Voracious. What a great word. But was John Burns right to use it this week in Derwent London’s interim results announcement?
Burns had every right to be pleased. Derwent’s chief executive was presiding over another impressive results announcement: EPRA NAV per share up 11%, an underlying valuation increase of 9.1% and a 5% rise in rental values.
You can understand why Burns remarked: “We have raised our average portfolio ERV growth estimates for the full year to 8-10% and expect property yields to remain firm in the second half, supported by voracious demand.”
Voracious? Well, says Burns, “In our areas there has been too little development, we still think there is a shortage of space. And we are finding grown-up companies going into the Tech Belt areas.”
Burns is the most admired propco chief executive (an EG poll for the Props lunch established that earlier this year) and he will know better than perhaps anyone whether demand in central London’s sexier fringes is indeed voracious. He would probably be right if he also extended the analogy to other parts of the capital.
Hermes Investment Management placed the Haymarket home of Tiger Tiger under offer for more than 21% above its asking price this week, reflecting a yield of less than 3.3%.
Across the river, a joint venture between Singapore-based Temasek and Canadian investor Oxford Properties has entered exclusive talks to buy the Blue Fin Building, home to Time Inc’s IPC Media. The £560m purchase price reflects a yield of 3.75%.
So far, so voracious. But what of resi? I hear you ask.
Well, the Stag Brewery in Mortlake – a prime slug of real estate between two of south-west London’s most affluent neighbourhoods, Kew and Barnes – was put up for sale this week. Bids could top £1bn for the site, which should deliver as many as 850 homes (p19).
Voracious demand? I should say so.
Speaking of demand for London assets, when LoneStar bid 131p a share for Quintain at the end of July, it represented a 22% premium to the Wembley-focused developer’s share price. The price inevitably spiked and has exceeded the offer level since. It is not uncommon, of course, and normally indicates a belief that a rival suitor is waiting in the wings, or an expectation that a suitor will have to raise its offer. Whether either is the case will become clear by 9 September.
Should the public sector get building to solve Britain’s housing crisis? That was a common question during the general election, whose surprisingly definitive outcome could be taken for a resounding “no”. Yet it’s happening.
Runnymede borough council has become the latest local authority to move into the private rented sector (p22). It has created an investment vehicle which will buy the PRS element of a £70m project and has another five potential opportunities in the pipeline. It is not the first local authority to turn investor/developer. Newham’s Red Door vehicle and Ealing’s Broadway Living are among those already operating along similar lines. It is only a matter of time before others do so too.
Plaudits to DTZ for publishing the first diversity survey of its UK business this week (p23). The results themselves are no great surprise – 58% male, 92.5% white, 94.3% heterosexual – but the fact that the stats are out there is to be welcomed, a point well made by head of UK and Ireland Colin Wilson. This worthwhile initiative should be taken forward by Cushmans once the takeover completes. And it should be mirrored by other leading agents.
Indeed, with the chief executives of CBRE, Cushman & Wakefield, JLL, Knight Frank and Savills committing to increasing diversity at a Changing the Face of Property launch event almost two years ago, that, I’m sure, will be in hand. In the meantime, you can help us monitor industry diversity by filling in our latest Top Agents survey. Go to www.thissurvey.com/TopAgent2015 to do so.
