L&G and PGGM launch £475m London office joint venture

By Bridging Loan Directory 30th January 2015

Legal & General Capital (L&G) and Dutch pension fund manager, PGGM, have launched a London Office joint venture partnership which has completed its first £67 million investment – 72 Broadwick Street in Soho.

The joint venture initially has an allocation of circa £375 million to invest.

The joint venture model of investing in property is attractive as it enables co-investment with a trusted partner who has local expertise and knowledge, along with providing a high degree of control over the investment.

The joint venture has been set up to source attractive Central London office investments which provide superior growth prospects due to neighbouring infrastructure and regeneration projects, as well as significant asset management opportunities. With a focus on impact investment, the Partnership will look to integrate material environmental, social and governance (ESG) aspects throughout its assets, in turn realising a strong ESG performance.

Legal & General Property (LGP) will lead the acquisitions process and act as the fund manager for the joint venture. The joint venture will focus on office properties where LGP can use its specialist asset management skills to realise value through repositioning and redevelopment. The joint venture will be looking for assets ranging between £30m – £90m which require significant improvement and where they can be part of a wider regeneration story.

Laura Mason, Director of Direct Investments at Legal & General Capital, said:

“The UK is a great place to invest, pension funds and sovereign wealth funds want to invest here in infrastructure, direct investments and property. Joint ventures are an excellent way of achieving this, as they offer co-investment with a trusted partner with specialist local expertise and knowledge. Today’s announcement is an excellent example of what can be achieved by partnering with forward-thinking international capital, and I would expect many more joint ventures of this type to follow.”

Mathieu Elshout, Senior Investment Manager at PGGM, said:

“Representing our second strategic partnership with Legal & General, the London Office joint venture yet again allows us to take advantage of the opportunities that exist in the UK for those with the right approach to investment and skills to proactively enhance its portfolio. This partnership is another example of our ambition to have a high degree of control over our investments.

“As a responsible investor we believe that we have an obligation to contribute to a sustainable world. We can do so via impact investment, or investing in solutions, as we call it. We strongly believe that ESG factors have a material impact on the financial performance of our real estate portfolios and that this will continue to grow over time. Sustainability is an issue that transcends national boundaries and requires an international approach. Looking to seek out assets where improvements could be made, we believe that together with L&G we are strongly placed to realise the value that is available for those that lead the way in pioneering ESG advances.”

The purchase of 72 Broadwick Street for £67 million represents a net initial yield of 4.7%. A landmark island site, located in the heart of Soho, the property enjoys a major frontage to Carnaby Street and is approximately 120m from Regent Street and Mayfair. Already supported by excellent transport connections, it is located near to a Crossrail station and set to significantly benefit from its opening in 2018.

72 Broadwick Street has a net internal area of 65,316 sq ft of accommodation, including 54,097 sq ft of office space and 11,219 sq ft residential accommodation, arranged over part basement, part ground and six upper floors. The offices, including the 22 basement car parking spaces, are let to The National Magazine Company Limited for a term of 15 years, expiring on 17 September 2018. Walbrook Land and Savills acted for LGP on the acquisition and JLL acted for the vendor.

The news follows the announcement earlier this month that L&G and PGGM had partnered together to acquire the Bishopsgate Long Term Property Fund Unit Trust for around £370 million. Held in a joint venture as well, the Trust comprises a good quality portfolio of 24 commercial properties located across the UK and arranged over 1,543,217 sq ft.