Cromwell Property Group is preparing to offload Silverburn House, an office site in Aberdeen, for £1.25m – after buying it for £17.6m in 2013.
Cromwell said that Aberdeen’s office market had “shifted materially” since its initial purchase, resulting in the decision to sell the asset through an auction process.
Earlier this year, it had appointed Knight Frank to sell Silverburn House with a price tag of £5.95m excluding VAT, reflecting a capital rate of £42.09 per sq ft.
At the time the 141,353 sq ft property had a passing rent of £1.98m, and was let to GE company Baker Hughes until 28 October this year on three separate leases, which it has since quit. Terminal dilapidations were served.
The price also included the option of buying the asset as a special-purpose vehicle.
The now-empty site will be sold through an Acuitus sale in London on 5 December.
The asset comprises a detached office building of four interconnected, five-storey rings around a central courtyard. It also includes a fitness centre, 41 car-parking spaces and outbuildings. It is located adjacent to the A90 road, around three miles north of Aberdeen’s city centre.
Silverburn House forms part of the €1bn Cromwell European Diversified Fund (CEDF), previously known as the Valad European Diversified Fund.
CEDF bought the offices in 2013 from Highcross, with the purchase price reflecting an initial yield of around 10%.
Office oversupply
A spokesperson for CEDF said: “CEDF was launched in 2013 and over the past 18 months we have been selectively trading out of assets following completion of asset management initiatives and in accordance with business plan.
“We have realised some excellent returns on the 11 UK assets traded to date, which have shown a circa 20% improvement in value and an IRR in excess of 15%.
“For this particular asset, while we have had the benefit of growing income, the office market in Aberdeen has shifted materially, hence our decision to explore an auction disposal.”
The Aberdeen market appears to be grappling with peak oversupply of office stock. Last month, housebuilder Barratt sold a largely vacant office tower in central Aberdeen through Allsop for just £20,000 – at a staggering yield of 620%.
Empty rates and service charges at the 43,000 sq ft Salvesen Tower were incurring heavy costs for Barratt. Vacancies totalled almost 33,000 sq ft, while the service charge budget reached £175,300 pa plus VAT.
Aberdeen has 3m sq ft of office space available, according to Radius Data Exchange.
Recent disposals
The sale is the latest in a series of disposals for CEDF, which invests in core-plus/value-add assets in the UK, Germany and France. Last month it appointed Gerald Eve to sell its Five Ways Entertainment Centre in Birmingham at an asking price of £44.7m.
M7 acquired the eight-asset Alpha portfolio from the fund for £68m this summer, which included five out-of-town retail warehouses.
Cromwell had bought Valad Europe from Blackstone Real Estate Partners VI (Blackstone) and Valad Europe’s senior management for €145m in 2015.
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