Great Portland acquires Jermyn St development opportunity
Great Capital Partnership, the joint venture between Great Portland Estates and Capital & Counties, has sold the Jermyn Street estate in SW1 to Great Portland. The price was £60m for the half that Great Portland does not already own, valuing the estate as a whole at £120m.
The five properties in the estate comprise office space and retail property in the West End, on Piccadilly and Jermyn Street. They are all held on separate 125-year headleases from the Crown Estate at a total fixed headrate of £675,000 per year until September 2014, thereafter reverting to 10% of rents received. The estate currently has 62 tenants. The Great Capital Partnership recently refurbished 27,700 sq ft of vacant office space on the estate, of which 3,800 sq ft has so far been let.
“The properties generate a current net rental income of circa £4.5m after payment of the headrent and have an estimated net rental value today of £7.3m. The sale reflects a net initial yield of 3.7% and net reversionary yield of 6.0% after the deduction of actual costs incurred in the transaction. The estate was sold at a 3.3% premium on the June 2012 valuation,” Great Portland noted.
Great Capital Partnership said it would consider further disposals this year. Great Portland’s chief executive Tony Courtauld said the new properties, combined with the company’s existing assets next to the estate, would “offer a superb development opportunity in one of the West End’s premier submarkets”.
Great Portland on Tuesday reported rental value growth in the first quarter of its current financial year of 0.9% overall, with its office space in the West End up 1.3% and West End retail properties up 0.4%. Rental values for its offices in the City, Midtown offices and Southwark office space were flat. The group’s portfolio valuation was up 8.2% over 12 months and EPRA net asset value per share was 417p at the end of June, up 11.2% over the same period.
In addition to the Jermyn Street deal announced on Monday, the group made total purchases of £159m in the quarter, and disposals of £140.5m, of which its share was £80.5m. The group said it had a further £261m (its share: £190m) of properties in the market to sell, of which more than £187m were currently under offer.
“Whilst occupiers in our markets generally remained cautious during the quarter, our continued successful letting activity demonstrates that demand exists for high quality, well-located and sensibly priced space,” the group said.
