Purchase of Legal & General’s 1 Fleet Place could signal bottom of market

Veteran investors Raymond Mould and Patrick Vaughan are under offer to buy Legal & General’s 1 Fleet Place in their debut purchase since floating their new company in 2007.

Mould and Vaughan’s AIM-listed London & Stamford Investments is in advanced negotiations with L&G to buy the building for between £70m and £75m, reflecting a yield of around 7.75%.

If the purchase completes it will be a boost for L&G – this is the fourth time the building has been under offer but it has struggled to complete any deal in the volatile market. The asking price has already been reduced from the original guide price of around £135m.

Vaughan and Mould have a reputation for opportunistic investment and buying counter-cyclically, so it could also signal a bottoming-out of the City market.

London & Stamford Investments also has significant firepower following a £200m equity boost from Cavendish, a subsidiary of a Gulf-based institution, in April this year. Both Vaughan and Mould have said they saw opportunities in the UK market as values declined.

It is thought the two investors are interested in 1 Fleet Place because it is let to law firm Denton Wilde Sapte at a fairly low rent ‘in the low forties’, which, in a recovering market in a few years time, could generate significant returns for the two investors.

L&G has been keen to sell the building, which it began marketing in March, as part of its strategy to reduce its exposure in the City of London.

It bought the building three years ago for £119m from British Land at a then-keen yield of 5%. It has already sold several other assets in the city including 95 Queen Victoria Street, which it sold for around £57m to US fund manager Invesco on behalf of US pension fund AT&T.

It is also marketing its 105,000 sq ft 99 Gresham Street building in the City of London at around £75m.

Jones Lang LaSalle is advising on 1 Fleet Place; King Sturge is acting for L&G at 99 Gresham Street; King Sturge is also thought to be advising London & Stamford at Fleet Place.