January 2020
One of the most satisfying asset management initiatives completed in 2019 was at an office building in Feltham, West London. The building lies very close to Heathrow and is occupied by HM Government as a court and tribunal facility.
We acquired the building in 2012 for £6.5 million and a yield of 9.5%, with five years remaining on the lease. What attracted us to purchase in 2012 was this low rent, good location and potential for residential.
Our business plan was to regear the lease and so as the lease expiry approached in 2017 we extended the lease for a further 5 years and increased the rent by 10%. Two years later, we increased the rent again by a further 5%, but importantly extended the lease for a second time, this time adding 10 years, providing us with an unexpired term of 13 years. We also included index linked uplifts at all the rent reviews.
We've long held that buying assets in this lot size range is not only good for liquidity but their full potential often gets overlooked by bigger institutions. We acquired this property off one of the big institutions who wanted out of small lot sizes, now that we've doubled the value of the asset, ironically we've created exactly the kind of asset the larger funds are hotly contesting for.
