M&G capitalises on demand for value add real estate assets

M&G Real Estate – part of M&G plc’s £65 billion private and alternative assets business – has sold Saffron House, a prime office building in one of central London’s key submarkets for £95 million, representing a 22% increase in value within nine months.

M&G acquired Saffron House for £78 million in March this year on behalf of a client strategy which is actively targeting value add opportunities in Asia, the UK and Europe. Despite lockdown conditions, M&G was able to complete the purchase within a time frame of less than two months, enabling a swift, efficient change in ownership.

Comprehensively modernised in 2019, the 73,000 sq ft asset is located in the sub market of Clerkenwell less than 200 meters from Farringdon station, which connects London Underground and Elizabeth Line services. The effects of COVID-19 have underlined the importance of future-proofed accommodation to ensure safe workplaces in good locations with abundant health and wellbeing amenities to attract and retain staff.

The City of London office market now ranks as one of the highest yielding in Europe in contrast to many major global cities whose core office yields have compressed during the pandemic. The pricing dislocations caused by Brexit and muted supply of prime offices ensures that highly accessible Central Business Districts such as Farringdon, which appeal to a broad range of occupiers, are likely to prove resilient moving forward.

Paul Crosbie, who leads M&G Real Estate’s value add initiatives, comments: “The acquisition of Saffron House during the UK Lockdown in the first quarter of 2020 highlights our conviction of value offered by the Central London office market during a time of uncertainty. This short hold period and completion of a sale within eight months of our ownership ratifies our conviction that Central London was set for a continued investment recovery and the sale has subsequently delivered attractive risk adjusted returns to our client.”