Great Portland sells Rathbone Square, proposes £110m return to shareholders

Great Portland Estates has sold the freehold of Rathbone Square, London W1, to Rathbone Place Jersey Limited £435m, reflecting a net initial yield to the buyer of 4.25%.

The sale is expected to crystallise a whole-life capital return for GPE from the entire development project of approximately £110m, which is proposed to be returned to shareholders by way of a special dividend.

Great Portland said the sale of the property and the proposed special dividend reflect its ongoing commitment to both capital allocation and balance sheet discipline, whilst also ensuring that the group retains the significant financial flexibility created over recent years as it looks ahead to a continued period of market uncertainty.

The 419,700 sq. ft. mixed used development is currently under construction with phased practical completion expected from late March 2017. The 242,800 sq. ft. of office space is pre-let to Facebook on 15 year leases at an initial annual rent of £17.8m.

Meanwhile, 13,900 sq. ft. of the 25,200 sq. ft. of retail space is under offer and 139 of the 142 private residential units have already been exchanged for sale on 999 year leases. The estimated rental value of the entire scheme was £19.7m at the end of September last year.

Following this transaction and the sale of the remaining residential units, total receipts from Rathbone Square are expected to be more than £655m.

Chief executive Toby Courtauld said: "Rathbone Square is our largest ever development scheme and this sale continues our successful strategy of recycling capital out of assets where we have created significant value. Having purchased the site in late 2011, obtained an attractive planning permission and commenced construction in early 2014, we pre-sold the vast majority of the residential units in summer 2014 and secured one of the largest ever lettings in the West End a year later. This sale is expected to crystallise a whole life capital return of 19.9% and an annualised unlevered internal rate of return of 12.1%.”