Property investment company Stenprop has acquired 25 Argyll Street, a 65 000 ft2 office building in London, for R1.39-billion and is acquiring Hermann Quartier, a shopping centre in Berlin, for R299.2-million.

Stenprop CEO Paul Arenson tells Engineering News that the properties are in locations that are experiencing significant growth.

“London and Berlin are both capital cities that are experiencing inflows of people pursuing work opportunities and are both well placed for rental growth over the medium term. The capital raise completed in March has enabled us to successfully acquire these two strategic yield-enhancing assets,” he says.

Stenprop raised R457.9-million in March through a substantially oversubscribed private placement to South African investors.

Located in the heart of London’s West End, the building at 25 Argyll Street is fully let, with rentals averaging £55/ ft2. The building was acquired in a 50:50 joint venture with a co-investor.

The 8 550 m2 Hermann Quartier is located on the high street of Berlin’s central suburb of Neukölln and has good public-transport links, including an underground station inside the shopping centre. The transaction for Hermann Quartier will be completed next month.
Arenson says the properties are well let and, therefore, produce a good net income from the net rents. There is opportunity to enhance these properties over time by extending leases and modernising space as it becomes vacant, with a view to re-let at higher rates to attract higher-end tenants for longer leases.

He adds that the opportunities are enhanced by the ability to fund the purchase prices with 50% debt at historically low interest rates.

Stenprop can fix these rates at well below the yields on the properties, thereby enhancing the overall return on investment, Arenson says.

The company expects the London property to show a starting return on equity of more than 6% and the Berlin property to show a starting yield on equity of more than 7%.

“These properties are in line with our strategy to invest in locations and markets likely to deliver growth in income and property values over time. We have a healthy pipeline and are in advanced discussions to potentially acquire another medium-sized suburban retail centre in a major German city,” Arenson adds.