Acquisitions case study

2009/10 Key priority: Profitable investments

Acquisitions case study

The global market turmoil which began in the second half of 2007, and continued into 2009, spread from the banking sector into the general economy and led to a significant recession in the UK. The lack of both liquidity and available credit drove a dramatic decrease in the volume of commercial property transactions in London and the UK as a whole. This contributed to a fall in UK commercial property values by over 40% from the peak of the market in June 2007.

It was against this backdrop that we approached shareholders to raise £166 million through a Rights Issue to provide additional resources to take advantage of these depressed prices. Our objective was to invest all of the proceeds within 18 months of the Rights Issue and ahead of this objective we had invested or committed 97% of the money by 31 December 2009 on a number of attractive opportunities.

“With property markets at a 30 year low, we have re-entered the market and invested the Group’s money in a number of acquisitions.”

Ben Chambers
Investment Director

Ben Chambers

Timing is everything when looking for value

Summary of 2009/10 acquisitions

Transaction type

Examples

Gross cost1
£m

Asset management plays

90 Queen Street, EC4

48.1

Austin Reed, 103/113 Regent Street, W1

14.2

Kingsland House, 122/124 Regent Street, W1

4.2

Redevelopment plays

Marcol House, 289/295 Regent Street, W1

and 23/24 Newman Street, W1

88.12

Major refurbishment plays

Jermyn Street Estate, W1 – leasehold extension

6.0

Total

£160.6m

Percentage of Rights Issue proceeds committed

97%

1 Our share of joint venture transactions. Gross costs include transaction costs.

2 Includes expected expenditure at date of acquisition.

90 Queen Street, EC4

90 Queen Street, EC4

Bought:
October 2009

Cost:
£48.1 million

Opportunity:
Prime city location, acquisition price below replacement cost. Multiple business plans to support high returns.

Marcol House/ Newman Street, W1

Marcol House/
Newman Street, W1

Bought:
November 2009

Cost and commitment:
£88.1 million

Opportunity:
Redevelopment of 127,700 sq ft of Grade A office space in a prime location.

Austin Reed, 103/113 Regent Street,W1

Austin Reed,103/113
Regent Street, W1

Bought:
December 2009

Cost:
£14.2 million (50% share)

Opportunity:
Superb retail location with occupational lease restructuring potential and longer term redevelopment possibilities.