City buy shows Asian investor appetite for development risk

21st July 2017

A Hong Kong-based private investor has acquired an office building in the City of London from Legal & General for £32.4m, in a sign that appetite exists among Asian investors for redevelopment opportunities.

The family office bought the 43,382 sq ft Garden House, which is located close to the Bank of England, at a yield of 5%.L&G had put the office on the market last July through JLL at a guide price of £34m and a yield of 4.75%.Garden House produces short-term income of £1.78m a year from sole tenant Deutsche Bank, which will vacate when its lease expires in 2023 and move to a new consolidated London headquarters at Landsec’s 21 Moorfields.Asian investors have mainly focused on acquiring well-let buildings in London in the past year. Market observers hope the deal is a sign that investors are prepared to take on development risk in search of better returns.

Prudent investment

“The opportunity to further refurbish and extend Garden House makes it a prudent investment for the future and, while we are seeing some uncertainty in the commercial market, the City of London will remain a highly attractive location, with high levels of investment coming from overseas, particularly from the Asia-Pacific region,” said Barry Marshall, head of commercial at Estate Office Property Consultants, which advised the Hong Kong buyer.The six-storey office, which was developed by MEPC in 1986, sits on the corner of Throgmorton Avenue and Austin Friars.Once the building is vacated, its new owner will implement a refurbishment and extension programme to increase the rents from their current level of £41/sq ft.Garden House is located just 150 metres from the Bank of England and 300 metres south of Liverpool Street and Moorgate stations, which are set to benefit from the arrival of Crossrail in 2019.