Brockton Capital is preparing to launch 33 Horseferry Road, SW1, to the market, having recently agreed a new 17-year index-linked lease with the Department for Transport.
JLL has been instructed to sell the circa 180,600 sq ft freehold HQ office with 10 ground-floor retail units for £215m – a net initial yield of 3.6%.
The price represents a low capital value of £1,190 per sq ft for 17 years of UK government income, with annual uplifts linked to the Consumer Price Index, with a collar of 1% pa and cap of 4% pa. The capital value per square foot is approximately 10% below the five-year average sale price in the West End.
The sale is expected to interest a broad range of institutional and wealth preservation buyers worldwide looking to take advantage of sterling’s circa 20% depreciation since the EU referendum.
JLL also expects high demand from domestic long-income and bond investors wishing to offset future liabilities in a continued low-interest-rate environment. The Department for Transport will continue to occupy the whole circa 160,000 sq ft of office accommodation off a low overall passing rent of £42.15 per sq ft, having elected to remain in a strategically important government hub, on advantageous terms. Recent lettings in Victoria range between £75 per sq ft and £80 per sq ft, suggesting a reversionary potential of approximately 60% on prime refurbished office space.
The property also has an existing residential planning consent, granted in 2014, enabling development of 122 luxury flats and a further 23 affordable and 14 intermediate units. Prior to agreeing the new lease, Brockton Capital with Stiff & Trevillion and Landid, had drawn up plans for a comprehensive refurbishment, creating an additional 60,000 sq ft over two additional floors within the existing residential planning consent envelope.
Tony Edgley, partner at Brockton Capital, said: “We expect this asset to attract widespread interest and demand, appealing to a broad cross section of wealth preservation investors and those proxy bond buyers for whom the circa 5% yield advantage between this income stream and a comparable index-linked gilt is a compelling buy.”
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