New Star acquires prime properties for Property Unit Trust

New Star has recently acquired two grade A office buildings for the New Star Property Unit Trust. The first, Governor’s House, is a prime office building just off Cannon Street, in the City of London. The building is let to M& G, the fund management company owned by Prudential, the life insurer.

Marcus Langlands Pearse, director, UK property at New Star, says: “This building is currently let at £43 per square foot and City commentators are expecting headline rents in the City for comparable buildings to have reached a reviewable £55 by April 2008. This would move the yield to nearly 5%, which, for a prime headquarters building in an excellent location, would look good value.”

The second building, Dundas House, is a newly-developed office building in the centre of Edinburgh. The property is let to Standard Life with 24 years remaining on the lease. In 2003, Dundas House was voted the best corporate workspace in Scotland.

Marcus, says: “The building has an unusual lease geared to 56% of open-market rents, allowing New Star to buy the building at an exceptionally low £220 per square foot. We would expect a significant uplift in the rent at the next review.”

These acquisitions, totalling more than £150 million in value, show that New Star is committed to investing in prime buildings let to strong tenants on long leases. The outlook for property remains strong and no more so than in the prime office market, where tenant demand is driving rental growth and investor demand is underpinning property prices.

Some 25% of the fund’s direct property portfolio is in Central London offices while the percentage for Greater London is nearly 35% . This is in line with the fund’s commitment to buying into the strong rental growth prospects of the London office market.