CITY of Edinburgh Council has sold one of its landmark office developments to a German real estate investor for £105 million, generating much-needed cash amidst an £85m cost-cutting programme.
Atria, a 200,000 sq ft office development that completed the masterplan for Edinburgh’s ‘Exchange’ financial district around Edinburgh International Conference Centre, has been sold to Deka Immobilien, a Frankfurt-based real estate investment company with more than €17 billion of property assets across 23 countries.
Based on Atria’s end valuation of £85m when it was officially launched in 2013, the sale price suggests a gross profit of around £20m, representing a return of more than 23 per cent.
“The fact that we have been able to attract investment into Edinburgh from a major overseas real estate company is testament to the quality of the building and its occupiers,” said Councillor Gavin Barrie, Edinburgh's economy convener.
“Our plan was always to sell Atria once the development was completed and the economic conditions were right to achieve the best possible return for the council’s investment and I believe we have achieved this.”
Property consultancies Montagu Evans and JLL, joint sales agents for City of Edinburgh Council, said the property attracted a significant amount of interest when it was put up for sale in October 2015.
“We received strong levels of enquiries from investors, both UK and overseas, with the main international demand from Europe and the US, but also interest from investors from the Middle East and Asia,” said Montagu Evans partner Ross Burnett.
Atria was originally built to help fund the £35m expansion of Edinburgh International Conference Centre amid increasing competition from international venues. Funded by City of Edinburgh Council with support from Scottish Enterprise, it was the largest speculative office development of its size outside London at launch and remains one of the city’s greenest developments under current environmental legislation for buildings.
City of Edinburgh Council said proceeds from the sale will be used to repay the monies borrowed to facilitate the development and to bolster the council’s £7.5m strategic development fund, which was set up in 2013 to help create new development opportunities, support business innovation, deliver jobs and promote economic growth in Edinburgh.
The funds will also help deliver the council’s transformation programme, which aims to address a budget shortfall of £126m by 2020.
In January, the city's Labour/SNP coalition announced that it had identified £85m worth of savings, including the sale of property assets, to balance next year's budget. It hopes that 2,000 jobs can be shed in 12 months without the need for compulsory redundancies.
Atria’s tenants include accountancy firm PwC, investment manager Brewin Dolphin, insurer Aon, technology group IBM, the UK Green Investment Bank, the Law Society of Scotland and Lothian Pension Fund. Retail occupiers include the Co-operative Food and Café Klaris.
Law firms Shepherd & Wedderburn and HBJ Gateley acted respectively for the City of Edinburgh Council and Deka Immobilien. Property consultancies Savills and CBRE represented Deka Immobilien.
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