Our business

Investment management

At the start of the financial year we had the objective of acquiring assets with the potential for strong absolute and relative performance. Over the course of the year we invested around £213 million in six different transactions and we are examining several interesting opportunities.

Since our rights issue in 2009, we have committed over £370 million to new acquisitions which at 31 March 2011 represented almost a quarter of the Group’s current property portfolio. These acquisitions have delivered an annualised ungeared IRR of over 37% whilst in our ownership.

purchases-for-the-year statistic

In June, we announced the acquisition of 35 Portman Square, W1 for £53.0 million from the shareholders of Portman Square Properties Holdings Ltd, reflecting a net initial yield of 7.7%. The consideration was made up of £31.0 million cash and assumed debt of £22.0 million (which has since been repaid). 35 Portman Square is an eight storey, 73,000 sq ft building fronting Portman Square in the West End occupying an under-developed corner site of around 0.5 acres. The property is held on a lease from The Portman Estate expiring in 2060 and offers a wide variety of asset management opportunities.

At the end of July 2010, our Great Star Partnership joint venture (“GSP”) completed the acquisition of City Tower, 40 Basinghall Street, EC2 and City Place House, 55 Basinghall Street, EC2. GPE and Starwood Capital each own a 50% interest in these properties. City Tower is a 20 storey, 132,600 sq ft office building in a prime city location, adjacent to the Guildhall, held on a 100 year unexpired leasehold interest from the City Corporation with significant opportunity to increase the rental income of the property following targeted refurbishment and active asset management. City Place House is a 177,000 sq ft Grade A building situated directly west of City Tower, held on a head lease from the City Corporation with an unexpired term of 108 years. Our intention is to refurbish the common parts and floors as appropriate, repositioning the building into a potential shortage of grade A space in the City from 2011.

See GSP case study

In November, we announced the refocusing of the Great Capital Partnership (“GCP”) through the acquisition of four properties by GPE and the appointment of Capital and Counties Properties PLC (“Capco”) as residential and retail strategy advisor to the joint venture. GPE purchased 24/25 Britton Street, EC1, 12/14 New Fetter Lane & 43 Fetter Lane, EC4, Tasman House, Wells Street, W1 and 183/190 Tottenham Court Road, W1 for a combined price of £45.1 million, broadly in line with their September 2010 book values. These sales represent a continuation of the joint venture’s strategy to focus on its West End holdings and will enable it to recycle the sales receipts into a variety of refurbishment and development opportunities within its core holdings on Piccadilly, Regent Street and Park Crescent. The restructuring enables the refurbishment and redevelopment of Britton Street and Fetter Lane which are described in the development section below.

We announced the acquisition of 20 St James’s Street, SW1 in December for a capital value of £42.5 million or £765 per sq ft. The purchase price reflects a net initial yield on expiry of rent free periods of 4.5%, or 5.2% assuming the 7,000 sq ft currently vacant is let in its existing condition at an average of £49 per sq ft. 20 St James’s Street is an eight storey, 55,500 sq ft building which was redeveloped in the mid 1980’s and is now multi-let to nine tenants producing a gross rent of £2.39 million per annum. The offices are let at an average of only £55 per sq ft and the majority of leases expire in 2015 or have breaks in 2012 providing a medium-term refurbishment opportunity. The property is held on a long lease, expiring in January 2111, at a ground rent of 15% of rents received.