Huge Potential Skyscraper Profit Shows Why Brookfield Is Taking Real Estate Subsidiary Private

Brookfield Property Partners could reap a profit of as much as £1B when it sells one of the City of London’s largest office buildings later this year.

The Canadian investment giant will seek as much as £1.8B when it puts the 1M SF 100 Bishopsgate in the City up for sale, The Sunday Telegraph reported. That would make it the most expensive single building in UK history, topping the £1.65B Intu paid for the Trafford Centre in 2010. 

In a presentation to investors in November 2019, Brookfield Property said that the building cost £800M to build, which means a sale at £1.8B would net the firm a £1B investment on the scheme. It has already reaped some of this profit with a refinancing in 2019, which saw it take £350M out of the building.

Brookfield bought into the scheme in 2012, when the City of London leasing market was still in the doldrums. When it pushed the button to begin construction in 2014, it was the largest speculative City development of the cycle. The building is close to fully leased, with tenants including Royal Bank of Canada, Freshfields and Paul Hastings.

Interestingly, the price linked to the sale is higher than the £1.5B at which the building was valued when it was refinanced in 2019. In October, Brookfield head of Europe Zach Vaughan said on Bisnow’s London State of the Market digital summit that in spite of the uncertainty created by Covid-19, the firm felt prices for the best quality offices in cities like London would actually rise, because of the ever-growing demand from investors for the solid income good real estate provides. The sale of 100 Bishopsgate will test this theory.

The sale also highlights why Brookfield Property’s parent company, Brookfield Asset Management, last week agreed to take it private in a $6.5B deal. The company has consistently argued that stock market investors undervalue what investors in direct real estate are willing to pay for assets like 100 Bishopsgate.