GI Partners buys London’s Aldwych House for £82.7m

The private investment firm, in partnership with Rowan Asset Management, has acquired the central London office building on behalf of its third investment fund.

GI Partners, through a joint venture with London-based commercial property and institutional fund manager Rowan Asset Management, has purchased Aldwych House, a 163,000-square-foot office building in London, for £82.7 million ($129 million, €98 million). GI Partners Fund III provided the majority of the equity, with Rowan and Taurus Investment Holdings kicking in additional capital.

The 10-story property, which was built in 1926 and most recently renovated in 1988, currently is 89 percent leased to 11 tenants, including Associated British Ports and the London School of Economics. Plans include a major refurbishment of the building that will cost a total of £12 million to £13 million, beginning with a lobby renovation.

“Aldwych House is an excellent opportunity for us to invest in a high-quality asset in the central London office market,” said Brad Altberger, managing director of GI Partners, in a statement.  “Purchasing Aldwych House at just over £500 per square foot, we think the downside is well protected.  In addition, we believe there is potential for significant upside as the building is let at below market rents.” GI Partners is projecting returns on the asset in the high teens to low 20 percent range, with a cash multiple north of 2x, following a four- to five-year hold period.

GI Partners, whose main offices are in Menlo Park, California and London, said it has a significant amount of dry powder in its $1.9 billion Fund III to pursue similar acquisitions that require intensive asset management. The fund, which closed in October 2009, currently is about 75 percent invested. This year, Fund III provided capital for the acquisition of a 226,042-square-foot office building in Munich through Elystan Capital Advisers, a Munich-based investment firm that GI Partners helped to launch in 2010, as well as the acquisition of €214 million in first lien, non-conforming residential mortgages backed by assets in the Netherlands.