Royal Mail is to turn a huge profit from the sale of one of its largest property assets in a boon for shareholders who bought into its controversial privatisation.
Barratt Developments, in joint venture with housing association L&Q, is frontrunner to buy the company’s South London Mail Centre site close to Battersea Power Station, SW8.
It is leading a shortlist of global heavyweights, including Ballymore in joint venture with Eco World Investment.
Intense competition for the site has pushed bids as high as £350m, reflecting a substantial premium to the valuation placed on the site prior to Royal Mail’s privatisation.
The deal – which remains at a sensitive stage and has yet to be formally agreed – is likely to reignite a debate about the value for taxpayer money achieved by the government when it floated the company in October 2013.
Much of the uplift has come from a near-trebling of land values in Nine Elms over the past three years thanks to the progress of Battersea Power Station and the confirmation of an extension to the Northern Line, which will improve transport links in the area.
Wandsworth council approved plans for 1,870 flats to be built on the 14-acre site in 2012 in a scheme including a new six-acre public square and more than 50,000 sq ft of shops and community space.
At least 15% of the flats will be affordable.
Based on a blended price of around £1,300 per sq ft for the flats, the gross development value of the scheme could be as much as £1.5bn.
Payment for the site is likely to be phased and the scheme is complicated by the need for remediation of some of the land, which was historically occupied by gas holders, making potential purchasers’ ability to deliver a key consideration for the vendor.
Barratt’s bid is considered favourable because of the company’s ability to deliver such a large scheme.
Barratt is already on site with the adjacent Nine Elms Point scheme, which it is delivering in joint venture with Sainsbury’s and L&Q. The housing association is also in talks to take on the private rented element of the neighbouring 40-42 Ponton Road scheme being developed by Bellway.
Rothschild and Savills are advising Royal Mail on the sale of the site; Knight Frank is acting for Barratt.
jack.sidders@estatesgazette.com
