JR Capital banks on Leicester
Estates Gazette- www.estatesgazette.com | Deals | 01-11-2014
JR Capital Invests £4 million into Midlands Real Estate
Leicester purchase marks latest JR Capital move outside London
JR Capital has completed the purchase of a £3.7m mixed use site in Leicester, anchored by the main city centre branch of Natwest bank with adjoining retail space and flats, off a net initial yield of 6.25%.
The investment provides a security of income whilst offering strong prospects for valuation appreciation through primarily rental growth, thanks to the highly reversionary nature of the 20 residential apartments above the bank. The deal prices the residential component at a pro-rata value of £65 per square foot, which compares highly favourably with comparable units in Leicester city centre.
The Leicester investment is underpinned through the strong covenant of the Natwest bank lease with 10 more years to run, an upward only rent review in four years and overall accounts for three quarters of the site’s income. The ground floor retail unit is currently let to Taking Shape, which has 150 outlets in its home country of Australia and making rapid inroads into the UK market.
JR Capital has invested more than £100m of its client managed capital into UK real estate over the past 18 months – mostly from Middle East institutions or family estates – and primarily with a residential-led component in central London.
JR Capital has increasingly been identifying and investing both on the fringes of prime central London and into prime regional southern England city centres where it has identified projects with secure income streams and greater potential for yield compression through lease re-gearing or redevelopment. The Leicester investment meets JR Capital’s strategy for its investors.
John Collier-Wright, founder and chief executive of JR Capital said: “Through our Natwest Leicester property deal we are literally banking on the strong growth prospects for England’s leading regional cities, while as always identifying real estate opportunities where there is an existing security of income and prospects for us to create added value for the site and our clients. This deal has all the hallmarks of the dependable income to be expected from a bank lease but with the added colour of a significant residential reversionary uplift where we can unlock value over time.
The investment matches our key criteria of providing stable and long dated income which remains attractive in the current low interest rate environment that we foresee continuing notwithstanding any inevitable quarter or half point rise in the base rate after the election next summer. We continue to see value outside of London where yields have not yet come in to pre-2008 levels and where opportunities remain for experienced investors who can drive rental growth and add value.
Although we expect market activity to pause leading up to the general election in May 2015 we believe that over a 12 to 24 month horizon, market activity will remain resilient on the back of a strengthening UK economy – set this year for 3% growth in GDP – strong demand from UK institutional investors and the continued inflow of overseas capital into the UK still looking for the relative safe haven of UK real estate all underpinned by long term income. We continue to look outside of London for higher yielding income whilst focusing on central London for our residential development and trading activities.”
Allsop acted for purchaser, JR Capital. The vendor, Threadneedle Investments, was represented by Fawcett Mead.
To see the details in the Estates Gazette click here Estates Gazette 01-11-2014