Deals

KIA-backed unit continues UK sales with disposal to AREA club

St Martins, the UK real estate arm of the $200bn Kuwait Investment Authority, has made further inroads into its plan to sell £900m of its UK real estate after agreeing the sale of three assets to a club fund involving AREA Property Partners.

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A club venture led by F&C REIT and including AREA Property Partners, has acquired a trio of commercial real estate assets for £120 million (€134 million; $195 million) from the UK real estate arm of Kuwait’s $200 billion sovereign wealth fund, Kuwait Investment Authority.

The deal marks the latest in a series of asset sales by St Martins which placed £900 million of its real estate on the market last September through property agent Savillis. The sales are part of a wider strategy overhaul which will see the company switch from investing across a wide array of sectors and locations in the UK to a more direct focus on large trophy assets. In December, the KIA unit agreed the £250 million sale of a retail portfolio to London-listed REIT Hammerson.

St Martins, a real estate investor in the UK for more than 25 years, will retain a number of core assets including the Willis building in London, a 496,000 square foot office acquired in 2008 for £400 million.

According to an announcement, the investment by F&C REIT, AREA and ESAS was for: a parade of retail units and offices in Stevenage, near London; Halton Lea shopping centre in Runcorn; and a wider-spread portfolio of offices. The assets combine to 1.183 million square feet and generate a rent roll of £11.5 million. The club, which also included ESAS Holding, is the latest of a number of deals completed by F&C REIT and AREA.

Of the deal, Zvi Noé, director of investments at F&C REIT, said the club should benefit from ‘attracting entry pricing’ and that the assets ‘offer a variety of value creation opportunities’. Meanwhile, Wilson Lamont, director of AREA Property Partners said the assets offered ‘good day one cashflow and future asset management opportunities.’

F&C REIT was formed in 2009 through the merger of REIT Asset Management and F&C Asset Management, two UK real estate investment management businesses. The firm had a global portfolio valued at £7.3 billion at the end of June last year. New York-based private equity real estate firm AREA Property Partners have more than $11 billion of equity under management and has been an active investor in Europe since 1995. It is currently investing the capital of Apollo European Real Estate Fund III, which closed in January 2008 with total commitments of $1.4 billion.