Schroder European REIT leases additional space in Hamburg

Schroder European REIT (SERE) has completed a new five-year lease agreement for a further floor at Hammerbrookstraße 94, its Hamburg office investment.

BAM Deutschland, the construction specialist, has taken the 8th floor which totals 646 sq m (c10 per cent of the lettable area), on a five year lease, which will generate an additional EUR104,500 of annual contracted rent. 

The building is now 81 per cent let to a diverse range of tenants, with the Company having leased five of the seven floors vacated following the agreement of a lease surrender with the headline tenant, at a combined rent of 19 per cent above business plan and 12 per cent above the ERV. The commencement of the lease will enhance the income return for the investment by 0.6 per cent and is expected to have a positive impact on 30 June 2020 valuation of c3 per cent/EUR600,000.

The modern property is located in Hamburg’s fast growing City Sud district. The submarket’s appeal has increased in recent years as a result of new residential and retail development, whilst the micro location benefits from its proximity to a number of key arterial routes and Hammerbrook S-Bahn station, which is one stop for Hamburg Hauptbahnh, the city’s main railway station.

Jeff O’Dwyer, Fund Manager, says: “Despite the near-term impact of Covid-19 on occupational activity, we continue to see demand from a range of tenants for well-located office space across our target Continental European markets. Following on from the transformational Boulogne-Billancourt transaction announced last week, it represents the latest successful example of our Winning Cities strategy, whilst further improving the portfolio metrics.”

On 1 October 2020, SERE announced it had exchanged contracts to sell its Boulogne-Billancourt office asset in Paris for approximately EUR104 million. The sale is structured as a forward funding, with the building being handed over to the purchaser in H1 2022, following completion of a comprehensive refurbishment which is being undertaken by the Company. The refurbishment and sale follows the agreement of a new 10-year pre-let contract with existing tenant Alten in June this year at a rent 39 per cent higher than the previous rent paid.

The sale delivers a profit of approximately EUR28 million, representing c35 per cent profit on cost and the net sale proceeds strengthen the Company's balance sheet, providing significant operational and financial flexibility. The funds will primarily be redeployed into new earnings enhancing initiatives including new investments.