June 21, 2007 By Marshall Taylor, European Correspondent
Evans Randall, the London investment banking and private equity group, has acquired the Riverbank House office development on the River Thames in an off-market deal from Pace Investments Ltd., in a forward funding for around £300 million (U.S.$597 million). The development has been pre-leased to the Man Group Plc for 26 and a half years. The price reflects a net initial yield of 4.42 percent.
The City of London Corp. owns the freehold and Evans Randall now holds a 155-year lease with a right to extend that for another 50 years. The 320,000-square-foot Riverbank House is scheduled for completion in 2009.
“By acquiring a new building, we figure we’re buying at a yield that is one-half of a percent better than if we bought an existing building in the market,” Michael Evans, chairman & chief executive of Evans Randall, told CPN. “In the market the yield is closer to 4 percent for a completed building.”
Evans (pictured) noted that the lease with the Man Group is based on a £45 per square foot rental rate, which is below market. “The rent today is around £55, which makes it particularly attractive for rental growth.”
Meanwhile, Evans Randall sold to a fund managed by Prudential 250 Bishopsgate, ABN AMRO’s London headquarters. The price was not disclosed. The firm had acquired the building in July 2005 for £194 million (U.S.$386 million).
“We got a good offer,” Evans said. “We only dealt with Prudential and didn’t go out for bids. We thought we made a good return for our investors.” The firm noted that its investors achieved a gross profit of around 40 percent, representing an internal rate of return of 35 percent.
In the pipeline, Evans Randall has just exchanged contracts on office buildings in Munich and Brussels, and on a retail outlet center in Germany.
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