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City Developments buys London's former Stock Exchange Tower for £385m
CITY Developments (CDL) has bought an office tower at London's 125 Old Broad Street - formerly known as the Stock Exchange Tower - for £385 million (S$686.48 million) amid an expected tightening supply of office space in the city.
The acquisition of the prime freehold Grade A office space - the developer's second London commercial property acquisition in 2018 - translates to £1,170 per square foot (S$2,088 psf) across its net lettable area (NLA) of 329,200 square feet (sq ft), which spans 26 floors with panoramic views of the city and three basement levels. It has also secured parking facilities.
"We have confidence in the long-term fundamentals of London as a global financial hub with a robust office market. The short-term uncertainties surrounding Brexit have presented us opportunities to acquire assets with deep value," said CDL's group chief investment officer Frank Khoo.
The property provides a diversified and significant income stream with strong rental growth potential, CDL said in a Friday press statement. Its current tenants include Cushman & Wakefield's European headquarters, King & Spalding, and China International Capital Corporation, with a passing yield of about 4.7 per cent.
The top five tenants account for over 60 per cent of the total NLA and income, CDL said.
"With average passing rents currently about 25 per cent below prime average rents in the City of London, there is strong potential for positive rental reversions. In addition, the property's overall weighted average unexpired lease term (WAULT) of five years (to lease breaks) and 5.4 years (to lease expiries) is attractive," CDL added.
The property is located within the main financial district, bounded by Old Broad Street, Throgmorton Street and Threadneedle Walk. It is within walking distance from the Bank of England's headquarters and overlooks St Paul's Cathedral.
The building, constructed in the 1970s, previously housed the headquarters, offices and trading floor for the London Stock Exchange until 2004. It saw significant refurbishment in 2008.
"The tightening of London's existing office stock and limited new supply will also drive rental growth into 2021. Given its excellent location in a diverse business district, 125 Old Broad Street will continue to attract a strong tenant mix from the finance, legal, insurance and technology/media/telecommunications sectors," Mr Khoo said.
Earlier in September, CDL acquired Aldgate House, a prime freehold Grade A commercial building in London for £183 million. The property has an NLA of some 211,000 sq ft and is located in the heart of the Aldgate district.