UBS Completes $263 Million Sale Leaseback of London Office Tower

Reuters - February 11, 2008

UBS Global Asset Management said on Monday it has sold an office building near London's City financial district to HSBC Private Bank for 135 million pounds ($263 million) and a rental yield of around 5.3 percent.

Richard Tanner, director of UK property funds at UBS (UBSN.VX), said local government was poised to move into the new 200,000 square foot (18,580 sq metre) property in the London Bridge area, across the river from the City, on a 25-year lease.

"It's a quasi-bond type asset and the market is reasonably liquid for these types of assets," he told Reuters. "I wouldn't say the market is hot for all types of properties but, for London offices on reasonably good terms and solid covenants, there seems to be a fair degree of liquidity."

Benchmark data showed a 12 percent drop in average UK commercial property values from their summer peak to the end of last year -- a peak-to-trough fall which may yet grow to 25-30 percent in 2008/2009, according to the property derivatives market.

UK commercial property transactions have slumped as buyers and sellers adjust to a more bearish climate, and were 60 percent down in January compared with the same month last year.

Tanner said the London Bridge office sale was on behalf of UBS's 600 million pound South East Recovery Fund, a specialist office fund, out of a total UK property portfolio worth around 3 billion pounds.

He declined to comment on whether the asking price of the Tooley Street office was cut to secure a sale, although earlier media reports said it had been put on the market in November for 140 million pounds.

Tanner said UBS expected to buy and sell a few more UK property assets this year with a reasonably stable income.

"Accepting there is a very uncertain economic backdrop, there are a variety of areas of the property market which look attractive at current pricing and a couple of areas which look a bit sparky," he said.

HSBC Private Bank could not be immediately reached for comment. Sphere: Related Content