GreenOak nets north of 30 percent IRR on exit – exclusive

The European platform of the private equity real estate firm has sold London office development Dixon House to insurer MAPFRE for around £50 million.

GreenOak Real Estate, the private equity real estate firm, has exited its Dixon House development and is believed to have generated an internal rate of return in excess of 30 percent and an equity multiple of more than two times its money.

The London-based firm sold the building, which is currently undergoing a major rebuild, to European insurer MAPFRE for £35.5 million (€47 million; $51 million), MAPFRE will fund the completion of the rebuild works at a cost of approximately £15.8 million.

“To take the risk off the table in a pretty uncertain world with upcoming risk and market volatility we are particularly pleased to have crystalized that investment,” Toby Phelps, partner in GreenOak’s London office told PERE.

Having secured vacant possession of Dixon House, GreenOak gained planning permission for a scheme involving a major reconfiguration of the floor plate and the addition of two floors, taking the building from its original 37,684 square feet to a planned 49,476 square feet (a 31 percent increase).

Work on the refurbishment is scheduled to complete in the first quarter of 2017. GreenOak will manage the works and lease-up of the remainder of the building on MAPFRE’s behalf. The scheme’s leasing agents are Knight Frank and Allsop.

“Their selection of Dixon House is a huge endorsement of GreenOak’s ability to identify under-managed assets and execute asset management plans that can deliver high quality accommodation to today’s modern occupiers,” added Phelps.

GreenOak acquired Dixon house in July 2013 for £18.1 million before carrying out the rebuild of the office property as part of a London recovery strategy which was established in July 2012.

The firm invested around £200 million in four transactions in the capital including Whitechapel Estate, a 4.5-acre residential-led development and Allen House in Kensington and Chelsea which is also a residential led development opportunity.

However, due to a dearth of value-add and opportunistic property opportunities in the capital GreenOak will look to launch a core-plus strategy for London.

“Since the end of 2014, we have been unable to find opportunities where we feel the returns reflect the risk. We are starting now on a core-plus strategy in London because we don’t see the value-add/opportunistic returns,” said Phelps.

GreenOak has acquired over £280 million of assets in the UK in the last 36 months, predominantly through off-market deals, and managed a further £700 million of assets for third-party clients between 2011 and 2014.