Hermes and CPPIB sell Aldgate House for £183 million to CDL

City Developments Limited (CDL) has completed the acquisition of Aldgate House, London, for £183 million from Hermes Investment Management, the £35.3 billion manager, and Canada Pension Plan Investment Board (CPPIB).

The eight-floor commercial building is situated in the City of London and provides over 211,000 sq ft of high-quality office accommodation. Located adjacent to Aldgate Underground Station, Aldgate House was originally constructed in the 1970s. Since its purchase by Hermes Investment Management and CPPIB in 2013, the building has undergone significant refurbishment, including an extension of the upper floors and interior refurbishment to several of the floors, including a stand-out reception area. It now benefits from an occupancy rate of 88 per cent with quality and well-diversified tenants, contributing to a strong recurring income.

Chris Taylor, Head of Private Markets at Hermes Investment Management, said: “The disposal of Aldgate House marks the culmination of a proactive asset management strategy that was put into place. This has included significant refurbishment works and the regearing of leaseholds within the building. Capital from this sale will be put towards the selective acquisition of assets, both within the City of London and further afield, that present an opportunity for added value to be achieved.”

Mr Frank Khoo, CDL Group Chief Investment Officer, said: “A key focus for CDL is to grow our recurring income significantly over the next 10 years through acquisitions and organic growth which will help to mitigate the volatility of development projects. This acquisition will enhance CDL’s recurring income portfolio. We see tremendous potential in this prime commercial building and we continue to believe that London will remain as a global financial hub. The vibrant Aldgate district is home to major occupiers from a diverse sector base including financial, fintech, insurance, legal, cultural and creative companies. It is also emerging as the heart of Digital London and the presence of healthtech companies is expected to increase with plans to develop a world-class life sciences research facility in the vicinity.

“There is also potential to undertake AEI (asset enhancement initiative) to add value to this property. We can refurbish office spaces to increase the rental and convert unused areas to provide additional facilities such as a restaurant. Planning consent has also been obtained for the creation of additional massing at the basement for a commercial gym. CDL will continue to seek opportunities in the UK to further enhance our recurring income streams.”

Rental growth in the Central London office market outlook is expected to continue into 2021, bolstered by the heightened demand and tightening of both existing office stock and new supply. Investment sales transactions in the City of London area also recorded their highest level of activity since the end of 2015, due to London’s status as a global financial hub and favourable exchange rates.

JLL and Corbett Northam acted on behalf of Hermes Investment Management and CPPIB.