Office Space in Town mulls serviced office fund launch

Office Space in Town is sounding out investors about pooling its serviced office properties into a fund targeting strong and steady income returns.

The fund would contain the company’s four London freeholds at Waterloo, New Broad Street, St Pauls and Monument, which are together valued at about £160m.

The target investors would be pension funds, family offices and sovereign wealth funds looking for strong and reliable sources of income.

Giles Fuchs, Office Space in Town’s chief executive, said the idea was spawned from his family’s experience running one of the UK’s first serviced offices in Northampton, which opened in 1979 and is still a serviced office today.

In the 37 years since it opened, Fuchs argued the property has delivered far superior and more consistent returns as a serviced office than it would have done as a normal office block.

“It would almost certainly have had half a dozen leases as well as empty periods between leases, refurbishments and rent-frees,” Fuchs said. “By contrast, we have refurbished out of cashflow, but we’ve never been empty and never had rent-frees.”

Even ignoring the impact of incentives and voids, he said a fund seeded with its London properties would offer better income returns than comparable investments. “At the moment, office buildings in London let for 10 years are changing hands at circa 4%,” said Fuchs. “We can provide in excess of 6%. Isn’t that a better investment?”

Worst-case scenario

He added that a serviced office fund would also continue to perform in a downturn.

“The worst-case scenario is that profits flatten out,” he said. “They’re all great buildings and they’re going to provide very steady income.”

Office Space in Town’s London properties are currently held in two joint ventures.

Earlier this year, Chinese real estate manager KaiLong replaced Forum Partners’ majority stake in the first venture, which holds its Waterloo, New Broad Street and St Pauls sites.

Forum remains a shareholder in its second venture, which holds the Monument property.

The launch of a fund would provide Forum and KaiLong with an opportunity to exit.

If you are interested in a serviced office please call Gryphon Property Partners on 0203 440 9800 or click on the following link - Office Space