The West End of London Property Unit Trust ('WELPUT'), managed by Schroders and advised by Grafton Advisors, has exchanged contracts to sell the freehold interest in Stratton House, 5 Stratton Street, London W1, to a private European investor for around £166 million.
The sale price reflects a net initial yield of 4.2%, a net equivalent yield of 4.6% and a sales price of £1,670 per ft² excluding the pre-sold apartment.
WELPUT acquired the freehold interest in Stratton House in 2005. The strategy post purchase was to carry out an extensive refurbishment of the building and reposition it from a tired secondary asset to a prime grade-A office-based mixed-use building.
The work was completed in 2009. A specially created penthouse flat was sold at a record price in 2010. The offices were let at an average rent of £84 per ft² across a diverse spread of strong covenant tenants. The top rent achieved was £106 per ft².
The Grade II landmark building, built in 1929, is opposite Green Park and the Ritz Hotel on Piccadilly, and next to Devonshire House in the heart of the West End. It provides a total of 108,000 ft² of prime mixed-use accommodation over basement, ground and seven upper floors and residential on the eighth floor and is currently let to 12 tenants.
Nigel Kempner of Grafton Advisors and Head of Fund Management at Quintain Group plc, said: "We have completed the repositioning of this property which, when acquired in 2005, was tired and in need of comprehensive refurbishment. Our team has created best in class accommodation enabling us to sell the new penthouse in early 2010 at a record Mayfair price and lease the offices at rents up to £106 per ft².
"We wanted to take advantage of the strong international investment market for prime West End investments and have sold at an attractive price, following good competition from all over the world, to a private European investor. We now look forward to using our expertise to reinvest in opportunities to use again our specialist management and development skills."
William Hill, Head of Property at Schroders, added: "Over the last three years Stratton House has been a significant driver of the performance of the Trust's property portfolio which, at 15.7% per annum, has comfortably beaten the 12.7% per annum of the IPD Quarterly West End and Mid Town Office Index.
"We expect investor demand for 'Super-Prime' West End investments to continue and will be looking to reinvest capital in buildings which can be repositioned towards that market."
DTZ and Strutt & Parker advised WELPUT on the sale, and Savills acted on behalf of the purchaser.
Source: FTI Consulting