British Land
Facebook HQ London
Facebook is renting 22,560 sqm on 15-year leases with no breaks at an initial annual rent of Stg£17.8m, and will start moving into the complex later this year.
That big German institutional investors are returning tentatively to the London commercial property market after the Brexit vote was confirmed earlier this month when German investors WestInvest and asset manager Deka Immobilien bought Rathbone Square, the site of Facebook's new London HQ, from Great Portland Estates for Stg£435 million.
Nr. 1 Rathbone Square is Great Portland's largest-ever development scheme, which it bought in 2011 and began developing in September 2014. The sale was one of the largest transactions since the Brexit vote, while the price represents a 4% discount on the asset's valuation last September, and a net initial yield to the buyers of 4.25%.
The buyers are two open-ended mutual real estate funds WestInvest InterSelect and DekaImmobilien Europa, both part of DekaBank, the co-operative bank for Germany's Sparkassen (savings banks). What they are actually buying is the commercial part of the development, with 22,600 sqm of ofice space and 2,000 sqm of retail space, due for completion in March this year and of which about half is still unlet.
Facebook is renting 22,560 sqm on 15-year leases with no breaks at an initial annual rent of Stg£17.8m, and will start moving into the complex later this year.
The total 39,000 sqm complex also included 142 condominiums, nearly all sold, which when completed should bring in Stg£655m for Great Portland, for a whole-life capital return of Stg£110m (19.9%) and a final annualised IRR to its shareholders of 12.1%.
The headline price of Stg£435mln is before deductions for Facebook tenant incentives, including a 30-month rent free period and a capital contribution of Stg£12m, paid by Deka, and maximum retail unit rent guarantees of Stg£3m, totalling Stg£60m. Hence the net purchase price payable by Deka to Great Portland is Stg£375m, subject to final area measurement and settlement of the retail rental guarantees.
The consideration comprises Stg£368m for the freehold sale and Stg£6.5m for reimbursement of the development costs, under a development agreement, to complete the scheme. Deka has already paid Stg£113m, with the balance of the purchase price payable in three instalments.
In an indication that the market may be slowing independent of the pluses and minuses associated with the Brexit vote, investors have generally managed to secure about a 3% discount on offered prices over most of the Stg£8 billion of UK property transacted since last June.
In a statement Great Portland's CEO Toby Courtauld said that the sale ensured that it retained significant financial flexibility created over recent years as it looked ahead to a continued period of market uncertainty. He told analysts the deals market for larger properties was less liquid, with buyers asking for lower prices given the higher risk in the current market.
"(For large projects), there aren't as many buyers around. That's what we've felt. It's a scale thing in a world with slightly less uncertainty," he said.
