Landsec has exchanged on the sale of 21 Moorfields, EC2, for £809m to a vehicle managed by Lendlease.
The development measures 568,500 sq ft and is fully prelet to Deutsche Bank on a 25-year lease, with annual net rent of £38m. Built directly above Moorgate station, the asset is targeting sustainability ratings of BREEAM ‘Excellent’ and LEED v3 ‘Gold’.
After outstanding development-related items, the sale will result in a £733m net cash receipt to Landsec. Rothesay is financing the acquisition with a 10-year senior term loan.
Landsec will retain responsibility for completing the development, with practical completion expected in Q1 2023. Lendlease will manage the investment vehicle, on behalf of its investment partners including Australia’s TCorp and its own minority interest. The deal marks TCorp’s first direct investment in London offices.
The total consideration of the disposal represents an effective 9% discount to March book value. Landsec said it will crystallise anticipated development profit of £145m, representing 25% profit on cost.
The owner said the sale forms part of its strategy to recycle capital out of mature London offices. Completion of the transaction is expected to take place in the coming week, and the net proceeds of the disposal will initially be used to pay down debt. The deal is expected to reduce its loan to value to 30%, from 34%.
Following a strategic review in late 2020, Landsec has now sold £1.8bn of London offices at an average yield of 4.35%.
Marcus Geddes, managing director for central London at Landsec, said: “21 Moorfields is a fantastic example of Landsec’s development expertise in delivering a high-quality project at one of the most complex construction sites in London.
“We are particularly proud to have achieved a number of engineering firsts associated with the development of such a significant building, which sits directly above both Moorgate Underground Station and the new Crossrail line to Liverpool Street.
“These achievements, combined with the securing of a 25-year prelet agreement with Deutsche Bank, has culminated in substantial grade-A office space with long-term income, the value from which we can now unlock in order to recycle capital into new opportunities, in line with our growth strategy.”
Neil Martin, chief executive for Europe at Lendlease, said: “The scale of this joint investment in the City of London reflects the global appetite for premium and sustainable office assets in the world’s key gateway cities. In addition to our close partnerships with international capital, Lendlease also brings our global expertise in funds and asset management to this deal at 21 Moorfields.
“This significant acquisition adds size and weight to our European investments platform and contributes to our global funds under management target of AU$70bn by FY26. In addition to converting our AU$117bn development pipeline, our team will continue to scope on-market opportunities across Europe as we seek to add further scale to our investments platform in the region.”
Stewart Brentnall, chief investment officer at TCorp, said the business has “been actively pursuing direct property investment opportunities across Europe”. “This strategic initiative contributes return, diversity and sustainability to our global real estate exposures,” he said. “This is TCorp’s first direct investment into the London office market and our second UK transaction after acquiring a large-scale, high-quality logistics asset earlier this year.”
Harish Haridas, head of commercial real estate debt at Rothesay, said: “ These types of high quality, secured commercial real estate loans are attractive to us and play an important part in our investment portfolio, providing long-term security for the pensions we protect.”
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