City Developments Limited CDL has completed the purchase of a freehold Grade A office tower, 125 Old Broad Street, for £385 million or £1,170 psf.
125 Old Broad Street comprises a Grade A office tower and ancillary retail space and has Net Lettable Area (NLA) of approximately 329,200 square feet (sq ft) spread over 26 floors with panoramic views of the city and three basement levels. It also has secured parking facilities.
The property provides a diversified and significant income stream with strong rental growth potential. It is fully leased to internationally renowned tenants, including Cushman & Wakefield’s European HQ, King & Spalding and China International Capital Corporation, with a passing yield of approximately 4.7%. At present, the top five tenants account for over 60% of the total NLA and income. With average passing rents currently about 25% below prime average rents in the City of London, there is strong potential for positive rental reversions. In addition, the property’s overall Weighted Average Unexpired Lease Term (WAULT) of 5 years (to lease breaks) and 5.4 years (to lease expiries) is attractive.
Mr Frank Khoo, CDL Group Chief Investment Officer, commented: “In line with our strategy to grow our recurring income significantly over the next 10 years, this is our second London commercial property acquisition in 2018. We have confidence in the long-term fundamentals of London as a global financial hub with a robust office market. The short-term uncertainties surrounding Brexit have presented us opportunities to acquire assets with deep value. Capitalising on attractive pricing and yields, we have continued to expand our London commercial portfolio through strategic off-market acquisitions of high performance assets. The tightening of London’s existing office stock and limited new supply will also drive rental growth into 2021. Given its excellent location in a diverse business district, 125 Old Broad Street will continue to attract a strong tenant mix from the finance, legal, insurance and technology/media/telecommunications sectors.”