Martley Capital has acquired The Lewis Building and the adjoining Priory Court, a grade-A office and retail asset in Birmingham’s central business district.
The Lewis Building, Birmingham
The two buildings, home to the well-known Lewis’s department store from the 1920s before it closed in 1991, were acquired by Gulf Islamic Investments for £140m in 2019. They were listed for a cut-price sale in March last year, seeking offers in excess of £73m.
The asset has been acquired into the Martley Capital Regional Office (MCRO) series of funds, bringing total deployment in the MCRO platform to over £110m.
The freehold asset has around 254,000 sq ft of grade-A workspace and retail accommodation and is underpinned by long-term government income from a lease with the Ministry of Justice.
Flexible workspace provider Regus and Freightliner are among the building’s other corporate and retail tenants. The property has a weighted average unexpired lease term of more than seven years.
Martley said it purchased the price reflected a yield of 11.6% and represented around 50% of the replacement cost, “providing an opportunistic entry point into one of the UK’s strongest regional markets”.
Martley said its plans to proactively asset manage the building, including leasing vacant space, regearing existing leases and investing to enhance the building’s amenities. The firm said it expects these initiatives to drive a significant increase in rental income.
Martley head of transactions Rory Finnan said: “We continue to see value in the UK regional office market. Occupational markets are strengthening, prime rents are growing and the supply of high-quality office space is becoming increasingly constrained, yet investment pricing continues to reflect historically weak sentiment, rather than underlying fundamentals.”
Chief executive Richard Croft added: “The regional office opportunity is similar in construct to the industrial opportunity in 2010 and the retail warehouse opportunity in 2020.
“The occupational market is behaving in a markedly different manner to the investment market, as was the case with the previous opportunities in industrial and retail warehouse sectors, which I believe will at some point lead to renewed investor interest in the sector.”
Martley is targeting £500m of gross investment for MCRO over the next 12 months.
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