The £4.2bn Norwich Union property trust’s decision to put two flagship London office buildings on the market has surprised the City.
NPT is marketing an office block at 10 Queen’s Street Place, which is yielding 5 per cent, for £180m and 16 Old Bailey, on a yield of 4.25 per cent, for £81m.
The two sales comprise more than 5 per cent of the trust’s overall portfolio.
The yields on both properties are below the 5.5 per cent cost of long-term borrowing, meaning a buyer would need to have either a very long investment outlook or a bullish view on prospects for capital and rental growth.
NPT assistant manager David Deimer says: “Anyone looking to fund from the UK would be cashflow-negative but the sales decision is not entirely driven by debt rates and there is still a market for ‘trophy assets’. We bought the buildings a little over a year ago and the capital growth we anticipated has happened much quicker than we thought it would. We have 19 per cent of the fund in liquid assets and are not forced sellers but are testing the market to see if we can lock in that growth.”
He adds if NPT does not find a buyer at an acceptable price, it will keep the buildings, which have blue-chip tenants and strong covenants.