Kildare Partners pays c.£260m for Karlin Real Estate’s Project Carolus plus Fox Court

Karlin Real Estate is selling both its near 30-strong Project Carolus granular UK secondary portfolio and Fox Court in London’s Midtown to Ellis Short’s Kildare Partners paying a combined circa £260m, CoStar News has learned.

Kildare PartnersRockspring Hanover Property Unit Trust, managed by Rockspring Property Investment Managers, only sold the 99,644 sq ft office building at 14 – 22 Grays Inn Road in early April to Magnus Real Estate, a Manchester-based asset manager now owned by Karlin.

Fox Court has now traded twice in less than two months after the Rockspring property unit trust owned the office building for nearly five years.

Karlin Real Estate, the real estate investment arm of Los Angeles-based Karlin Asset Management, only entered the UK commercial property investment market in August 2013, acquiring around 30 granular secondary commercial properties throughout the UK in just over 18 months.

In February, Karlin appointed Eastdil Secured to sell the Project Carolus secondary portfolio, with an initial asking price of £200m, which would have reflected a 9% net initial yield, based on a circa £18m annual rent roll.

However, a small number of assets from the original 2.5m sq ft Project Carolus portfolio were sold separately, which reduced the asking price to £190m, excluding Fox Court.  

Under Rockspring’s ownership, planning permission to provide a further 25,263 sq ft of new office and retail space over the ground, first, second and third floors, was approved.  When built, this will incorporate a major refurbishment of the Gray’s Inn Road entrance and the existing office space.

Planning permission has also been obtained for a new entrance on Brooke Street. It is anticipated that the new scheme could be delivered by mid-2016. Terms have also been agreed for a new ground floor retail unit to be pre-let to Tesco for 20 years, with indexed uplifts.

Project Carolus includes regional offices, retail, business parks, logistics facilities, and a maintenance and R&D facility.

The portfolio includes:

  • Two-fifths of the portfolio is comprised of the 16 multi-let North West Mangus office portfolio over 458,000 sq ft which Karlin acquired in a recapitalisation strategy from a defaulted RBS loan in September 2014;
  • the 169,931 sq ft Worldwide House office block in in Thorpe Wood Business Park, Peterborough, fully leased through 2021 to Travelex Limited, the world’s largest non-bank foreign exchange business.  It was acquired from Glanmore Fund Advisors for £16m in July 2013, marking Karlin’s entry into the European commercial real estate;
  • the 405,365 sq ft Phoenix distribution building in Ellesmere Port from Highcross in December 2013, located on a 21-acre site within the Hooton Park Supplier Park in Cheshire, leased to Jaguar Land Rover;
  • the freehold interest in Earlswood Court, a two-storey 41,363 sq ft commercial office building in Solihull near Birmingham, from Helix Property Advisors in December 2013. Since construction in 2002, the building has been occupied by The Paragon Group of Companies, a UK based consumer finance and mortgage lender. While the Phoenix distribution building and Earlswood Court were acquired from separate vendors, the price announced at the time was a combined £18m;
  • Jackson House and New Century House, two retail-led buildings over a combined 97,935 sq ft in Gateshead, near Newcastle upon Tyne, from UK-based real estate firm Reef Estates for £8.55m in May 2014. At the time of the acquisition, the circa 22,000 sq ft retail space was fully leased to Halifax Bank, Argos, JD Wetherspoon pub The Tilley Stone, PureGym and Peacocks.  The office component had been renovated and was as of 10 months ago 52% leased;
  • the three building 111,087 sq ft British Airways UK Maintenance and R&D Facility, leased to British Airways Avionic Engineering Ltd. Karlin acquired the BA facility in Llantrisant, South East Wales, from a private investor for £.7.8m.  Purpose built for BA, the airline company signed a 25-year lease in 1994, currently paying circa £987k per annum and on five-yearly upward rent reviews, expires in March 2019;
  • Sony Building, a three-storey office building comprising 50,655 sq ft of office accommodation on 3.07 acres of land in Wavertree Business Park in Liverpool.  Karlin paid Telereal Trillium £4.396m in August 2014, reflecting a net initial yield of 10.75%.
  • International House, in Stratford Park, Telford, comprised of a 101, 573 sq ft industrial unit and 28,888 sq ft of additional office space. Karlin acquired the asset from B8 Real Estate, acting on behalf of Barlows Ltd, in September 2014 for £6.1m.

All parties declined to comment.

About CoStar News

Finance Editor, CoStar News
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