Brookfield Office Properties is buying most of Hammerson’s London office portfolio for £520m, as revealed by Property Week (news, 15.6.12).

New York-listed Brookfield and UK REIT Hammerson this morning confirmed that they had struck a deal which will see Brookfield buy 75% of Hammerson’s London offices.

The deal sees Hammerson come closer to its goal of becoming a specialist retail REIT, and gives Brookfield a platform in Europe to match its scale in North America.

The main assets being sold are: 99 Bishopsgate, EC2; the 50% stake in 125 Old Broad Street, EC2; Leadenhall Court, EC3; and the development site Principal Place, which comprises commercial and residential, EC2.

Additional smaller assets included in the acquisition are 1 Puddle Dock and buildings on Shoreditch High Street adjoining Principal Place. 

The yield on the investment assets included in the deal is between 5.2%, the figure given by Hammerson, and 6%, the figure given by Brookfield. These assets have a total size of 884,000 sq ft. The price paid represents a 5% premium to book value, Hammerson said.

Brookfield is funding the acquisition through the assumption of £66 million of debt, with additional property level debt expected to be put in place prior to close, and from available cash resources.

Payment of £329 million in respect of 99 Bishopsgate, Principal Place and two smaller assets will be received by 30 September 2012. 125 Old Broad Street and Leadenhall Court will complete by 30 June 2013 for £189 million. Further details on the individual assets are provided in the notes below.

Hammerson intends to retain its 50% stake in The Goodsyard on Bishopsgate, a large mixed-use scheme with a significant retail element. Hammerson will also retain its 50% ownership of its London head office in Grosvenor Street, W1.

Its other major development site, London Wall Place, is an option held with the City of London, with consent for a 495,144 sq ft of office development in London EC2. The option has no value in Hammerson’s books and in line with its revised strategy, Hammerson intends to allow it to lapse by 28 June 2012 as the scheme does not provide sufficiently high returns to the company.

The remaining London office assets, with a combined December 2011 value of £113m, include: a 30% stake in 10 Gresham Street, EC2, held in a joint venture with CPPIB; Stockley House, SW1; and an interest in Harbour Quay, E14. Hammerson said it intends to dispose of these interests over the next 18 months.

“This transaction is a unique opportunity for Brookfield Office Properties to acquire a portfolio of top-quality office assets and a well-located development site in the London market,” said Dennis Friedrich, president and global chief investment officer of Brookfield Office Properties. “This acquisition aligns with our strategy of providing front-office accommodations to the world’s most prestigious tenants by owning and operating premier properties that are well-located within the most dynamic global markets.”

David Atkins, Chief Executive of Hammerson said: “In our strategic review announced earlier this year we identified the opportunity to enhance returns by focusing our energy and capital on the successful sectors of retail which cater to consumers’ increasing desire for experience, convenience and value.

“I am confident that at this point in the cycle we can reinvest successfully to increase scale in our three chosen areas of prime shopping centres, convenient retail parks and premium designer outlets.”