-A vacancy, almost no new supply, and will continue to be a strong occupational market for the right asset.”
Lambert Smith Hampton and CMS acted as financial advisors to Starwood Capital Group; Pinsent Masons acted for the shareholders of Abstract (Glasgow) Limited; JLL represented Zurich; the joint letting agents on St Vincent Plaza are CBRE and Ryden.
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