PETALING JAYA: Gamuda Bhd
is expanding its quick turnaround projects (QTPs) strategy to London to deliver higher returns in real estate development.
The group has been investing in QTPs in Vietnam, and yesterday it announced a landmark commercial property deal in London.
The £257mil (RM1.39bil) acquisition of Winchester House will ensure that Gamuda’s QTP programme moves into high gear in London and Europe in due course.
Gamuda deputy group managing director Mohammed Rashdan Mohd Yusof said Winchester House is a 317,000-sq-ft building and a highly-sought-after commercial asset in the city of London.
“This is especially with its eventual top-tier environmental, social and governance (ESG) rating of BREEAM Outstanding, which is exactly what all large global corporations, being highly ESG conscious themselves, are looking for.
“Yet these ESG offices are in dire short supply in the city,” he said in a statement.
Rashdan said Gamuda has a strong balance sheet, “where gearing is currently only 0.07 times, at this rather opportunistic time of distress and dislocation, to be able to strategically capitalise on attractive investment propositions such as Winchester House”.
Gamuda said it will then divest Winchester House to future investors, who are looking for core assets with good yields, once Winchester House is fully pre-leased by corporations such as financial institutions, mega-tech corporations or professional services firms.
“This is the business model for Winchester House,” it noted.
In a filing with Bursa Malaysia yesterday, Gamuda said it had partnered with Castleforge Partners Ltd via a joint-venture vehicle called Venta Belgarum II Ltd Partnership (VB II) to sign a sale and purchase agreement to acquire 100% equity interest in Wessex Winchester Propco Ltd (Prop Co), the owner of Winchester House, for a total cash consideration of £257mil (RM1.39bil).
The asset will be acquired from Wessex Winchester Ltd Partnership.
VB II is a 75:25 development partnership, with Gamuda holding the majority stake.
It was formed between the wholly owned subsidiary of Gamuda in Labuan, Gamuda Land (Labuan) Ltd, and Castleforge’s 100% partnership entity, Athelstan Ltd.
The acquisition will involve an initial capital outlay of £15mil (RM81.4mil) for Gamuda, while the rest will be funded by debt and deferred payments in two years, it said.
Upon completion of this proposed acquisition, Gamuda said it will effectively own 75% of the Prop Co, with the remaining 25% owned by a Castleforge fund, Castleforge Partners IV Limited Partnership (via Athelstan Ltd) where Castleforge will also serve as its development manager.
Gamuda said it intends to syndicate part of its 75% equity stake to interested investors after the completion of the proposed acquisition.
Rashdan said acquiring Winchester House presents a strategic opportunity for Gamuda as the group expands its property development footprint to the BREEAM Outstanding club of properties, which are few and far between in London.
The office project is situated in the heart of the city of London, the Square Mile, which is the global financial centre and mega-tech hub.
Gamuda said it is also a less than five-minute walk from the game-changer Crossrail infrastructure now named the Elizabeth Line, with the Liverpool Street station linking east and west of Greater London.
These factors make it an ideal choice for multinational and global corporations seeking the best in modern, high-specification refurbished offices with the pinnacle category of ESG credentials with the BREEAM outstanding rating, as they seriously consider making this office development their European or global headquarters, it said.
Gamuda said the business model is simple, which is to acquire-develop-market-monetise.
The group said its plan is to refurbish the existing building to the BREEAM Outstanding level, which is the top ESG rating.
It will add a few floors from the current eight to 11, increasing the floor space by 50% to about half a million sq ft and ensuring the best modern office specifications and or features and thereafter to secure a top tenant seeking the best commercial property in the city of London, preferably under pre-lease agreements, and finally to sell the building to core long-term investors that will help it get top quality rental yields.
“We expect a resultant strong exit value yielding a commensurately high return on our equity investment.
“With the strong demand for top-class ESG buildings, coupled with the acute lack of supply, Gamuda is expected to double its equity investment from this asset upon disposal within five years, thus demonstrating strong returns on investment and maximising shareholder value,” it said.
Meanwhile, Gamuda Land, the property arm of Gamuda said it aims to achieve its targeted revenue growth through a two-pronged strategy.
Firstly, Gamuda Land said it will continue to focus on its core strength of developing signature premium residential and township developments such as Gamuda Cove and Gamuda Gardens with a Township Strategy that will provide a strong revenue base.
This will then be complemented by the higher return developments strategy of QTP, which entails investing in opportunistic bite-sized real estate developments that will see a quick turnaround entry and exit within five years and requiring investments of less than US$100mil (RM442.15mil) each, generating a high return of at least 18% internal rate of return.
“This quickens and halves the return-on-investment timeframe compared to the Township Strategy, which requires significant placemaking and infrastructure investment with a longer investment horizon of 10 to 20 years,” it said.
