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Arlington buys half-empty Fleet Street offices at 1.7% yield

Property Week 23.06.2006

Arlington Securities has bought 165 Fleet Street, London EC4, from Kilmartin Properties for £55m, reflecting a net initial yield of 1.7%.

The low yield reflects the fact that five floors are vacant, although the equivalent yield is 4.8% based on an average rent of £38 per sq ft (£409.03 per sq m).

The eight-storey building totals 67,553 sq ft (6,456 sq m) of which only three floors are let. Talks are under way with prospective tenants on two further floors, which would leave 27,500 sq ft (2,555 sq m).

Arlington bought the building as part of a strategy of investing in the City, which it believes will be one of the strongest-performing office markets in the country.

John O'Connor, managing director of the investment management team, said: “Our research highlights the strong performance of the central London office market.

“It is projected to be the best-performing property sector in the UK over the next few years, with returns of up to 20% forecast.”

Arlington, which also bought Princes House in Holborn for £20m in April, is looking for further acquisitions in the area.

"We are very comfortable with letting risk at the moment," said O'Connor. "We'll invest in buildings with a little more risk but better upside. We think it will exceed our target rents."

Kilmartin owned the property in a joint venture with SCI. HP Four acted for Arlington on the acquisition.

DTZ and Farebrother are the letting agents.

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