German buyer moves for EBRD site: Likely deal brings good news for Rosehaugh Stanhope Developments

A GERMAN investment fund is close to clinching a deal to buy the opulent City home of the European Bank for Reconstruction and Development for pounds 175m.

If the acquisition by DGI goes ahead the 370,000 sq ft building in Broadgate will have been sold on an income yield of just under 8 per cent, a high price even for a well-let property with a dependable tenant.

The deal confirms the interest being shown in the UK property sector by German investors, attracted by high yields, secure leases and favourable exchange rates since sterling's exit from the exchange rate mechanism.

Dieter Bock, the German joint chief executive of Lonrho, and Lord Palumbo, the Arts Council chief, recently agreed to develop jointly 1 Poultry, the controversial site opposite the Bank of England.

Otto Wisskirchen, from what is thought to be one of Germany's richest families, is also reported to have been on a secretive pounds 250m shopping spree in London, picking up nine properties through a string of Jersey-registered companies.

Jones Lang Wootton confirmed that it had acted for DGI in the EBRD building sale, having previously advised Broadgate Properties, the vendor. But it said the deal had not yet been completed.

The acquisition is good news for Rosehaugh Stanhope Developments, the joint venture between two of the best-known British developers - Rosehaugh, now in receivership, and Stanhope.

Its most valuable asset is the Broadgate collection of offices, developed in the 1980s.

The pounds 175m sale price is slightly in excess of the original development loan on the building, which was put in place by County NatWest and a consortium of banks. RSD owes its bankers a total of pounds 1.25bn. The reduction in debt means that the Broadgate development moves a step closer to becoming self-financing, with the rental income from the remaining buildings covering the interest payments on the debt.

In Rosehaugh Stanhope's latest report and accounts rental income totalling pounds 91m was more than eaten up by interest payments of pounds 97m.

The resolution of that imbalance improves the chances of KPMG Peat Marwick being able to dispose of the 50 per cent stake in RSD it inherited when appointed receiver to Rosehaugh last December.

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