Property Week - August 7, 2009
An investment company backed by the former prime minister of Lebanon is in pole position to carry out a purchase and leaseback of one of Credit Suisse’s buildings in London’s Docklands.
M1 Real Estate is leading a consortium of Lebanese investors that is thought to have placed the 258,314 sq ft 20 Columbus Courtyard under offer for more than £150m – a yield of less than 6%. Credit Suisse will lease back the property for 25 years.
M1 Real Estate is a Monaco-based property company and an affiliate of parent company M1 Group, which was founded by the former Lebanese prime minister, Najib Mikati, and his brother.
The deal is another example of overseas investors believing the UK offers good value. This week an Australian fund has placed under offer a stake in the Bullring, Birmingham, and a German fund has bought Centrium in London’s Midtown.
M1 Real Estate has made other investments in central London. In March, it bought the Times Place building at 45 Pall Mall in London’s West End from Legal & General. It paid £56.5m, entirely in equity, for the 60,000 sq ft property at a net initial yield of 7.5%.
Credit Suisse has been assessing its sale-and-leaseback options on all of its buildings in London’s Docklands for more than three years.
In May this year it instructed CB Richard Ellis to market 20 Columbus Courtyard in a process dubbed ‘Project Hunter’. The guide price was around £147m, reflecting an initial yield of 6.25%. It offered the building on a freehold or long-leasehold basis with a guaranteed 25-year lease to Credit Suisse Securities.
The tenant has two options to extend the lease for five years. The rent will be reviewed annually on a Retail Prices Index-linked increase with a ‘cap and collar’ maximum and minimum increase of 4% and 1.5%, respectively. The current rent is £37.50/sq ft.
Credit Suisse received 20 formal bids from parties attracted by the size of the property and the guaranteed rent rises.
The purchase and leaseback is thought to be part of M1’s long-term strategy to build a global portfolio of prime assets in large cities.
Moustapha El-Solh, chief executive of M1 Real Estate, said after the purchase of Times Place that, ‘although the London real estate market, like many cities around the world, is currently seeing one of its worst downturns, we believe that making investments in prime assets with strong fundamentals is a sound long-term strategy.’
M1’s portfolio includes investments in the US, Europe and the Middle East.
Credit Suisse is also considering the sale and leaseback of other buildings it owns in London’s Docklands.
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