Great Portland Estates is in early-stage negotiations to sell the new Facebook London HQ to Deka for around £450m – a 4.25% yield.
If completed, the deal would be the largest in the West End this year and underline the importance of the tech industry to the investment market.
The office at One Rathbone Place, W1, is also attracting interest from other parties and a deal with Deka has not yet been agreed.
German open-ended funds such as Deka have historically timed their activities in the London market shrewdly, buying when West End yields push out to around 4%, and the City to 5%, and during weak points in the cycle when pricing starts to match their return requirement. They then halt purchasing and sell selectively when the market heats up.
In an interview with Estates Gazette last October, before the market slowdown, Matthias Danne, Deka management board member, said: “We still like the UK, and we would like to keep UK exposure in our funds. It’s just not easy at the moment [because of pricing].”
All 242,800 sq ft of
office space at One Rathbone Place is prelet to Facebook on a 15-year lease, ahead of a scheduled completion in February.
An additional 25,200 sq ft of shops and restaurants is also included, and is currently unlet.
According to analysts at JP Morgan, the building will have an estimated total end rental value of £19.6m, which, off a yield of 4.25%, would give an end value of £461.1m. This is lower than JP Morgan’s assumed end value of £475m but “either way, this would be a boost to the London office market post-referendum”, the analysts said.
GPE and Deka have a history of doing business together and in January completed a double deal in which GPE sold 33 Margaret Street, W1, to Deka for £216.3m, and bought 50 Finsbury Square, EC2, from Deka for £119m.
The prospective sale follows on from GPE’s £205.2m sale of nearby 73/89 Oxford Street and 1 Dean Street, both W1, last week.
Following that deal, GPE chief executive Toby Courtauld said he was preparing for the next development cycle.
“Following more than three years of net property sales crystallising material surpluses, our balance sheet has never been stronger and gearing never lower, giving us significant financial capacity to exploit any market weakness, just as we did in 2009, and we have a first-class team ready to capitalise on this period of uncertainty,” he said.
GM Real Estate is acting for Great Portland Estates; CBRE and Savills are Deka’s retained UK advisers.
• To send feedback, e-mail david.hatcher@estatesgazette.com or tweet @hatcherdavid or @estatesgazette
