Realising potential par excellence – sale of the Bishopsgate Tower development project
The Bishopsgate development project with planning permission for a spectacular 300-metre office tower, which enabled the sale of the project in 2007, is a prime example of how to tap into the potential of existing holdings. The project was a milestone for Union Investment due to the huge performance uplift.
The back story to this transaction – which will inevitably remain a one-off – demonstrates how foresight, market knowledge and flair can deliver optimum results for a fund. From 1997 onwards, three adjacent sites in one of the most sought-after locations in the City of London were gradually acquired for DIFA-Fonds Nr. 1. The intention from the start was to replace the existing small to medium-sized office buildings on these sites with a major development project. An inspirational design by architects Kohn Pederson Fox featuring a Marilyn Monroe aesthetic paved the way for receiving planning permission for a building which was intended to be the crowning glory of a cluster of skyscrapers approved by the City Corporation in London's financial district. .
“Obtaining planning permission for one of the most exciting skyscraper projects in the heart of Europe’s most important financial centre gave us the opportunity to achieve an exceptional uplift in the value of our properties – especially against the backdrop of what were at the time almost ideal market conditions for a long-term project of this nature,” comments Dr. Frank Billand, who was responsible for project management on the DIFA management board at the time. Full advantage was taken of the opportunity. In December 2006, the City of London gave the green light for construction of what was then the tallest skyscraper in London on the corresponding prime sites held by DIFA-Fonds Nr. 1. In February 2007, the same month in which DIFA changed its name to Union Investment Real Estate, the fund management company was able to announce that it had found an investor for the spectacular project. “For DIFA-Fonds Nr. 1, shortly to be renamed UniImmo: Deutschland, an investment of EUR 1 billion with a construction period of more than four years would not have been viable in terms of concentration risk,” explains Dr. Billand.
Maximum increase in value thanks to a well-funded investor
On payment of the purchase price, the properties and planning permission, including the architectural design, were transferred to an Arab investment consortium. The new investor forged ahead with the project, now called The Pinnacle, but completion of the building is currently in doubt due to the financial crisis of 2008 and other factors.
“The sale allowed us to maximise the potential of the existing properties. While luck certainly played a part, it was our strong commitment and determination to make the project a success together with our British partners that paid off,” says Dr. Frank Billand, summing up. “The transaction remains one of the largest in the company’s history and taught us a great deal about the key ingredients for successful development projects and effective asset management.” Union Investment's success story in London, which started in 1992, continued after the sale of Bishopsgate Tower in the form of further sales and acquisitions – with more milestone achievements sure to follow in the years ahead.