KWE acquires South East office portfolio for £211m
Kennedy Wilson Europe Real Estate Plc (LSE: KWE) an LSE listed property company that invests in direct real estate and real estate loans in Europe, has completed the acquisition of nine south east offices from an entity affiliated with Apollo Global Management LLC (NYSE:APO). The underlying real estate is valued at £211 million at completion, reflecting a yield on cost of 8.0%. The corporate acquisition was funded from the Company’s cash resources.
Summary of portfolio
|Watford||Levesden Park||196,300||BT Plc||100.0|
|Harlow||Edinburgh Gate||141,200||Pearson Plc||100.0|
|Bracknell||Thames House||33,700||Cable &
The nine modern offices comprise 814,700 sq ft of lettable space, generating a day one NOI of £17.0 million from 14 tenants, with 80% of the income coming from very strong covenants, including listed companies and the Government. The weighted average unexpired lease term (WAULT) is 5.0 years (5.4 to expiry) and occupancy by ERV is 98.6%.
Significant asset management opportunities include re-gears, extending lease lengths, refurbishments, rental growth from rent reviews and improving voids with 52% of the current NOI subject to lease events over the next 24 months.
Mary Ricks, President and CEO of Kennedy Wilson Europe, commented: “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% 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%.”
Further detail on the portfolio acquisition metrics vs weighted historical market metrics is provided in Appendix 1 in the full announcement which you can download as a PDF.