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Bloomberg: Westbrook to Acquire Shell-Mex House for $988 Million (Update1)

By Simon Packard

July 4 (Bloomberg) — Westbrook Partners LLC, the New York- based property investor, agreed to buy London’s Shell-Mex House, an art-deco office building overlooking the Thames river, for about 490 million pounds ($988 million).

The purchase is due to be completed tomorrow, said Mark Donnor, managing principal of Westbrook’s European business, in a telephone interview today. The property at 80 The Strand in the West End district is owned by a group that includes real estate investors Robert and Vincent Tchenguiz.

“This acquisition is in keeping with our strategy of investing in high-quality real estate in prime locations in global gateway cities that also offer opportunities to add value,” Donnor said.

A shortage of office space in central London, the most expensive location in the world, will enable landlords to charge higher rents, according to real estate consultant Colliers CRE. Shell-Mex House is the headquarters of Pearson Plc, owner of the Financial Times and the world’s largest educational publisher.

The property, built in 1931, has about 550,000 square feet of space, 58 percent of which is occupied by Pearson. Other tenants include Royal Dutch Shell Plc, Vodafone Group Plc and Omnicom Group Inc. Average rents are about 48 pounds a square foot and increase each year in line with inflation, according to Donnor.

Would-Be Buyers

The group that owns Shell-Mex House, which includes David and Simon Reuben and Jack Dellal, acquired the building for 328 million pounds in May 2002. They bought it from Lehman Brothers Holdings Inc. and real estate investment firm Witkoff Group, who in turn had purchased it three years earlier from Royal Dutch Shell for 164 million pounds.

During the past 18 months, investors including Dubai’s Istithmar PJSC, Tishman Speyer Properties LP and Land Securities Group Plc have all sought to buy Shell-Mex House, according to reports in the Financial Times, Property Week and the Times of London.

Westbrook Partners was founded in 1994 and its seven funds oversee assets worth almost $28 billion. The funds, which typically use 70 percent or more of debt to finance acquisitions, focus on cities such as New York, San Francisco, Paris and Tokyo.

“Westbrook has a reputation for being expert at finding big off-market opportunities and not over-paying,” said Rob Skioldebrand, director of leasing and development in the West End at real estate consultant Jones Lang LaSalle. “They do a very effective job of identifying potential, working income and adding value.”

Record Prices

This year, investors have paid record prices for office buildings in London. In April, Metrovacesa SA bought HSBC Holdings Plc’s base in the city for 1.09 billion pounds, the U.K.’s biggest property transaction. The tower in London’s Canary Wharf that serves as Citigroup Inc.’s European headquarters was this week bought by Derek Quinlan, an Irish investor, and Propinvest Holdings Ltd. for about 1 billion pounds.

Fourteen properties around the world were sold for at least $1 billion in the first five months, as many as in the whole of 2006, according to real estate consultant Jones Lang LaSalle Inc.

“Investors face intense competition for quality assets,” said Padraig Brown, an associate director at Jones Lang. A single trophy asset “can be attractive to many investors, especially when rental growth for prime assets is forecast to outperform,” he said.

Knight Frank LLP advised Westbrook, while CB Richard Ellis Inc. acted for the vendors.

To contact the reporter on this story: Simon Packard in London at [email protected] .

Last Updated: July 4, 2007 12:42 EDT

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