German fund Commerz Real has struck a deal with Irish developer Ballymore to buy the development at 1 Snowhill in Birmingham for an estimated Â£124 million.
The office building, which has 250,000 square feet of office space, was put up for sale in September for Â£111 million – a yield of 7%. Commerz Real is rumoured to have agreed a price between Â£124 million and Â£128 million – a yield of at least 6.25%. The sale is the largest transaction in the city since the Carlyle Group paid Â£150 million in 2006 for Colmore Plaza. Interest in the property is said to have sky-rocketed in the last 2 to 3 weeks. Many financial experts have reported a recent surge in demand as a weight of money is chasing prime UK properties, of which there is a current shortage.
Eight bids were received for the property with many from overseas investors. Israeli investor Igal Ahouvi and Luxembourg-based fund manager Aerium are believed to be behind some of the bids.
The building is currently 85% let to KPMG and Barclays at rents around Â£33 per square foot. Ballymore will provide a 5 year rental guarantee on the 36,000 square feet of remaining vacant space at around Â£27.50 per square foot.
A souce said; “This price is well in excess of what anyone expected. With rents agreed in the early Â£30′s, there’s no growth in the short-term, but there’s a good income stream. There’s a shortage of prime stock at the moment with with a weight of money following it”.
A spokesperson for Ballymore said some of the money from the sale will go towards paying some of the money back it loaned off Anglo Irish Bank to complete the development. The construction of the neighbouring development at 2 Snowhill was delayed earlier this year due to the downturn and lack of development finance. Law firm Wragge & Co has taken a pre-let of 250,000 square feet.