How long will the fun last?

The intriguing question in London is how long the inward flow of money into prime assets will continue, although the recent increase from Greece and Spain indicates demand is undiminished.

Apparently there are no limits to what can be sold with the German CLI Group Fund putting he iconic 28,910 sq.m. Lloyds Building on the market for £290 million for a yield of 5.5%.

A similar price is being asked for the 30,110 sq.m Tower 42, another landmark property in the Square Mile.

Knight Frank’s Stephen Clifton said: “Investors with global perspective can find best in class assets and tenant covenants in the city.” Adding to the attraction is that sterling is down 30% since 2007 and there is also the consideration of the euro being under pressure. The high prices available and the prospect of rental increases make this a perfect period for selling, particularly as some of the German funds show large gains.

One of the largest portfolios on offer is from KanAm which is using Knight Frank for the 34,373 sq.m. headquarters of the European Bank for Reconstruction and Development at One Exchange Square, EC2. Also in the portfolio, which could raise £1 billion, are Deutsche Bank’s Winchester House, Thomson Reuters’ 30 South Colonnade and Olswing’s HQ at 90 High Holborn.

Some of the selling is coming from the Irish, such as Shieldpoint, which is putting the 8,361 sq.m. Royal London House at 22-25 Finsbury Square on the market through Savills. This is the third time Shieldpoint has sought to sell city properties in the past two years. What is impressive in London is the wide range of investors. For example, the Canadian group Brookfield is prepared to pay over £300 million for the 42,734 sq.m. Broadgate West, EC2, from Gemini Commercial for a yield of 6%.

Towering deal

The spread of the investment deals is right across London with the largest off market deal for some time close to completion with Credit Suisse selling the 17,187 sq.metres (185,000 sq.ft.) Richard Rogers designed Tower Bridge House, E1. The buyer is yet another foreign pension fund. It is the Employees Provident Fund of Malaysia which is thought to be paying £140 million for a yield of 5.2%.

This underlines the enthusiasm by foreign investors for putting their money into safe havens, notably the UK, because of global economic problems and uncertainty about equity markets. That is always worth remembering when predictions of a collapse of commercial property markets are broadcast. In the City, Mitsubishi Estate has bought the 13,634 sq.metres (146,820 sq.ft.) 6-8 Bishopsgate which is occupied by Deutsche Bank. Mitsubishi’s Hiroyuki Arimura said: “This building is in a prime location in the core of the City and the strategically important eastern cluster of tall buildings.”

A number of buildings are still coming onto the market from Receivers, such as the 196 bedroom Crown Plaza Hotel in Shoreditch (now in the fast growing technology corridor of the East End) where Colliers International is seeking a buyer at £80 million. It is close to Liverpool Station. Also in Shoreditch, Knight Frank is marketing the 208 bedroom Hoxton Hotel for £70 million.

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