Abu Dhabi sovereign wealth fund Mubadala Investment Company is in advanced talks to buy the UK headquarters of UBS for around £1.1bn.
The 710,000 sq ft 5 Broadgate, EC2, is being sold by British Land and Singaporean sovereign wealth fund GIC, which also jointly own the broader City of London estate.
No deal has yet been signed, and the opportunity continues to be circled by other potential suitors, but the Middle Eastern investor is soon expected to begin work on final structuring and due diligence.
The proposed purchase priced reflects a yield of around 3.4%.
The Make Architects-designed building is let to the Swiss bank, which moved in last year, for another 18 years at a rent of £54.50 per sq ft.
British Land and GIC, which are long-term holders of the remainder of the 32-acre estate, are expected to reinvest the proceeds in further revamping Broadgate.
A 550,000 sq ft, 32-storey tower has been granted consent at 2-3 Finsbury Avenue Square, the pair are undertaking the 530,000 sq ft major refurbishment of 100 Liverpool Street, and the retail and leisure offering at Broadgate is also being enhanced as the owners look to reposition it away from being dominated by finance-orientated tenants.
If completed, it will be the City’s third deal at more than £1bn this year, with the Leadenhall Building, EC3, having been bought for £1.15bn by CC Land and 20 Fenchurch Street, EC3, having been bought for £1.3bn by LKK.
Mubadala Investment Company was formed at the start of the year through the merger of two state-owned companies – Mubadala Development Company and International Petroleum Investment Company – to create “an international development powerhouse” for the emirate.
It holds around $125bn of investments in sectors including energy, automotive, banking, construction, aviation, real estate and infrastructure.
Mubadala most recently made a major real estate investment in the UK when, at the end of 2014, it formed a joint venture with the University of Manchester to develop a 3,000-bed student accommodation project in the city.
In May, executive director of its real estate and infrastructure division, Ali Eid Al Mheiri, told EG: “Our core focus is developing the physical and social infrastructure required to underpin a structured and rapidly evolving society [in Abu Dhabi].
“We know that the real estate industry is cyclical in nature, and we are accustomed to the periodic fluctuations caused by macroeconomics.
“We are currently primarily focused on the UAE but we are interested in exploring investment opportunities in the US and Europe, as well as emerging markets around the world.”
Alistair Meadows, head of UK capital markets at JLL, said that volatility in the Middle East, including the shifting of political power in Saudi Arabia, the diplomatic isolation of Qatar and war in Yemen, would likely continue to drive investment into London from the region.
“The political change that is happening in the Middle East is a catalyst for capital movement,” said Meadows. “London has overtaken New York this year as the most traded global city and deals like this underline its status as the primary destination for that type of global capital.”
CBRE and UBS are advising British Land and GIC.
To send feedback, e-mail david.hatcher@egi.co.uk or tweet @hatcherdavid or @estatesgazette
