Big Deals Continue with Sale of 3.4M-SF Portfolio in U.K.

In a real estate investment market that has been quieted by the credit crunch and staggering economy, a spate of major deals over the past week may be an early sign that activity could be picking up in the near future. But an uptick in sales does not necessarily mean the industry is returning to health; many of the sales are being made by owners desperate for cash to repay debt and shore up balance sheets, as well as creditors that have seized property back from borrowers that have defaulted.The latest such deal took place in the United Kingdom, where a joint venture of F&C REIT Asset Management and AREA Property Partners acquired a 3.4 million-square-foot portfolio once held by collapsed investment firm Dawnay Day for a reported ₤600 million. The parties have exchanged contracts on the deal, which is expected to close by the end of the month. The portfolio consists of 211 properties, 70 percent of which are retail assets. The properties became available after British investment firm Dawnay Day ran into financial troubles last year, and the assets reverted to the control of Norwich Union, Dawnay Day’s primary lender. Norwich tasked BDO Stoy Howard with putting the portfolio–with an appraised value of ₤800 million–up for auction. Should the reported ₤600 million sale price prove accurate, the buyers would be the latest investors to take advantage of property being sold at bargain prices by lenders who have seen their loans go sour. Just last week, CB Richard Ellis Investors snapped up a 905,500-square-foot office condo portion of 1540 Broadway in Manhattan from Deutsche Bank, who took control of the property when Macklowe Properties ran into debt trouble as part of its $7 billion acquisition of a massive portfolio from Equity Office Properties Trust in early 2007. The reported $355 million price tag on that deal was a steep discount from the $525 million paid by Equity Office for the property in mid-2006, at the height of the real estate boom. And in Washington, D.C., last week, debt-heavy Broadway Partners unloaded the 418,000-square-foot office building at 1615 L St. in a $180 million sale to a company controlled by Bernard Spitzer, the father of former New York State governor Eliot Spitzer, who also worked on the deal. The sale was the latest in a string of selloffs by Broadway as the firm attempts to pay down debt incurred when it ponied up $3.3 billion to take a 10-building portfolio from Beacon Capital Partners in 2006.