Almacantar has launched a strategic review of assets, including 125 Shaftesbury Avenue, WC2, where it has abandoned plans to refurbish and extend the 190,000 sq ft office block, having let the building to WeWork.
The property company said it was exploring a potential sale of the £275m West End building, as well as considering refinancing some of its assets.
Chief executive Mike Hussey said it was not “openly” selling 125 Shaftesbury Avenue, although agents at CBRE sent details to selected prospective buyers last week with the price reflecting a yield of 4.25%.
The potential sale comes as Almacantar begins to deliver on a series of central London development schemes, into which it could recycle fresh capital released through a disposal or refinancing.
Its major developments, Centre Point, WC1, South Bank Place, SE1, and Marble Arch Place, W1, are currently fully financed through Starwood, Cain International and the Children’s Investment Fund respectively.
Hussey said a sale or refinancing could be used to “restock” the company’s development pipeline, releasing liquidity for the potential redevelopment of CAA House on Kingsway, WC2, which could start following a lease expiry in December 2019. A £60m Crédit Agricole and Sumitomi Mitsue loan secured against the property matures next June.
The Agnelli family-backed property company was founded in 2009 and currently has a £2bn pipeline by gross development value. Almacantar is still considering new acquisitions.
A senior industry source said Almacantar’s decision to potentially sell and review its investments was a natural step for a company with a large amount of development exposure.
Almacantar acquired the Shaftesbury Avenue building in 2013, when it began letting out vacant space on medium-term leases, lined up to expire at the end of this year, when a redevelopment was mooted. It was multilet to a variety of tenants including Gucci, Yahoo Europe and Lloyds TSB Bank, generating an annual rent roll of £6.4m.
The scheme received permission for a refurbishment and extension of the existing office building to provide 100,000 sq ft of additional floorspace.
However, the relationship it had established with WeWork at Southbank Place – where it let the flexible office giant 280,000 sq ft – was instead expanded to include 140,000 sq ft at Shaftesbury Avenue, unlocking the potential sale of the block.
WeWork is understood to have a signed a 20-year lease on a rent that will rise close to £80 per sq ft.
Investors will be attracted to the fact it is a freehold site with long-dated income. But it will be another test of the WeWork covenant, which is a relative newcomer to the London market.
The company has significant exposure to the West End residential and office markets, and some exposure to retail.
After eight years spent growing its development pipeline, with income derived mainly from short to medium-term office lettings, it will start to receive the bulk of proceeds from the sale of flats in Centre Point from October. Just under half of the 82 luxury flats are understood to have been sold there.
At Marble Arch Place it is bringing forward 52 luxury flats for delivery by 2020 and on Edgware Road it is building 76 apartments and townhouses, of which 47 will be affordable (the affordable is associated with Marble Arch Place).
Its office lettings to date have particularly focused on its main tenant, flexible office provider WeWork, which occupies 420,000 sq ft at two Almacantar schemes – Two Southbank Place and 125 Shaftesbury Avenue. Almacantar is also developing 95,000 sq ft of offices as part of Marble Arch Place.
On the retail side, its portfolio includes 45,000 sq ft of space at Centre Point, which is fully prelet to tenants including Rhubarb – the operator behind the Walkie Talkie’s Sky Garden. Marble Arch Place also includes rebuilding an Odeon cinema and six retail units.
CBRE is advising Almacantar on the strategic review.
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