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KWE acquires South East office portfolio for £211m

28 July 2015

Kennedy Wilson Europe Real Estate Plc (LSE: KWE) an LSE listed property company that invests in direct real estate and real estate loans in Europe, has completed the acquisition of nine south east offices from an entity affiliated with Apollo Global Management LLC (NYSE:APO). The underlying real estate is valued at £211 million at completion, reflecting a yield on cost of 8.0%. The corporate acquisition was funded from the Company’s cash resources.

Summary of portfolio        
         
Location Scheme Area
(sq ft)
Tenant Occp'ncy
(%)
Watford Levesden Park 196,300 BT Plc 100.0
Farnborough Discovery Place 140,100 Multi-let 100.0
Harlow Edinburgh Gate 141,200 Pearson Plc 100.0
Hook Bartley Wood
Business Park
109,700 Multi-let 87.5
Maidenhead Eton House 65,100 Avaya 100.0
Heathrow Stockley Park 46,500 Canon 100.0
Slough Axis One,
Hurricane Way
56,800 Travelport 100.0
Bracknell Thames House 33,700 Cable &
Wireless
100.0
Reading Eldon Court,
London Road
25,300 Secretary
of State
100.0
Total   814,700   98.6

The nine modern offices comprise 814,700 sq ft of lettable space, generating a day one NOI of £17.0 million from 14 tenants, with 80% of the income coming from very strong covenants, including listed companies and the Government. The weighted average unexpired lease term (WAULT) is 5.0 years (5.4 to expiry) and occupancy by ERV is 98.6%.

Significant asset management opportunities include re-gears, extending lease lengths, refurbishments, rental growth from rent reviews and improving voids with 52% of the current NOI subject to lease events over the next 24 months.

Mary Ricks, President and CEO of Kennedy Wilson Europe, commented:  “This is a high quality portfolio which we have acquired at an attractive entry basis with it trading at substantial discounts to both historic 15-year average and market peak capital values, yields and rental values. Furthermore, the portfolio provides a good balance between security of income – with strong tenant covenants and high occupancy – along with sufficient medium term lease events to capture today’s ERVs, which are 5.0% ahead of passing rent, and future market rental growth.

“This along with the material yield and rental gaps against prime Central London offices of 400bps and over £80 psf, respectively, will contribute to growing our day one cash-on-cash of 14.8%.”

Further detail on the portfolio acquisition metrics vs weighted historical market metrics is provided in Appendix 1 in the full announcement which you can download as a PDF.

Leavesden Park, Watford, UK (1)

Investor enquiries
Juliana Weiss Dalton, CFA
Investor Relations Director,
Kennedy Wilson Europe
+44 (0) 20 7123 5577
ir@kennedywilson.eu

Press & media enquiries 
Dido Laurimore / Tom Gough
FTI Consulting
+44 (0) 20 3727 1000
kennedywilson@fticonsulting.com