1912-Built Block off Oxford Street Offers Redevelopment Opportunity Royal London Asset Management has sold 117-123 Great Portland Street, London W1, to real estate investor Concord London Developments for £19.15 million. The prominent corner building, which spans around 14,700 square feet, was originally developed in 1912 and had been owned by Royal London for decades. It retains many original features and is leased for a further nine years to HSBC, which is not in occupation. Concord is reviewing refurbishment and change-of-use options. Concord London was founded by Terry Hui, chief executive of Concord Pacific Developments and Christopher Murray of Ridgeford and W1 Developments. This development team and Brookfield are behind the landmark 50-storey Principal Tower at 2 Shoreditch High Street, designed by Foster + Partners. Hanover Green advised RLAM. Concord was not advised.
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Developer Is Exiting Smaller London Buildings With Fewer Repositioning Opportunities Derwent London, the listed London focused developer and investor, has exchanged to sell its 63,170-square-foot freehold interest in 19 Charterhouse Street EC1 in London for £54 million. The purchaser was a family office advised by Morgan Capital and BNF Capital. The building, which was bought in November 2013 for £41.3 million, is occupied by the London College of Accountancy on a lease expiring in August 2025. The passing rent is £2.6 million a year. The disposal price represents a 4.6% net initial yield to the purchaser, a capital value of £855 per square foot and reflects a marginal discount to June 2022 book value. The sale is one of a handful to have exchanged in the capital in 2023 as the market looks for momentum after a slowdown towards the end of last year. Paul Williams, chief executive of Derwent London, said the sale forms part of an ongoing strategy of reducing exposure to smaller buildings with less repositioning potential. "As the flight to quality continues and occupiers become increasingly selective, proceeds will be recycled into our exciting development pipeline where we are currently on site with 435,000 square feet of net zero carbon projects which we expect will deliver attractive returns."
By Mark Stansfield CoStar Analytics 16 January 2023 | 09:00 London office investment slumped in the final months of 2022 as rising interest rates and uncertainty over pricing brought the market to a virtual standstill, according to CoStar data. Less than £500 million of London offices changed hands in the fourth quarter, a drop of more than 80% on the £2.8 billion spent in the third quarter and more than 90% down on the £6.4 billion transacted in the first quarter of 2022, when hopes for a strong post-pandemic recovery unleashed a wave of blockbuster deals. The figures make the fourth quarter the weakest quarter in more than 20 years. Volumes were less than half those recorded in the lockdown-hit second quarter of 2020 and comfortably below the levels in the depths of the financial crisis at the start of 2009. Annual volumes remained on par with those in 2021 with just over £13 billion changing hands thanks to a bumper start to the year. Only a handful of transactions over £10 million took place last quarter. By far the biggest deal occurred in November, when Singapore’s Hoi Hup Realty bought Holborn Gate in Midtown for £160 million. The 159,000-square-feet building previously traded for £138 million in 2016, shortly after it was refurbished. It was a strategic long-term acquisition for Hoi Hup, as its ownership of several neighbouring buildings unlocks a major development site. Among few other deals of note included two in the West End, with Criterion Capital acquiring 89 Eccleston Square for around £40 million in a potential repositioning play – having been initially marketed by M&G at £57.5 million in February and a sale agreed at this level – and Singapore’s The Land Managers buying 6-10 Cavendish Place for £18.6 million at 11% below the asking price. In the City, 85 London Wall sold for £35 million. Weak fourth-quarter trading reflected cooling investor demand amid rising interest rates, which reduce the relative attractiveness of property and raise borrowing costs, as well as political uncertainty following the calamitous mini Budget in late September and the growing likelihood of recession. However, it also reflects a lack of distress in the market, with building owners that do not need to sell holding fire until more clarity emerges around the economic outlook, the path of interest rates and how far property prices have fallen. This clarity should start to unlock trading again as 2023 unfolds, with several large deals in London already on the cusp of closing in January. The second half of the year is likely to be busier than the first.
Retailers in 11 out of 14 cities around the UK should expect to see their average rateable values decrease in the 2017 business rates review, according to a leading real estate firm. Analysis from CBRE has indicated Aberdeen, Leeds, Cardiff and Bristol will all see their average values decrease by over 30 per cent. While this may be welcome news, as well as an incentive to buy in these cities with reduced occupancy costs, the rateable value decrease won’t be felt across the board, as some retailers are still likely to have an increase from April 1 next year. In Central London, rateable values could increase by a whopping 170 per cent. CBRE’s analysis comes shortly after the government established a consultation for the regulations that will underpin the business rates appeals process. The regulations state that the Valuation Tribunal will only order an alteration to the rateable value of a business if it considers it to be “outside the bounds of reasonable professional judgement”. Retailers will also have to pay to pursue an appeal for each individual site, increasing the potential overall costs involved. Click here to sign up to Retail Gazette's free daily email newsletter “With the cumulative rateable value set to fall across the UK, the government will be seeking to maintain the level of tax generated by the business rates system,” CBRE rating senior director Tim Attridge said. “Therefore the multiplier will be higher than we’ve ever seen immediately after a revaluation. Retailers should be aware of what the potential changes might be, and the impact on their business. “Yes, there is the option to appeal, but this will be a very protracted process and the definition of ‘reasonable judgement’, is far from clear. “If the margin of error is as much as 10 per cent or 20 per cent, for example, retailers will pay considerably more than they might reasonably expect over the five years of the new rating list. “With this lack of clarity, the key is for retailers to budget accordingly now, review their strategy and ensure they have sufficient funds in place to either challenge, or adapt to a new system in order to survive.”
The local real estate market proved to be just as hot in August as the weather. The London and St. Thomas Association of Realtors (LSTAR) reports that 999 homes were sold last month, making it the best August on record. According to LSTAR, 804 detached homes and 195 condos were sold in August. The average sale price was $277,660, $200,000 less than the national average of $478,954. "This has been an absolutely outstanding year for real estate in our area," says Stacey Evoy, LSTAR President in a news release. "We've seen the best April ever, the best June ever and now the best August ever – all in 2016."
Fears of commercial real estate crash recede but agents still warn of extended slowdown Three months after the Brexit vote caused property shares to plunge and forced a series of funds in the sector to halt trading, the UK’s real estate market is slowly regaining confidence. “This is a correction, not a crash,” says Mike Brown, chief executive of Prestbury, a property investment company. “This is a million miles away from the Lehman Brothers era.” UK real estate investment trust shares fell by an average of 23 per cent on the day after the referendum, according to MSCI’s index of the sector, but have since regained half of that loss. Meanwhile, of the eight property funds that halted trading in the face of mass redemption requests from investors, three have reopened their doors. Columbia Threadneedle’s £1.4bn UK fund resumed trading this week, saying that “informed reflection has settled the market”. More than 80 investment deals have been agreed on central London buildings since the referendum, according to Stephen Down, head of central London at the property advisers Savills; in 80 per cent of transactions, the buyers were from overseas. Turnover of City of London buildings in the third quarter is on track to be about 10 per cent below the same period a year earlier, he said. But while the market has found some reassurance since the Brexit vote — one agent said a mood of “euphoric relief” set in after the initial shock — there is an awareness that the worst may not be over. “There is a lot of post-Brexit complacency around, with sterling recovering and economic indicators reversing their pre-referendum weakness, but … we are cautious on the economy and hence property markets,” said Mike Prew, an analyst at Jefferies. Nick Leslau, chairman of Prestbury, said any slowdown was now “more likely to be a slow burn thing”. His company expects rents to fall and vacancy rates to rise, but that the effects will be contained, given “proportionate” levels of new property development and bank lending. Analysts at Deutsche Bank this week said they could see shares linked with London office holdings falling as much as 30 per cent in their gloomiest scenario, which involves substantial staff cuts in the London offices of banks. Among many unanswered questions on Brexit is whether financial services companies in London will lose so-called “passporting” rights to sell products into continental Europe. Deutsche Bank downgraded stocks such as Derwent London, which develops office properties in fashionable areas such as Shoreditch and has itself reduced its rental growth expectations. Capital values for London offices dropped more than 6 per cent in July, according to CBRE, but then fell just 0.8 per cent in August. Muddying the waters is a sense that the property cycle had peaked, even before the referendum. “Pricing has been easing off its high water mark since June 2015, and where we are seeing some inertia is where vendors are still holding out for last year’s pricing,” said Mr Down. “Something will have to [...]
Real Estate Investment Trusts (REITs) were introduced in the UK in 2007. Since then, most of the UK’s largest property companies have converted to REIT status, including big names such as British Land and Land Securities. Here we take a look at what REIT status means and why REITs could be of particular interest to income investors. We then take a closer look at two individual REITs, one specialist and one generalist. What is a REIT? A REIT is essentially a company devoted to property investment. This means that, unlike many other property investments, it can be easily traded on the stock exchange – exactly the same as any other share. This can make it an attractive way for retail investors to access property investments at reasonable prices. In order to qualify for REIT status, at least 75% of a company’s profits must come from property rental, and 75% of the company’s assets must be involved in the property rental business. REITs must also distribute 90% of their property rental income to investors. In exchange for operating within these relatively strict parameters, and to encourage investment in UK real estate, REITs do not pay any corporation or capital gains tax on their property investments. What are the advantages for income investors? Having to pay out 90% of rental income as dividends can make REITs an attractive option for investors looking for income. The special tax arrangements also mean that the dividends are only assessed for tax once, rather than twice as would otherwise be the case. Many REITs have long-term lease agreements with their tenants, which helps to make rental income relatively reliable, though of course there are no guarantees. Those who are able to impose regular rent reviews on occupiers should also enjoy steady, if usually unexceptional, income growth. These traits led us to include Tritax Big Box, a logistics-focused REIT discussed in detail later in this article, in our five higher yielding shares for a low interest rate environment. Evaluating REITs REIT returns to investors are made up of two components - dividends and changes in Net Asset Value (NAV). NAV represents the value of all the assets owned by the REIT. For example, if the assets owned by the REIT, less any debt, are worth £1m and there are two million shares in issue, the NAV per share is 50p. If the value of the properties increases, either through market movements or development activity, the REIT’s NAV will grow. If a REIT, or the sector in which it invests, is particularly popular, demand might push the share price to a premium over the NAV. The same process in reverse might push the REIT to a discount. However, as a general rule, REIT share prices will tend to move in line with the NAV. Since REITs are required to pay out 90% of their income to investors, it is hard for them to build up enough capital to reinvest in new properties from their own earnings. For companies looking to expand, that [...]
White & Case has hired tax partner Michael Wistow from Berwin Leighton Paisner (BLP) to co-head the US firm’s Europe and Middle East tax practice. Wistow is currently head of BLP’s tax department, where he provides tax advice across corporate, finance and real estate transactions such as acquisitions, securitisations, and restructurings. He joined BLP as head of tax in 2007 from Clifford Chance, where he had been a partner since 2000. At BLP he was also a member of the board and executive committee. The UK firm has appointed Elizabeth Bradley as the new managing partner of its tax practice. Bradley trained at the firm and was made up to partner in 2008. White & Case global head of tax Kim Boylan said: “Michael is a leading tax lawyer and his arrival is of clear strategic importance as we look to continue expanding our role advising clients on all aspects of corporate taxation, from both a transactional and a tax advisory and restructuring perspective.” London executive partner Oliver Brettle added: “We believe a larger tax team is appropriate and necessary here in London. The team will continue to focus on both high value, tax advice-driven mandates and supporting our transactional practices. Our tax lawyers will play a particularly strategic role in the ongoing development of our real estate, private equity, finance and infrastructure industry practices. I imagine Michael will be working especially closely with our real estate team.” White & Case has made several hires to its London office recently. It hired London head of disputes Mark Clarke and equity capital markets partner Jonathan Parry from Ashurst in May and April respectively. In June, the firm boosted its banking practice with the hire of Freshfields Bruckhaus Deringer London banking partner Jeffrey Rubinoff.
Wealthy individuals in the GCC will continue investing in global real estate this year with London, New York and Singapore the top preferred investment destinations. According to a report by estate consultancy Cluttons, 63 per cent of GCC-based high net worth individuals claim they are likely to invest in their most preferred real estate investment location during 2016. The third instalment of Cluttons’ 2016 Middle East Private Capital Survey, carried out in partnership with YouGov, shows that London, New York and Singapore are the destinations of choice (outside of the Middle East) for the region’s wealthy, with 54 per cent naming residential as their preferred asset class. Sixty per cent of those surveyed identified capital value growth as their main financial investment driver across all asset classes. Steven Morgan, senior partner at Cluttons, said: “For the Gulf states as a whole, the oil price collapse that began in mid-2014 has certainly put government budgets under pressure. This has also triggered a series of macro policy amendments, aimed at tackling the projected budget shortfalls. “However, from an investment perspective, sentiment remains positive amongst high net worth individuals who are targeting real estate in London, New York and Singapore in particular. These locations offer investors a variety of asset classes that command high capital value gains and high rental returns.” Cluttons’ latest report says that London has emerged as the favourite global property investment destination amongst respondents, with 11 per cent naming the British capital as their most preferred city for investment. In the first quarter of 2016, Middle East investors pumped $418 million into London’s commercial real estate, accounting for 7 per cent of total investment during that period. This adds to the $5 billion invested by Middle East commercial investors in the city throughout 2015. The report highlights that New York is the second most preferred city for investment, with 5 per cent of respondents identifying the American city, which has historically been a popular destination for both institutional and private investors from the GCC.