Date: Friday 01 Jun 2012
Real estate investment trust Great Portland Estates (GPE) has bought interests in two properties in the heart of London's St James's district from fund management firm Henderson Global Investors.
GPE is paying £39.0m for the leasehold interests in French Railways House and 50 Jermyn Street, SW1. The purchase price reflects a net initial yield of 5.1% and a capital value of £782 per square foot.
The 1950's properties are multi-let to nine tenants, producing a gross rent of £2.12m per annum, which reflects an average rent of £46.50 per square foot on the offices and £125 per square foot Zone A on the retail space.
The properties are held leasehold from The Crown Estate, with the leases expiring in 2057 and 2053, respectively. They have a total fixed ground rent of £13,250 per annum.
Handily, the properties adjoin the Piccadilly Estate, a 130,000 square foot office and retail holding owned by the Great Capital Partnership, GPE's 50:50 Partnership with Capital and Counties Properties.
"The acquisition offers an attractive net initial yield of 5.1% which we expect to be able to grow to around 7% over the next 24 months as a result of imminent lease events and focused asset management," said Toby Courtauld, GPE's Chief Executive.
"Over the longer term, these two adjoining properties offer a superb development opportunity in one of the West End's premier sub markets, potentially delivering material uplift in both the quantity and quality of accommodation on the site," he added.
As for Henderson, Nick Deacon, Director of Property at Henderson Global Investors, said the proceeds from the sale would be reinvested into the firm's CLOF 1 fund's development programme over the near term, including the fund's joint venture with Istithmar P&O at Regent Quarter in King's Cross, the proposed redevelopment of 54-57 Great Marlborough Street in Soho and Bishop's Court in Spitalfields.
"The London office investment markets remain a challenging and competitive environment. Deploying capital into the fund's development and refurbishment activities is a prudent and cost effective course of action for us to adopt," Deacon said.
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