London: British Land Co., the U.K.’s largest property company by assets, agreed to sell an office building to the government of Kuwait for 400 million pounds ($786 million), the largest real estate transaction in London’s main financial district since the start of the global credit crisis.
The building, designed by Norman Foster, will be bought by St Martins Property, the Gulf state’s real-estate investment company, according to a statement today. Willis Group Holdings Ltd, the world’s third-largest insurance broker, occupies the property at 51 Lime St. on a 25-year lease. The transaction is due to close next month.
“We have an appetite for landmark buildings,” Nigel Brown, managing director of St Martins, said in the statement. “We believe it is a great investment, offering a guaranteed income stream and long-term value.”
Middle East investors are buying central London offices at a time when prices are falling and the fallout from the U.S. subprime mortgage crisis is making it harder for investors to raise money to finance transactions.
Qatar this year bought 80 percent of the Shard, which will be London’s first 1,000-foot tower, while Oman’s State General Reserve Fund co-owns the Heron Tower. St Martins has been an investor in the district for 80 years.
Arab investors last year also bought the proposed Bishopsgate Tower, which was known as the Helter Skelter because of its shape and which is now called the Pinnacle and will be the tallest building in the City of London.
The sale price of the Willis Building, which was completed last year, includes a 3.8 year rent-free period worth 60 million pounds. The property includes a 28-story tower together with an adjoining 10 story-building with a combined space of 496,000 square feet (46,000 square meters).
Excluding the rental incentive, the sale price of 340 million pounds is 5.6 percent less than its last-published valuation of 360 million pounds at March 31 last year. Overall, the value of British Land’s offices in the City district declined 8.2 percent in the fiscal year ending March 31.
British Land said the sale would reduce the company’s leverage and strengthen its ability to finance other acquisitions.
“We are surprised that British Land has chosen to sell one of the jewels in its City crown in terms of lease longevity and quality of income at a time of uncertainty,” JPMorgan Cazenove Ltd. analyst Miranda Cockburn, who rates the stock “in-line” said in a note to investors.