02 July 2019
Telereal Trillium has instructed DTRE to sell £110m of freehold office buildings let to the UK Government. Located in London and three prime South East towns, the 14-asset sale provides an exceptional opportunity for investors to acquire a substantial, high quality, secure income portfolio, with strong residual values.
With a total floor area of 294,000 sqft and a combined annual rent of £5.46m, the 11 of the 14 assets located within Greater London make up the “Bruton Portfolio”, whilst the “Stratton Portfolio” comprises the three South East assets. The portfolios can be acquired together, or as two distinct packages.
All buildings are let to the Secretary of State (operated by Department for Work and Pensions – “DWP”) on co-terminus, 10-year, FRI leases, commencing on 1st April 2018. There are no lease breaks, and the rents are subject to CPI-linked uplifts at the 5th year.
The packages offer a rare opportunity to acquire a London focussed, freehold portfolio, at a low overall capital value of less than £375psf, and let at an average rent of just £18.50psf.
Telereal Trillium owned and managed the DWP’s estate for 20 years through the PRIME property outsourcing contract, which concluded on 31st March 2018. DWP’s delivery of services changed significantly in recent years and, following a comprehensive review of its estate prior to the end of the PRIME contract, the DWP committed to new leases on these 14 core properties.
Graham Edwards, Executive Chairman at Telereal Trillium said: “With last year’s sale of the £282m Hayhill Portfolio, and our acquisition, with Blackstone, of Network Rail’s Commercial Estate Arch Portfolio, the sale of the Bruton and Stratton portfolios continues the rebalancing of our investments”.
“With the undoubted covenant of the DWP committing to 10-year leases on these 14 assets, and the potential for long term value enhancement through future redevelopment and lease renewal, we believe that these portfolios will be well received by a market currently lacking in quality product”.
David Emburey, Partner at DTRE, who is leading the sale, said: “We are delighted to have been awarded this high-profile sale, which is an exciting opportunity to acquire a substantial and well diversified portfolio of freehold London and South East real estate. Capturing the arbitrage from historically low UK government gilts, together with longer term redevelopment, renewal and break-up opportunities, I have no doubt the portfolios will attract significant interest from a wide range of UK and overseas investors”.