LGP acquires BT Gatwick office and secures 20-year lease with Nestlé (UK)

Legal & General Property ('LGP') announces that it has acquired 1 City Place in Gatwick from RREEF for £39 million (approx. €47 million), whilst completing the surrender of BT's lease on the property and simultaneously agreeing a new 20-year lease with Nestlé UK Ltd.

These transactions have all taken place on behalf of LGP's UK Property Income Fund ('UK PIF'), which reached its final close in October with a total geared investment capacity of circa £475 million and only recently completed the purchase of The Meadows Shopping Centre, Chelmsford, Essex.

Constructed in 2002, 1 City Place comprises a Headquarters office building arranged over a ground floor and three uppers, with a total of 130,783 ft² (approx. 12,000 m²). Situated adjacent to Gatwick airport and only a short distance from the M23 and M25, the property is within minutes' walk of the Gatwick Express which departs every 15 minutes and links it directly to London Victoria within 30 minutes travel time. The building, which was fully let to BT until May 23, 2017, had not been occupied for some time.

The Fund will refurbish the building to grade-A quality to make it ready for Nestlé, who will remain in occupation at St George's House while works are undertaken. Nestlé is the world's leading Nutrition, Health and Wellness company.

Gordon Aitchison, Director of Investment and Development, comments: "This transaction demonstrates the significant scale and expertise of LGP's investment platform, with its unrivalled reach and network of contacts, and ability to secure complex major acquisitions and corporate lettings off-market."

Charlie Walker, Fund Manager of the UK Property Income Fund, adds: "The simultaneous nature of the transaction, against a challenging timetable, is a substantial achievement and served to de-risk the investment for the Fund. The Gatwick transaction delivers a highly attractive indexed lease profile secured against a strong, international covenant and will be a great addition to the Fund at this stage of its investment period."

The UK PIF reached its final close in October 2011, having secured commitments totaling £300 million from 14 major international institutional investors based in the Middle East, Denmark, UK, France, Finland, Switzerland and Japan. The closed ended fund has an innovative structure which allows investors to choose their preferred level of gearing of between 0% and 50% Loan to Value (LTV), thereby offering a unique solution to accommodate a range of risk appetites.

The Fund aims to provide investors with returns of 15% (geared) and 10% (ungeared) through careful stock selection of large lot size assets which will be positioned to capitalize on the economic recovery in the UK based on a core/core-plus risk strategy. The internationally dominated investor base clearly signifies the global appeal of UK commercial property.

To date, the Fund has acquired assets totaling circa £300 million, including:

  • The Meadows Shopping Centre in Chelmsford
  • Fremlin Walk Shopping Centre in Maidstone
  • Guildford Business Park , Guildford
  • Co-op distribution center, Andover.

Source: FTI Consulting

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