Monday, August 13, 2007

Lloyd’s of London Building Offered for £320 Million

Property Week - August 10, 2007

One of the best-known office buildings in London is about to come to the market. Commerzbank subsidiary CLI Group, which initiates and manages closed-ended funds, is selling the distinctive Lloyd’s of London building, designed by Lord Rogers, with a price tag of around £320m. The annual income from the 310,000 sq ft building is around £17m and a sale would reflect a yield of around 5%.

The news comes at a time when a credit crisis in the financial markets and rising interest rates are causing some investors to reconsider property deals. Savills is advising the vendor and is thought to have already approached several parties seeking an off-market transaction. Sources say it is likely the building will be brought to the market more widely this autumn after the August lull.

The sale will attract interest from institutions as well as wealthy overseas investors given the solid covenant of the UK’s largest insurance company, its long lease, its status and its prime location in the City.

CLI, which holds the scheme in its CFB Fonds 154 fund, bought the building from fellow German open-ended fund manager Deka for £231m in 2004 with a £141m loan from Hypo Real Estate. Deka bought the building upon its completion in 1986 for £180m from insurer Lloyd’s in a purchase and leaseback, before selling it to CLI.

The Lloyd’s lease at the Leadenhall Street building, which is considered to be one of the best examples of modern architecture in the world, expires in 2021. It has one tenant break option within the lease agreement.

Despite apparent warning signs of a market slowdown, investor interest in the City and Midtown markets for well-situated and let buildings shows no sign of abating. Last month Invista Real Estate and Delancey sold their 350,000 sq ft Mid City Place in Midtown for around £330m to US fund manager Beacon Capital Partners at a yield of around 4.25%.

Last year GIC Real Estate, the government of Singapore’s property arm, bought the Merrill Lynch Financial Centre at 2 King Edward Street in the City in a £490m purchase and leaseback. The financial services company took a 15-year lease on the building. GIC’s president, Dr Seek Ngee Huat, said it had bought the building because it was a ‘compelling investment opportunity due to its high specifications and modern design, and the strength of Merrill Lynch’s commitment.’

The rise in the cost of finance and credit problems in some areas of the banking world means the sale of the Lloyd’s building may not attract many heavily debt-backed buyers. Sphere: Related Content

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