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New Swiss Life fund makes debut UK purchases with Burberry and British Gas HQs

By Paul Norman - Wednesday, February 07, 2018 15:00

Mayfair Capital Investment Management Limited has bought two assets for a total of £72.26m - Burberry's new Leeds home and British Gas offices in Oxford - for a new Swiss Life Asset Managers real estate fund, CoStar News can reveal.

In Leeds, it has bought the freehold of 6 Queen Street, a 70,940 sq ft office building which completed in 2016 for £37.23m, reflecting a net initial yield of 5.4%.

The second to fifth floors of the property are let to Burberry Ltd until 2027. The ground and first floors are vacant but subject to a rent guarantee. JLL advised Mayfair Capital and Knight Frank advised vendor Rockspring Property Investment Managers LLP.

Phil Sturdy, Investment Director at Mayfair Capital, said: “This asset matches our client’s income requirement and reflects our investment strategy of investing in high quality buildings, on long leases, let to strong covenants to deliver our investors attractive, low-risk income returns.

“Leeds had a record breaking year in 2017 with city centre office take-up exceeding 1m sq ft, the highest recorded. Accordingly, we believe that the quality of 6 Queen Street combined with the level of occupier demand in Leeds gives positive scope for future enhancement of the asset.”

Last year, Rockspring completed the largest private sector office letting deal of the year in Leeds at 6 Queens Street when Burberry took 46,000 sqft, on four floors of space on a 10 year lease.

6 Queen Street was speculatively developed by Rockspring which acquired the site in 2014. The building, which was completed in July 2016, comprises 70,940 sqft of high spec office space spread over six floors with basement car parking for 47 vehicles. It is located in the heart of Leeds’ business district and has been awarded BREEAM ‘Excellent’ and EPC A ratings.

Mischa Davis, Hanover Fund Manager at Rockspring, said: “We acquired the site and speculatively developed 6 Queen Street at a time when the economy supported high levels of concentrated vacancy risk and when the supply of Grade A office space in Leeds was at historically low levels. In line with our strategy to reduce risk in the portfolio, now is the perfect opportunity for us to crystallise profits and reduce the Fund’s overall exposure to vacancy. 6 Queen Street has delivered a total return of approximately 20% pa over the past three years and has contributed to the Trusts outperformance.”

Mayfair Capital has also bought for the same fund, the British Gas building at Plot 2600 on Oxford Business Park for £35.04m, reflecting a net initial yield of 4.9%. The self-contained office building is let to GB Gas Holdings until 2029. ACRE Capital advised Mayfair Capital.

Phil Sturdy said: “With just under 500,000 sq ft of office take-up in Oxfordshire during 2017, Oxfordshire has also had a record-breaking year. Science and technology firms continue to locate in and around Oxford to capitalise on the skilled workforce that Oxford University produces.

“This is a substantial, well-let, reversionary office investment which, like the Leeds purchase, was bought off-market.”

Swiss Life Asset Managers launched its new real estate fund in November last year and raised €300m with its first issue.

Mario Holenstein, Portfolio Manager at Swiss Life Asset Managers, Real Estate Switzerland, said: “The new fund will invest in Core and Core-Plus properties in European large cities, regional centres and their agglomerations.

“The focus of the investments will be on the European core markets of Germany, France, Austria, Benelux, the United Kingdom, Scandinavia and southern Europe.”

Mayfair Capital will act as asset managers for the fund’s UK investments.

Mayfair Capital Chief Executive James Thornton commented: “We are pleased to have acted for the Swiss Life fund in making its first purchases in the UK; the first since Mayfair Capital became part of Swiss Life in November 2016.

“The UK remains an attractive market for overseas investors and the yields available are higher than those available in Switzerland and Mainland Europe. Importantly, the blended net income return on the two assets at 5.16% is also in excess of the target income yield for the fund.”

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