Hong Kong investor eyes £70m Exchange Flags buy

The 360,000 sq ft building in Liverpool is understood to be under offer with a quoting price of around £70m, around two years after it was purchased by Shelborn Asset Management for £42m.

Place North West understand s the building has been under offer from a private individual investor, based in Hong Kong. If the deal completes, it will be one of the largest property transactions in the city since L&G’s purchase of the India Buildings for £125m in August 2017. Sources close to the deal said the deal had “gone quiet” since the start of the year but could yet go ahead.

Comprising Horton House and Walker House and positioned directly behind the town hall, Exchange Flags includes 313,000 sq ft of offices over 10 floors, along with 28,000 sq ft of retail, along with an 18,000 sq ft museum.

Office tenants include law firms Brabners and DLA Piper; Regus; the Secretary of State for Defence; Jackson Carter; Brookes Bell; Colliers International; and Deloitte. Colliers signed up for 1,260 sq ft in 2017 but is rent-free until September this year.

The Secretary of State for Defence is the largest tenant with 68,000 sq ft over three floors at a rent of around £16/sq ft. Its lease is due to expire in November 2023. Brabners is the largest occupier in Horton House with 44,000 sq ft over the second, third, and fourth floors, again at a rent of around £16/sq ft, and with a lease expiry in 2023.

Regus is also based in Horton House in 23,500 sq ft; the serviced office firm signed up for the space in January 2018 with two years rent-free.

At the ground floor, the retail occupiers are the Vincent Café; Equire Coffee; Philpotts; and Fazenda.

The building generates a passing rent of around £5.6m a year, equating to a rent of around £15.50/sq ft on average. Headline rents at Exchange Flags now stand at £17/sq ft, driven by a shortage of available office space in the area.

A purchase at £70m would reflect a net initial yield of 7.82% and a capital value of £195/sq ft.

If the deal completes, it will be the fourth time the building has changed hands in the last 20 years.

Exchange Flags was bought by UK Land & Property and Pochins from Bill Davies’ Walton Group in 2006 and refurbished at a cost of £22m before being taken on by Hudson, on behalf of private equity fund Lone Star, as part of a legacy property debt purchase from the Irish Bank Resolution Corporation.

Sherborn Asset Management then bought the building from Hudson for £42m in November 2016.

Worthington Owen is the letting agent for Exchange Flags, while Knight Frank is acting on the sale.