Kennedy Wilson Europe Real Estate (KWE) has completed the acquisition of nine South East offices from an affiliate of Apollo Global Management. The £211 million purchase, funded from the company’s cash resources, represents yield on cost of 8 per cent.
The portfolio comprises 814,700 sq ft of modern office space with an occupancy rate of 98.6 per cent, generating a net operating income of £17 million.
The 14 tenants include listed companies and the Government with a weighted average unexpired lease term of 5 years. KWE will seek to improve these figures further through asset management opportunities arising over the coming two years.
The portfolio comprises the following assets: Leavesden Park Watford, Discovery Place Farnborough, Edinburgh Gate Harlow, Bartley Wood Business Park Hook, Eton House Maidenhead, Stockley Park Heathrow, Axis One Slough, Thames House Bracknell and Eldon Court Reading.
Commenting on the acquisition Mary Ricks, President and CEO of KWE, said: “This is a high quality portfolio which we have acquired at an attractive entry basis with it trading at substantial discounts to both historic 15-year average and market peak capital values, yields and rental values.
“Furthermore, the portfolio provides a good balance between security of income – with strong tenant covenants and high occupancy – along with sufficient medium term lease events to capture today’s ERVs, which are 5.0 per cent ahead of passing rent, and future market rental growth.
“This, along with the material yield and rental gaps against prime Central London offices of 400bps and over £80 psf respectively, will contribute to growing our day one cash-on-cash of 14.8 per cent.”
