Monday, 31 July 2017

HSBC moving out of 78 SJS

The Azeri oil fund bought this building in 2012 for a 4.5% yield.

HSBC like most banks is under margin pressure so the UK Private Bank is moving elsewhere and Asset Management going to Canary Wharf.

They were apparently paying £81/ sq ft/ yr. Although the rent previously had been as high as £120 I believe, but got negotiated lower after 2008.

Assuming the owner finds another tenant is £70/ sq ft an unreasonable expectation? At that rent and a 6.5% yield its only worth £128m. At £60 its worth £110m. At £60 and an 8% yield its only worth £89m.

It was bought for £177m. If rents start to structurally fall the cap rates will plunge at current valuations.  

https://www.ft.com/content/19119b76-486a-11e2-a6b3-00144feab49a

http://www.jll.co.uk/united-kingdom/en-gb/case-studies/170/78-st-james-s-street

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