Cityhold Property group, the European property joint venture of the First and Second Swedish National Pension Funds, has acquired an office building in Paddington, London, for £230 mln (EUR 278.3 mln) from a joint venture between Aviva Investors and Union Investment Real Estate. The transaction reflects a net initial yield of just under 6% including costs.

The deal, which was completed on 30 December, marks Cityhold's first acquisition in London. 'It is a new high quality property which provides an excellent long-term stable income stream from blue-chip tenants,' CEO Per Sjöberg said. 'This is an excellent fit with Cityhold’s investment strategy.'

The freehold office building at 1 Kingdom Street has a net lettable area 260,569 sq.ft. and is located close to Paddington main line station. Tenants include Vodafone, Statoil and Misys and the average unexpired term exceeds 11.5 years.

The Swedish pension funds are providing initial funding for the acquisition, which will be partly replaced by third party finance in early 2012. 'The property has excellent environmental credentials and we believe that the future Paddington Crossrail link will drive further positive rental uplift to this investment in the future. We are also very pleased with the yield this property is generating,' said Rickard Backlund, Executive Chairman of Cityhold.

Neil McLeod, Fund Manager at Aviva Investors, said the sale would enable the company to recycle some of the proceeds into the two remaining plots, 4 & 5 Kingdom Street, where planning consent was secured earlier this year.

Jones Lang LaSalle was Cityhold’s advisor in the acquisition. The vendors were represented by CBRE and Savills.