Luxury London workplace portfolio involves market in potential £400mn deal | USAEMALL.com

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The owners of Argyll have started a sale process seeking up to £400mn for the serviced office group and its portfolio of trophy buildings in the City of London and the West End.

The potential sale by private equity group Alpine Grove Partners and Baupost, Seth Klarman’s hedge fund, would be among the biggest office deals in the city since the pandemic. It will provide another test of demand for upmarket and flexible office space in the UK capital.

Alpine Grove Partners and Baupost appointed advisers in the spring, who have recently started sounding out potential investors, according to several people familiar with the matter.  

The sale includes an “irreplaceable” portfolio of buildings such as 1 Cornhill — the former Royal Insurance building opposite the Bank of England — and 33 St James’s Square, which is set for a refurbishment, one of the people said.

The sellers are seeking roughly £350mn-£400mn, but could also choose to recapitalise the business, the people said. 

“It is a bit of a bellwether deal. It’s office. It’s flex,” one person with knowledge of the process said. 

The sale of Argyll — which is popular with smaller hedge funds and private equity firms seeking fancy offices with prestigious addresses — will test investor demand for premium office space as commercial property emerges from a brutal two year downturn caused by higher borrowing costs.

Sentiment has also been hurt by anxiety among some investors that the rise of hybrid working will hit demand for office space. Argyll declined to comment, while Baupost and Alpine Grove Partners did not respond to requests for comment.

Flexible offices — which range from co-working to dedicated, private serviced office space on shorter leases — have become more popular with investors since the Covid-19 pandemic. 

Landlords, from big listed groups such as British Land, Land Securities and GPE to aristocratic estates including Grosvenor and Howard de Walden, have expanded their offering of flexible office space.

Argyll, which has operated in London for decades under different names, was acquired by Alpine Grove and Baupost through a restructuring at the height of the Covid-19 pandemic, when offices were forced to close. 

Green Street News reported in May that advisers were appointed for a potential sale, which has now kicked off in earnest. 

Large scale City office deals are also coming back to life, after Brookfield listed CityPoint tower near Moorgate and Nuveen started marketing the so-called “Can of Ham” building.