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Telereal Trillium puts £280m DWP regional office portfolio on block

By Paul Norman - Wednesday, February 14, 2018 9:00

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Telereal Trillium has instructed CBRE to sell a £280m portfolio of regional offices let to the UK Government.

It said the sale "provides an exceptional opportunity for investors to acquire a substantial, high quality, secure income, office portfolio".

The UK-wide portfolio, named “The Hayhill Portfolio”, comprises 98 regional offices let to the Department for Work and Pensions (DWP) on new 10 year, FRI leases, commencing on 1 April 2018. The properties are let at newly agreed market rents, which are subject to CPI-linked rent reviews.

The full list of properties the DWP intends to remain in and intends to divest as part of its estates review can be viewed here.

The 2.6m sq ft portfolio has a combined annual rent of £23.36m, reflecting a net initial yield of 7.81% and a capital value of £109 per sq ft.

Telereal Trillium has owned and managed the Department for Work and Pensions estate for 20 years through the PRIME property outsourcing contract, which concludes on 31st March 2018.

DWP’s delivery of services has changed significantly over recent years and, following a comprehensive review of its estate, through which the DWP has secured new leases across its UK portfolio to provide operational and occupational stability into the future, the DWP has committed to new leases on these 98 properties.

Eighty-five per cent of the portfolio’s properties are located in town centre locations, with the majority incorporating an on-site Job Centre Plus.

Graham Edwards, Chief Executive at Telereal Trillium said: “With the undoubted covenant of the DWP taking new 10 year leases on these 98 assets at current market rents, it is a good time to rebalance our portfolio. We continue to invest across the UK in the office, industrial, and strategic land sectors, where we deploy our asset management capabilities to create value. Over the last year we have invested in excess of £100m in new investment property, land, and residential development schemes”

Peter Arduino, Capital Markets Executive Director at CBRE, who is handling the sale, said: “The Hayhill Portfolio offers attractive government income with an opportunity to capture the arbitrage between low UK government gilts and the portfolio running yield. The assets are spread nationally, providing a strong regional network for DWP’s operations, as well as geographical diversification on a portfolio level.

"There is no doubt this portfolio will attract significant interest from the UK and global markets, which are currently lacking a supply of interesting stock.”

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