Schroder Property’s value-added and opportunistic real estate investment business, Columbus Capital Management, has created a joint venture with British Airways Pension Fund to buy an office in the financial heart of London.
Columbus Capital has teamed up with the pension fund to buy Austin Friars House, London EC2, for £25 million (€30 million; $38 million).
The investment reflects a yield of seven percent and has been made on behalf of the Columbus UK Real Estate Fund, which is sponsored by Schroder.
BA Pension Fund invested in the forerunner to Columbus UK Real Estate Fund, Gresham Real Estate, which raised £150 million in 2005, but is understood to be keener to participate in individual joint ventures on opportunistic properties rather than blind funds.
In a statement, Joe Froud, managing partner of Columbus Capital, said the firm expected City of London office rents to recover strongly over the next 24 months, due to a lack of new supply, and the existing leasing structure lent itself to this cycle timing.
“The building is typical of the type of asset the fund targets; in a good location, between Tower 42 and the Bank of England property, well configured but in need of physical improvement,” he added.
Paul Scott, head of property at British Airways Pension Investment Management, said the pension fund had historically avoided the City of London office sector due to its past “volatility”.
However, he added this asset looked to be well positioned for the current cycle.