A UK institution is back buying in the City. Legal & General has swooped for a £200m trophy. It’s a big deal for the City and for domestic investors at large.
Sovereign wealth has dominated recent deals in the Square Mile, with three-quarters undertaken by overseas buyers in the first six months of the year. Much, consequently, has been made of UK institutions being priced out of the City, forced out of London and the capital becoming the preserve of a global elite. This off-market deal for 70 Gracechurch Street, EC3, proves that ain’t necessarily so.
It’s not a typical story, of course.
Days before MIPIM, the Kuwaiti government went under offer with Irish owner Michael Whelan’s investment company Moritz Group on the building. Within a fortnight the deal had fallen out of bed over an unexpected potential VAT issue. DTZ had been readying to bring the asset back to market before L&G stepped in.
Bill Hughes and his team will be feeling rightly pleased with themselves: after all, the prize is considerable. As well as already offering a strong covenant from tenants including Marks & Spencer and XL Group, the site has potential for further development. A tower is possible.
But there is a broader point too. The deal highlights how UK investors can and should capitalise on their geographical advantage and market knowledge. St Martins’ withdrawal was not the first and won’t be the last reversal of fortunes for international buyers. L&G’s very proximity to, and knowledge of, the market helped secure the deal.
Of course, for the capital at large it matters little who is buying. But for the health of the domestic property market it matters greatly that there is a breadth of domestic and international investors competing and co-operating. In the City at least, the L&G deal strikes a blow for diversity.
• A decade and a half ago, back when the business world was worrying about the millennium bug, a small but committed and far-sighted network of advisers was urging UK plc to put green issues at the heart of their corporate strategies. With a handful of notable exceptions, it never happened. It may yet.
This week Gazeley struck a deal with tractor manufacturer JCB to take the world’s first BREEAM outstanding building. The shed has lain empty since completion four years ago, despite green features that could save an occupier £200,000 a year.
It’s just possible that the £2.9m incentive from the government’s regional growth fund proved a more compelling draw to JCB than enhancing its green credentials. But, symbolically at least, it is a reminder for occupiers and landlords that sustainability commitments matter.
Grosvenor is currently experimenting with a green-furb in part of its estate. Others are undertaking similar initiatives.
Again, I suspect these are the minority. Given that from 2018 buildings that don’t meet minimum energy efficiency standards will be unlettable, there is a lot of work to do.
• Thanks to Greenpeace protestors, the Shard was in the spotlight for the wrong reasons this week. It was there for all the right ones last Thursday night, as more than 200 guests gathered for Estates Gazette’s latest Question Time event. Infrastructure investment, London’s place as the world’s real estate capital and the capital’s widening core dominated the debate. Listen to the full debate or watch here
• Entries for this year’s Estates Gazette Awards are flying in. Nonetheless we want to give you every chance to ensure your efforts are recognised. So the entry deadline has been extended until 26 July 2013. Whether you are a retail advisory team or an industrial developer, make sure you take part. Details are here
damian.wild@estatesgazette.com
