Great Portland makes SW1 purchase for £42.5m
Great Portland Estates today confirmed it has bought the eight-storey building at 20 St James’s Street, SW1 for £42.5m from IVG UK Limited. The 55,490 sq ft building was redeveloped in the mid-1980s, the company noted, and is now let to nine tenants producing a gross rent of £2.39m per year.
The company says the purchase price, which represents a capital value of £765 per sq ft, reflects a net initial yield on expiry of rent-free periods of 4.5%, or 5.2% assuming that the 7,000 sq ft currently vacant is let in its existing condition at an average of £49 per sq ft. The offices in the building are let at an average of £55 per sq ft and most of the leases expire in 2015, or have breaks in 2012, which Great Portland says provides a medium-term refurbishment opportunity. The property is held on a lease from The Crown Estate, expiring in January 2111 at a ground rent of 15% of rents received.
Meanwhile an article in the Financial Times today says that investment activity in the property sector is likely to remain sluggish next year, with the reins once again being tightened on secured asset finance. While financing is being obtained for prime properties, many more poorer-quality portfolios are being turned down, it says. Daniel Thomas says the industry would be wise to realise this is more than a short-term problem, and adds that investors may have to accept lower returns in a market where liquidity constraints could continue for several years.
