Cornerstone Plans $303 Mln U.K. Real Estate Investment

Cornerstone Real Estate Advisers LLC, which manages $38.9 billion of property and related assets, will spend as much as 200 million pounds ($303 million) buying U.K. warehouses and office buildings over the coming two years, European Chief Executive Officer Charles Weeks said.

The purchases will be made on behalf of Cornerstone’s clients, Weeks said in a March 14 interview. He said Cornerstone, a unit of Massachusetts Mutual Life Insurance Co., will buy office buildings in central London and warehouses leased to small- and medium-sized U.K. businesses.

Cornerstone’s London-based European operations “can buy fundamentally a very good bit of real estate in a great location,” but the best-valued assets have a short lease, Weeks said. “If you believe in the real estate, then you should still be interested in acquiring the asset because you’re confident that you’ll be able to” extend the lease or attract new tenants, he said.

Cornerstone will buy from 100 million pounds to 200 million pounds of property without initially borrowing to fund the purchases, Weeks said. It may “apply some leverage to that in time,” once the portfolio is built up, he said. Cornerstone recently bought 35 million pounds of warehouse parks located in Solihull, about a 90-minute drive from London’s Heathrow Airport, as well as in Sheffield, England, and in Glasgow, Scotland, according to a March 1 statement.

Rental Yields

Yields for the best U.K. warehouses ranged from 6.25 percent to 8.25 percent last year, according to data compiled by broker CBRE Group Inc. Yields for income-producing office buildings in London’s West End district average 3.5 percent and in the City of London financial area they’re about 4.7 percent, broker Savills Plc said this month. Yields are the annual rental income expressed as a percentage of the purchase price.

Cornerstone, based in Hartford, Connecticut, may also open offices in Germany and France this year as it seeks to increase lending and attract more equity from investors, according to Weeks. It’s likely to double the amount it lends to commercial-property owners in Europe to as much as 800 million euros within 24 months, he said in the interview at the MIPIM real estate conference in Cannes, France.

Before it's here, it's on the Bloomberg Terminal.