Landmark block sold in biggest deal yet this year

Credit Suisse Real Estate Fund Global is understood to have paid close to the asking price of £36.915m for the prime property, which is home to law firm DLA Piper and serviced officer provider Regus.

The seller, Canada Life Investments, had purchased the building from Credit Suisse at the top of the market in 2005 for £46.5m.

Credit Suisse was said to be “delighted” with the purchase. It bought eight-floor Princes Exchange from the developer Teesland in 1999 for £32m.

Princes Exchange, next to Leeds train station, is regarded as one of the best office investments in Yorkshire.

Institutional investors see this type of investment as core fund management as they are considered to be low risk and low return, said one real estate expert.

He told the Yorkshire Post that sovereign wealth funds, which are generational investors, are pushing institutional investors out of the London market by bidding aggressively for prime assets.

“Investors are having to look further afield for a return which makes sense for them,” said the expert.

“Sovereign wealth funds are buying properties as trophy assets rather than for returns.”

Commenting on the deal, Tim Cameron-Jones, head of the Leeds office at DTZ, said: “It’s interesting it’s another overseas fund.

“They have been the major buyers of the best quality regional office properties.”

He agreed that institutional funds have been forced into the regional marketplace because of a lack of availability “at the right sort of price and right sort of space in the London market”.

He added: “London is still regarded as a defensive play.”

Mr Cameron-Jones said the deal highlighted the polarisation of between the top and bottom of the Leeds commercial property market.

He said prices for tertiary property “continue to fall away quite rapidly, while people are very worried about future occupation and future cost”.

Property consultancy Knight Frank and law firm Eversheds advised Credit Suisse on the acquisition.

Gerald Eve marketed the property for Canada Life and there was said to be a lot of interest.

Rebecca Foord, associate at Eversheds, said: “It shows for the right property there is still a great deal of interest.”

The 108,000 sq ft building is fully let and generates rent of £2.636m a year. The first lease expiry is 2024. The asking price of £36.915m reflects a net initial yield – the rent generated by a property expressed as a percentage of its valuation – of 6.75 per cent.

A spokesman for Canada Life Investments declined to comment.

Sovereign wealth funds represent some of the biggest investors in the world.

They tend to be funded by foreign exchange assets.

They have invested heavily in London in recent years as the capital is seen as a safe haven in times of economic and political turmoil.

There are thought to be around 70 sovereign wealth funds operating globally with trillions of dollars to invest.

They come from countries as diverse as Norway, Angola, Azerbaijan, Malaysia and Singapore.

The Princes Exchange development, a joint venture between Teesland, Railtrack Property and Yorkshire Forward completed in 1999.

Teesland billed it as “one of the finest office developments outside London”.

It was pre-leased to DLA Piper, then known as Dipp Lupton Alsop.

Princes Exchange has a steel frame behind glazed cladding with uppermost floors offering views across the city and riverside areas.

The building won a City of Leeds Award for Architecture 2000 for its innovative design.

It was put on the market at the beginning of the year.

Speaking at the time, Richard Lines of property agent Gerald Eve said: “There continues to be genuine demand for the very best regional UK offices, provided the fundamentals are right.”

[email protected]