Carlyle Grabs 1.6M SF of Premier London Office Assets for $1B

July 12, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user Dimitry B

The Carlyle Group, acting on behalf of its two-year-old Carlyle European Real Estate Partners III fund, has just snapped up a 1.6 million square-foot chunk of the Central London office market at the bargain price of $1 billion. The international private equity concern acquired six fully leased landmark office properties that had been part of the portfolio that secured the White Tower 2006-3 plc CMBS, which was placed in liquidation.

Each of the properties involved is leased in its entirety to a single corporation, a coveted feature given that the average vacancy rate in the Central London office market is presently 7.7 percent, according to a second quarter report by commercial real estate services firm CB Richard Ellis. Among the assets Washington, D.C.-headquartered Carlyle has snapped up are Alban Gate, a 382,000-square-foot property leased to JP Morgan Chase. The Thames Portfolio accounts for the remaining five assets and includes the 420,000-square-foot complex at 60 Victoria Embankment, also home to JP Morgan Chase; the Ludgate House, a 170,000-square-foot building occupied by United Business Media; the 350,000-square-foot Samson House, home to IBM; the 200,000-square-foot Millennium Bridge House where UBS is the name on the tenant roster; and BSI Tower, a 140,000-square-foot property occupied by BSI Management Systems Ltd. Together, the six assets generate an annual sum exceeding $93.7 million in rent.

“Whilst each property benefits from an existing secure income profile, there are considerable longer term opportunities across the portfolio for active asset management and redevelopment, where we believe we can add significant value,” Robert Hodges, Managing Director, Carlyle European Real Estate, noted in a prepared statement.

Carlyle’s steal of a deal comes as a result of the global financial crisis to which so many commercial real estate owners have fallen victim, including London-based investor Simon Halabi, who defaulted on loans secured by a group of nine assets, including the six that Carlyle just acquired. CBRE Loan Servicing Ltd. was appointed special servicer for the White Tower CMBS in August 2009, at which point the firm noted that the total value of the nine properties was approximately 1.4 billion pounds.

As for financing the mega-purchase, Carlyle pulled off what many investors may view as the impossible, given the current state of the credit market across the globe. To finance its acquisition of the Thames Portfolio, the company secured funds from an international consortium of banks led by Société Générale, which acted as structuring bank and arranger along with BNP Paribas, Crédit Agricole and ING. AXA REIM was also involved. Additionally, Société Générale served as arranger and sole bookrunner for financing for Alban Gate’s financing.