Blackstone has exchanged contracts on its £415m acquisition of Broadgate Quarter in the City of London.
The US private equity giant is close to concluding a deal to buy the office complex from Hines and joint venture partner HSBC Alternative Investments (HAIL) for a net initial yield of 4.95%.
Blackstone secured the deal after a handful of other investors came close to buying the 460,000 sq ft development. A Chinese investor had agreed to buy the asset for around £455m before failing to complete the acquisition. Separately, The Deerbrook Group also came close to buying it at a level nearer the £432m asking price. Other interested parties included Brookfield, which was understood to be lining up Amazon as a potential future tenant, and Gingko Tree jointly with Grosvenor and Taiwanese investor Fubon Life which also ran the rule over the building but did not bid.
Upcoming lease events at Broadgate Quarter could pave the way for asset management opportunities for Blackstone. Law firm Ashurst is set to vacate the c.80,000 sq ft it occupies in the building in 2019 ahead of its relocation to the Fruit & Wool Exchange, and it remains uncertain as to whether UBS will continue to lease the c.50,000 sq ft it occupies in Broadgate Quarter beyond next year.
Hines and HSBC, advised by leasing agents Squarebrook and Cushman & Wakefield, have steadily let the vacant space in the building, signing a deal with DTCC to expand its presence in the building by taking the 8th floor. Since putting the building up for sale, a deal has been agreed on the 10th floor with Factset, also expanding in the building, and terms have been agreed to let the 9th floor at a rent of around £65 per sq ft with less than 18 months rents free.
Knight Frank and DTZ, now Cushman & Wakefield, were instructed in May to sell the sprawling Broadgate Quarter, EC2, for a net initial yield of 4.75%.
The pair stands to sell the asset for a substantial premium to its original 2012 purchase price due to the upward trajectory in City values over the last three years and recent asset management undertaken at the property.
Hines and HSBC agreed a deal in February 2012 to buy the asset from Peter Marano’s Gemini Commercial Investments, before closing the transactions in June that year for £290m, reflecting a yield of 6.32%.
Hines had previously entered into advanced talks to buy the development for a price reflecting a 6% yield, before Canadian developer Brookfield swooped in to put it under offer.
The asset, which is split into phases one and two totalling 460,000 sq ft, is let for a further nine years with a rent roll of £19.4m pa.
Last year Hines announced plans to re-brand Broadgate West on the northern edge of the Broadgate Estate to Broadgate Quarter.
The asset was at the centre of an acrimonious divorce settlement in 2009 when Marano split with then wife Elena. Hines and HSBC originally offered a 60:40 debt to equity arrangement on the deal.
Cushman & Wakefield and Knight Frank are advising the vendors; GM Real Estate is acting for Blackstone.