An office leased to WeWork is hitting the London market with a price tag of close to £1bn, the biggest test to date of investors’ faith in the strength of the co-working company since its initial public offering last year.
One and Two Southbank Place, which also includes the London headquarters of Shell, is being marketed by developer Almacantar for £935mn. A deal at that size, representing a 4 per cent yield, would be among the largest in the UK capital since the outbreak of coronavirus two years ago.
Mike Hussey, founder and chief executive of Almacantar, said the resolution of some of WeWork’s issues, in the form of a public listing on the New York Stock Exchange in October last year, had “given people more confidence” — despite WeWork shares trading at about $7, about a third below their listing price.
Following WeWork’s failed run at a public listing in 2019, during which investors poked holes in its prospectus — questioning bullish growth and revenue projections and an eccentric corporate culture that involved tequila-fuelled parties — office buyers have been warier of taking on the company as a tenant.
But post-IPO, under new management and with more modest growth targets, a WeWork covenant is now regarded as stronger, according to investors and agents.
Earlier this month Singaporean investor Sun Venture paid £148mn for 120 Moorgate, a City of London block sold by WeWork’s property acquisition and management arm and leased to the co-working company. The net initial yield on the building is 4.5 per cent.
Southbank Place had been on the market twice before in the past three years, but both times a potential sale was pulled. In 2019, in the midst of the public collapse of WeWork’s IPO, an £850mn sale of the block to Singaporean group Bright Ruby was scrapped.
A potential sale to US investor Blackstone collapsed in 2020 when coronavirus hit. Hussey is confident that the third attempt will be more successful.
Nick Braybrook, head of capital markets in London for estate agent Knight Frank, said “much depends on investors’ view on WeWork”.
“People feel WeWork has significantly improved as an investment prospect [since 2020],” he added.
The London market has also been boosted by the return of overseas investors after international travel restrictions were lifted, with a number of large deals in train.
CK Asset Holdings, the developer controlled by Hong Kong’s richest man Li Ka-shing, is on the verge of completing the sale of 5 Broadgate, the UK headquarters of Swiss bank UBS, to South Korean pension fund NPS and LaSalle Investment Management for about £1.2bn, according to two people with knowledge of that deal. Details of the transaction were originally reported by Bloomberg.
Meanwhile Deutsche Bank’s new headquarters, 21 Moorfields, is also edging towards a sale, with developer Landsec seeking a little over £1bn, the people said.
“It’s very rare to have a sale at £900mn to £1bn; it just happens there are three out there at the moment,” said one.
Almacantar has recently sold an office block in Marble Arch, west London to UK property investor ARA Dunedin, for £280mn said Hussey. He added that he was pushing for a sale now because “there is plenty of money out there in the market”.