Brookfield hammers on

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US developer closes in on Hammerson’s £500m London office portfolio

Hammerson is in exclusive talks to sell its London office portfolio to US-listed Brookfield Office Properties for more than £500m, Property Week
can reveal.

Principal Place

Principal Place

Brookfield is understood to have placed under offer the division, which accounts for about 11% of Hammerson’s £5.7bn portfolio, having been granted a period of exclusivity by the REIT.

A sale could be announced as early as next week, although sources close to the process indicated that it was not yet completed. The exclusivity period lasts until the end of next week.

Nevertheless, New York-listed Brookfield Office Properties has been working on a prospective deal for nearly six months, and has the appetite for a portfolio that gives it a platform to grow in Europe and try to mirror its scale elsewhere. Brookfield has a $25.5bn portfolio in the US, Canada and Australia.

The sale would mark the completion of Hammerson’s evolution into a specialist retail REIT.

In February, it announced its intention to dispose of its London office portfolio and work on improving its performance by becoming a pure retail company. It said the process could take several years, and it could sell the portfolio as a whole or piecemeal.

But the announcement led to offers for the entire portfolio from Brookfield, Oxford Properties and Land Securities, the last of which hoped to swap Hammerson’s offices with some of its retail assets.

Brookfield is to pay more than £510m for most of Hammerson’s 13 London assets, among them its London Wall Place and Principal Place schemes.

The only London assets not to be included in the sale are 10 Grosvenor Street in the West End, which is a joint venture with Grosvenor, and the 10 acre Bishopsgate Goods Yard in the City, a joint venture with Ballymore that has planning permission for 2,000 homes and further commercial space.

 

The 13 London assets were valued at £623m at the end of 2011 — £548m for the investment properties and £75m for the developments.

The investment assets Brookfield is buying are fairly disparate, and many are held in joint ventures. The largest by value is the 339,000 sq ft 99 Bishopsgate, thought to be worth around £230m.

Among the other sizeable assets are 10 Gresham Street, valued at £175m and held in a 50:50 joint venture with Canada Pension Plan Investment Board, and 50% of 125 Old Broad Street, worth £150m and co-owned with GE Real Estate and Bank of Ireland.

There are also asset management and redevelopment opportunities, such as Leadenhall Court in the City, bought in 2010 for £65m.

A sale to Brookfield Office Properties would reunite Martin Jepson, the company’s UK head, with the portfolio he used to manage — he left Hammerson to join the US firm last year.

Brookfield Office Properties owns a 50% stake in the 1m sq ft 100 Bishopsgate development scheme alongside Great Portland Estates, and is the largest individual shareholder in Canary Wharf Group.

All parties declined to comment.

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