Islamic bank in £40m swoop for BT base

The bank bought One Sovereign Street in Leeds from UK fund manager La Salle on behalf of Royal Mail Pension Fund in one of the region's biggest property deals so far this year.

With conventional lenders rationing credit, Islamic finance

institutions such as Gatehouse are increasingly competing with them to finance non-Islamic companies and projects.

One Sovereign Street represents Gatehouse's first real estate acquisition in Yorkshire after acquiring the headquarters building of Proctor & Gamble in Weybridge, Surrey in December 2009 and a portfolio of student accommodation units in Liverpool and Loughborough in March 2010.

The 139,000 sq ft building, which was built in 2002, is let to BT until September 2020.

The deal reflects a yield – the rent generated by a property expressed as a percentage of its valuation – of almost seven per cent.

Adam Cavanagh, vice president of real estate at Gatehouse, said: "This latest acquisition brings the total value of our UK portfolio to more than 100m.

"This is a major transaction, particularly in a recovering market, and makes a significant addition to the high quality portfolio that we have established for our clients over the last six months. It is clear that the appetite from Islamic investors for prime real estate investments remains unabated, and we look forward to working on further acquisitions in the near future."

DTZ acted for Gatehouse Bank on the acquisition, while UK fund manager La Salle, on behalf of Royal Mail Pension Fund, were advised by Stephenson Day.

Tim Cameron-Jones, investment director at DTZ, said: "This recent deal demonstrates the strong opportunities available for investors in the Leeds office market."

Meanwhile, two other Yorkshire office buildings have been sold in deals totalling 12.5m.

The Portergate on Ecclesall Road in Sheffield, which is let to Aviva Life and Pensions, was sold to Invista Foundation Property Trust for 10m, while City House, above Leeds train station, is believed to have been sold for 2.5m.

The sale of the 50,343 sq ft Portergate building, which is located on the edge of the city centre, reflects a yield of almost 10 per cent.

It is let to Aviva Life and Pensions for a further nine years without break at a rent of 1m.

Duncan Owen, chief executive of Invista Real Estate, said: "This acquisition is part of our strategy of acquiring properties with good fundamentals, which provide the company with exposure to high quality tenants and above average income yields but are generally located in areas that have been largely overlooked by the market."

The sale of City House is one of the first big sales from the former Kenmore Property Group empire, which went into administration last November.

It is Bruntwood's fifth acquisition in the city in as many years. Comprising 120,000 sq ft of office space over 12 floors, the building is currently in a shell condition having been stripped out by the building's previous owners.

Now, family-owned Bruntwood plans to work with Network Rail and Leeds City Council to regenerate the building in a multi-million pound refurbishment, incorporating Grade A offices and serviced offices for all sizes of business.

The acquisition of City House will bring Bruntwood's total office space offering in Leeds to 390,000 sq ft, spread across the buildings of West One, Hepworth Point, West Gate and 14 King Street.

Busy time on the property market

The sale of BT's Yorkshire headquarters comes amid a flurry of deals which are currently taking place in Leeds.

Kings Court, a 48,000 sq ft building on King Street, is rumoured to be under offer to a fund. The building, being sold by the Alliance Trust, is currently home to law firm Walker Morris and it is thought it could be sold for more than 10.5m.

Meanwhile Park Place, a 39,000 sq ft building which is let to the Job Centre, is also under offer to an unknown buyer. The Prudential is selling the building for around 8m.

Prince William House, on Queen Street is also under offer to property company Ripley Capital.