Sterling Weakness Attracts Foreign Investors to Prime UK Real Estate
10 February, 2023
– US investor VCM buys Orchard Brae House for GBP18.6 million in Edinburgh –
– Nick Wright heads VCM Real Estate in Europe after 12 years at UBS –
Edinburgh, January 25, 2023 – Sterling weakness is making UK real estate acquisition opportunities attractive to foreign investors as Brits start to head back to the office. For example, US real estate investor VCM Global Asset Management announces its acquisition of Orchard Brae House for GBP18.6 mllion. The acquisition bucks the current UK investor trend of shying away from commercial property in a recession.
“Sterling weakness makes the UK attractive to foreign investors,” says VCM Real Estate head for Europe Nick Wright, who led the acquisition after joining VCM following 12 years at UBS. “Negotiations began nine months ago, and the UK has had three Prime Minister in that time, but we were able to close the deal with the right pricing conditions in a city center location where office space is highly constrained. Interestingly, the tenant demand is there, with multiple expressions of interest and terms already being agreed shortly after taking on the property. This backs up our investment rationale that there will be continued demand for office space as employers adjust staff to the hybrid model of working more mandated time in the office. We expect more people to return to their offices within the next 18 months as big companies increasingly adjust to this hybrid model.”
Orchard Brae House is a 105,000 sq ft five-story office building in the west end of city centre of Edinburgh, which is strong high-barrier-to-entry market that can be slightly overlooked by real estate investors who prefer London or other large regional markets such as Manchester, Birmingham and Bristol.
“Orchard Brae House represents an underdeveloped opportunity at an attractive price with potential upside in a strong market at well below replacement cost. On top of this, we believe that the collective memory is very short and our experience is that people want to get back to living their lives asit was before the pandemic, and this includes going to the office more,” adds Wright, who has 25 years of experience in North American and European real estate investments.
Further investment opportunities
“At VCM, our strategy is to look for more mid-sized acquisition and development partnerships in the UK and Europe, and we will continue to seek out overlooked and attractive opportunities with potential upside at below replacement cost,” says Wright.
The latest VCM acquisition adds to its existing European portfolio of real estate and private equity in the UK and Germany. VCM is also targeting other countries in Europe. Indeed, Orchard Brae House comes a year after the US investor’s USD30 million significant stake acquisition in FX markets-focused fintech MillTechFX, a subsidiary of currency manager giant Millennium Global Group. Co-investors included Sir Ronald Cohen, widely known as the father of British venture capital.
Before the pandemic, VCM purchased a USD215 million economy hotels chain from Wyndham Hotels in the US. The economy hotels are focused on offering space to railway workers. Despite COVID-19, the hotels chain has proven resiliente. US railways continued to be maintained throughout the pandemic. Today, the US investor is now looking at further bolt-on acquisitions in the same space.
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