Link Asset Management Limited has entered the UK market for the first time with the £380 million acquisition of The Cabot, London offices.
As part of its Vision 2025 growth strategy, Link has acquired London offices The Cabot in Canary Wharf on behalf of The Link Real Estate Investment Trust.
The Cabot is a 17-storey, 481,605 square foot building, which is almost fully occupied by high-quality tenants including Morgan Stanley and UK government departments.
Chief Executive Officer, George Hongchoy, says the acquisition of the London offices is part of Link’s Vision 2025 growth strategy. It adds resilience and sustainable growth to the portfolio.
“The Cabot is exactly the kind of stable income-producing high-quality asset with long-term growth potential that we’re looking for. It’s a prominent, Grade A building and one of the few freehold properties in Canary Wharf. It’s well located with excellent connectivity and accessibility and it is almost fully occupied with long leases to high-quality tenants. The transaction will immediately be earnings accretive to Link.
“Today’s acquisition is part of our Vision 2025 growth strategy to diversify and improve portfolio mix, enhancing our ability to deliver sustainable returns for unitholders. A diversified portfolio can strengthen our portfolio resilience, allowing us to benefit from the varied economic cycles of different markets. Going beyond our home Hong Kong and Mainland China, we’re looking at opportunities in the UK, Singapore, Australia and Japan – transparent and liquid markets with sound legal frameworks and strong economic fundamentals.”
The Cabot has undergone extensive refurbishment and extensions in the six years to March 2020. The £380 million consideration paid to HGR Liquidating Trust represents a 0.4% discount on the 17 July 2020 valuation by Colliers International (Hong Kong) Limited.
The 17-storey London offices building offers 481,605 square feet of space and is being acquired with an annual net passing rent of £18.83 million and weighted average lease expiry of 10.9 years. The transaction offers an equivalent gross yield of 5% based on the property’s net passing income and the purchase price.
Link will fully fund the investment of the London offices through internal resources as well as new facilities to fully hedge any foreign exchange fluctuations. Upon completion, Link’s pro-forma adjusted ratio of debt to total assets will rise from 17.8% to 19.2%, based on its consolidated financial position as of 31 March 2020.
The London offices transaction is expected to complete on 25 August 2020. Following completion, Link will engage PATRIZIA UK Limited to provide asset management services for The Cabot.
Two logistics parks bought in Warsaw
Global real estate investment manager LaSalle Investment Management has acquired two inner-city logistics parks in Warsaw on behalf of LaSalle E-REGI.
The City Logistics Warsaw Airport and City Logistics Warsaw City North logistics were built by Panattoni Europe, the largest logistics developer in Europe.
Warsaw is one of Europe’s most popular logistics markets: despite increasing levels of supply, Warsaw’s logistics vacancy rate has trended downwards from above 20% in 2010 to a current level of 6.5%, due to strong demand.
These market conditions are in part driven by the city’s location, which benefits from being near the A2 motorway that links Warsaw and Lodz, the most significant logistics markets in Poland, and connects the country directly to Western Europe through Berlin.
In total, the portfolio offers close to 25,000 square metres of rental space, comprising modern class A logistics space, flexible layouts that are adaptable to the needs of small and medium-sized occupiers, and top-of-the-range technical specifications.
The parks are both fully-let with a well-balanced mix of tenants, including an international customs services and customs compliance firm, a logistics operator that works with some of Europe’s largest fashion brands, and the largest supplier of woodworking machinery in Poland.
Uwe Rempis, Managing Director and Fund Manager of LaSalle E-REGI, says, “Logistics has long been a target sector for the LaSalle E-REGI and recent events have only served to strengthen our view of the asset class. Given the rapid expansion of e-commerce – as well as Poland’s developing national road infrastructure, access to low-cost labour and relatively low rents compared to Western Europe – we expect that the portfolio will experience favourable demand fundaments over the coming years, providing long-term secured income for the fund.”
LaSalle was advised by Allen & Overy as legal advisor, BNP Paribas as technical advisor and JLL as commercial advisor.
LaSalle has a strong track record of developing strategic relationships with best-in-class partners. This is the third transaction with Panattoni Europe in the past year, following the acquisition of Panattoni Park Warsaw West in July 2019 and the development in Wroclaw.
Dublin offices deal
KGAL Investment Management has acquired an additional office property in the embassy quarter of Dublin for a pan-European real estate special AIF.
The building at 2 Burlington Road, Saint Peter’s was purchased for an undisclosed sum and is fully leased to EBS Building Society – a 100% subsidiary of the stock-market-listed Allied Irish Banks (AIB) – until 2027.
It was built in 2002 and consists of around 86,000 square feet of rental area and 33 parking spaces.
André Zücker, who is Managing Director of KGAL Investment Management, says, “Dublin is a very attractive location for global IT companies, with Google, Facebook and Amazon all operating their European head offices in the Irish capital. These companies are continuing to experience dynamic growth and fuel the office market.
“Ireland has the youngest population in the EU and the level of education there is high; and demographic forecasts indicate growth ahead.”
The property is in a coveted area of Dublin’s city centre in an exclusive location in the Grand Canal and Baggot Street area. Around 20 international embassies have premises within one kilometre of the property, and other high-profile neighbours include LinkedIn, the Bank of Ireland, Sky and Amazon.
The seller is the European private equity real estate platform Henderson Park, London.
The image is courtesy KGAL GmbH & Co. KG.
Seven logistics units acquired for €52m
Diversified real estate investor and manager, Cromwell Property Group and Korean real estate investment manager, IGIS Asset Management have agreed to purchase seven DHL logistics assets in Italy.
The purchase price is A$85.7 million (€52.5 million), with settlement due in September 2020. Cromwell will fund its share of the acquisition from existing cash reserves.
The assets will then form the seed portfolio for a new Cromwell European Logistics Fund once launched. The Fund will be focused on core+ logistics assets throughout Benelux, France, Germany and Italy, with a target total Gross Asset Value (GAV) of €400 to €500 million (A$650 to A$800 million).
Cromwell’s Chief Investment Officer, Rob Percy, says, “Logistics is a ‘high conviction’ sector that we believe will prove resilient in these difficult times and provide our capital partners with strong potential for outperformance over the medium term. We are excited by our new capital partnership with IGIS and the opportunity to launch a new European Logistics Fund.
“The demand for logistics assets is likely to continue to increase, supported by long term structural and demographic trends, especially in urban locations where supply is constrained.”
Cromwell announced the Stratus Cromwell Data Centres Fund on 13 July 2020 after the non-binding heads of terms agreement was signed. Cromwell is now working towards having definitive documentation approved and signed by the Cromwell Board and will provide a further update in due course.
“We have received significant inbound interest from capital partners and the first two projects in London and Frankfurt are under exclusivity,” comments Mr Percy.
“As per our ‘Invest to Manage’ strategy, we will look to retain 20% to 30% stakes in each fund in the medium to long term, depending on the opportunity. We intend to launch the new Cromwell European Logistics Fund in Q4 2020,” he concluded.
Located in northern Italy, near the cities of Milan, Turin, Bologna and Verona, the seven properties are fully let to DHL on long-term leases with an overall portfolio WALT of 16 years.
Two of the seven logistics centres are brand new, built to modern and technologically advanced specifications, while the other five are fully compliant with DHL’s high standards.
Lorenzo Caroleo, Cromwell’s Head of Italy, says, “We are delighted with these new acquisitions, which increase Cromwell’s exposure to the logistics sector through seven assets with excellent fundamentals, located in the strongest economic regions of Italy.”
“The urban logistics sector in Italy is characterised by a significant supply/demand imbalance and a supply chain that needs upgrading to keep pace with the needs of modern logistics providers. By acquiring this portfolio, fully let to a multi-national business such as DHL, we are able to tap into this opportunity on behalf of Cromwell and our capital partners globally.”
“We look forward to deploying further capital in the sector as further opportunities arise, both in Italy and elsewhere in Europe.”
Sei-hyun Kwon, Senior Vice President at IGIS Asset Management, says. “This acquisition is an excellent example of the type of logistics assets we are looking to invest in. We have been observing rapid growth of E-Commerce and express courier market in Italy for quite some time.
“Understanding how tough it is nowadays to identify this type of logistics portfolio in strategic locations, we are very fortunate to be able to work with Cromwell who provides us with the sort of on-the-ground asset and investment management expertise that is so important to ensure success as we continue diversifying our exposure to Europe.”