About the development opportunity

The proposal comprises a number of shops on the pre-eminent shopping street in Edinburgh, that have become vacant due to the opening of a new shopping centre in the city. Subject to planning permission being gained, these ex-retail units will be converted to a high-quality hotel scheme, providing over 300 keys and will overlook the world-famous Edinburgh Castle and Old Town.

Investment rationale and value creation

Princes Street is suffering currently from a number of vacant units, following the opening of the St James Centre, which has attracted many retailers to locate there. The city would like to see the regeneration of Princes Street and the creation of a brand-new hotel can be an integral part of this scheme.

An agreement for lease has been signed with a well-known hotel operator to take the completed building. Over the next few years, planning permission will be obtained to change the use of the scheme, followed by construction, with completion expected in 2025. A brand-new hotel in the centre of Edinburgh, off a long lease to a high-quality hotel operator, should be well received by the investment market.

LaSalle Global Solutions has pooled commitments from our clients to be the lead investors on the scheme, alongside the underlying General Partner.

Environmental credentials

The intention is that the development will be one of Scotland’s first net zero carbon hotels with a BREEAM rating of “Excellent.”

The project is being delivered with the following additional objectives:

• 100% diversion of all construction and demolition waste from landfill.

• Maximise the reuse of existing on-site materials to reduce embodied carbon and create social value.

• Design for energy efficiency in operation including the use of renewable technologies and water efficiency.

• Design for future reuse and adaptability.

About the building

Met House is an education building of approximately 130,000 square feet located within the vibrant East London district of Whitechapel. It benefits from great connectivity with Aldgate East Station is within a five-minute walk and the new Elizabeth line’s Whitechapel station is within eight minutes. The building was owned by the UK Government and needs substantial renovation to convert it into a great education campus.

Investment rationale

LaSalle’s value-add investments team was able to acquire the building with a construction contract already in place at acquisition and two leases secured (representing 40% of the building area). Therefore, the building was already partially de-risked. We also strongly believe in the education market which benefits from a good momentum (fuelled by an increasing number of students, both domestic and foreign, attracted by the London area). The characteristics of the asset class, namely long-indexed leases and very stable tenants should lead to an increase in interest from the market when the time comes to sell the asset.

Future plans

As part of the refurbishment plans for the existing building, LaSalle is aiming to secure a small extension and let the remaining vacant space to other educational occupiers.

Construction is currently progressing with partial completion scheduled for Summer 2023. The refurbishment aims to create a brand-new education building with improved sustainability standards, with a rating of BREEAM “Excellent” targeted, but BREEAM “Very Good” at a minimum.

About the buildings

Located in the heart of the coastal infill submarket of University Town Center in San Diego, California, the Class A property consists of almost 800,000 square feet spread across six state-of-the-art office, lab and accessory buildings on 44 acres. The property is 100% occupied by Illumina and is under a long-term lease agreement serving as their world headquarters. 

Investment rationale

The life sciences segment of the real estate market has been expanding in the US for over 20 years, and the COVID-19 pandemic has accelerated private and public funding in the life sciences, thus boosting real estate demand.  

Aging populations, rising healthcare spending and technology advancements have all led to growing demand from life sciences tenants, and these specialized properties support their research and production needs. This makes properly configured life sciences real estate different from other property types, including traditional offices.  

The acquisition of a partial interest in the Illumina world headquarters is part of a larger strategy by the LaSalle Property Fund’s Investment Management team to increase the fund’s exposure to the life sciences sector. When compared to traditional offices, life sciences real estate cash flows are more stable and have a better demand outlook. In addition to higher long-term net operating income growth, the sector has lower ongoing landlord capital expenditure needs, as most investment is reusable and there are high retention rates for tenants. 

Future plans

As part of the transaction agreement, the LaSalle Property Fund will participate with other campus co-owners to invest in potential future projects that will expand and densify undeveloped land located on the campus site. 

About the building

Memorial Hermann Medical Plaza (MHMP) is a 28-story, 510,000 square foot, Class A+ medical office building located at 6400 Fannin Street on the northern boundary of the Texas Medical Center, the world’s largest healthcare complex and directly adjacent to Memorial Hermann Hospital. The building is a state-of-the-art facility that boasts an iconic design with highly efficient modern construction, and is further complemented by popular retail amenities, Texas Medical Center campus connectivity and an active 13-level integrated parking garage serving both tenants and visitors.

MHMP is designed to serve as Memorial Hermann’s integrated medical office tower for its flagship hospital campus of over 1,000 beds and features hard-to-replicate healthcare infrastructure including an ambulatory surgery center, a linear accelerator and various imaging and diagnostic systems.

The Memorial Hermann campus serves as the main teaching hospital for the McGovern Medical School (the graduate medical school associated with the University of Texas Health Science Center at Houston). It is comprised of both Memorial Hermann Hospital and Children’s Memorial Hermann Hospital, plus four institutes dedicated to heart and vascular health, neuroscience, trauma and sports medicine.

Investment rationale

The MHMP benefits from a prime location located at the edge of the Texas Medical Center and in a dense, amenity-rich and transit-oriented submarket of central Houston with access to Houston’s major thoroughfares and mass transit. The LaSalle Property Fund’s management team believes that this, combined with having a strong anchor tenant in Memorial Hermann (the largest not-for-profit healthcare system in Southeast Texas) means that it can offer a stable, attractive income return and good prospects for long-term appreciation. At the time of purchase, MHMP was 99% occupied.

About the buildings

The LaSalle Property Fund has been an investor in self-storage since 2016 and has grown the portfolio to 22 properties valued at greater than US $325 million, as of Q4 2023, with an emphasis on sunbelt markets. The Fund has strategic relationships with leading self-storage firms, Extra Space and Metro Storage. These units, when compared to their competition in the local trading areas, benefit from being both of a superior quality and in more desirable locations.

Investment rationale

Self-storage units in the United States benefit from high demand, with nearly 10% of households renting space in a self-storage facility. As an investment, they tend to require less maintenance that traditional real estate assets but benefit from stable yields owing to the high demand for space.

The LaSalle Property Fund’s management team believes that these fundamentals, combined with the superior quality of the invested self-storage facilities in the portfolio will offer stable and attractive income returns for the foreseeable future.