Case study : Kista Office Portfolio

• Quality office portfolio in attractive sub-market of Kista, Sweden’s largest corporate centre
• Potential for strong rental growth in improving office market
• Diversified income stream from more than 50 tenants in various sectors
• Strong cash-on-cash yield
• Potential for value enhancement through light refurbishment and lease renegotiation

Over a period of 18 months, Doughty Hanson fully implemented the business plan for the properties and transformed the assets into a product more suitable for long-term real estate owners. Key accomplishments during Doughty Hanson’s ownership included:

• Lease renegotiations: Although no leases were scheduled to expire within the first 18 months of ownership, we renegotiated leases on 38,000 sqm of space, increasing rents and extending the average unexpired lease term for the property from 3.5 years to 5 years.
• Cost efficiency: We improved non-recoverable cost efficiency for the properties to achieve a 6% increase in net operating income.
• Refurbishments: We refurbished the entrances and common areas of the properties and created more modern and flexible office premises.
• Development opportunities: We identified and defined future development potential involving new offices and residential to increase the value of the investment at exit.

Having achieved the asset management objectives for the investment, Doughty Hanson marketed the property for sale. In December 2007, the portfolio was sold for €315m to a property fund managed by a large Norwegian bank. The transaction generated an 83% gross IRR and a multiple of 2.5 times the equity invested.