Goldman Sachs grabs Alecta property portfolio

Goldman Sachs has got its hands on $2.3bn (£1.7bn) of property on both sides of the Atlantic, having been picked this week as the preferred buyer of 48 assets being sold by Swedish pension fund Alecta.

In the UK the investment bank has agreed to buy 26 industrial, office, big-box and high street retail assets, predominantly around London and the South East, valued at close to £348m.

In the US it will take on 22 office, grocery-anchored and high street retail, multifamily, and industrial assets, mostly in California, the South West and North East, valued at £1.4bn.

Goldmans fought off competition from Blackstone, Northwood Investors and Starwood Capital, which wanted the entire portfolio, and a jv between Patron Capital and Clearbell, bidding for the UK portion only.

Alecta had been looking to sell the UK assets for £380m, a yield of 6%. The buyers ultimately valued it at close to 8% lower, the price reflecting a yield of 6.6%.

Alecta stats Given the scale of the deal, it will be an important yardstick for the pricing of large portfolios in an uncertain market following the EU referendum.

The UK assets will be managed for Goldmans by Square Metre Asset Management.

Gerald Eve is advising Goldman Sachs and Square Metre on the acquisition.

The deal is a boost for the adviser, which won the appointment as a result of relationships with key personnel in its 18-strong capital markets team. Led by partners John Rogers, Leo Zielinksi and Nick Ogden, the team transferred over from Deloitte Real Estate in April following a strategic review prompted by conflicts arising with other clients of the accountancy firm.

Alecta appointed JLL to sell the portfolio in April, which makes up all of the SEK732.5bn (£67.2bn) pension provider’s directly held international property. Its chief investment officer, Per Frennberg, said at the time that its property ownership was “an organisational anomaly” that did not have the same economies of scale as the rest of its business and that it was seeking to take advantage of strong appetite in the market.

Goldman Sachs declined to comment.

What will Goldman Sachs do with its latest UK portfolio?

The attraction of Alecta’s UK portfolio is that 88% of its income is located in the most liquid markets of London and the South East, with a strong income stream of just under £23m and an occupancy rate of only 94.4%.

However, there are still areas to reduce its vacancy rate and increase occupancy further.

As a result, Goldman Sachs has the option to recoup some cash quickly by selling the well-let central London assets.

The central London assets

Property	Size (sq ft)	% let	Annual income (£m)	WAULT to break
70 Gray’s Inn Road, WC1	34,873	100	1.5	4.2
223-237 Borough High Street, SE1	31,003	100	0.7	1.5
55-57 Drury Lane, WC2	27,337	83.1	1.4	4.7

There are also a host of other well-let assets elsewhere in the South East that are expected to be attractive to buyers should Goldman look to make quick disposals.

The prize South East assets

Property	Size (sq ft)	% let	Annual income (£m)	WAULT to break
Kings Place & Conquest House, Kingston-upon-Thames	98,209	100	2.3	7.3
Boreham Interchange, Chelmsford	251,419	100	1.9	10.8
Four Pools Retail Park, Eversham	76,436	100	1.2	10.2
London Road Retail Park, Newbury	112,012	100	2.1	11.4

There are only four assets that are not fully let outside central London (below). Six assets also have an average of less than three years to first break options. Goldman is likely to hold on to these for longer, attracting new tenants and regearing leases.

The asset management projects

Property	Size (sq ft)	% let	Annual income (£m)	WAULT to break
Olympic Court, Salford	109,910	73.3	0.5	2.7
The Technology Centre, Station Road, Theale	31,945	68.2	0.2	1.2
Access 12, Station Road, Theale	46,959	77	0.4	5.4
Parkview House, Uxbridge	47,337	50.9	1.4	2.1