This private business deal to find new use for an empty industrial building is a great example of how real business intelligence and foresight doesn’t have to cost the earth and stands in stark contrast to Oldham Council which wants to expand low GVA, low-paid warehouse and logistics work by building expensive new warehouse parks when warehouses all over Oldham stand empty and underutilised.
Picton (LSE:PCTN), the income focused property investment company, has disposed of a non-core property in Drury Lane, Oldham, for £2.2 million, completing its business plan for the asset.
The warehouse was purchased in April 2010 for £0.4 million with an annual rent of £74,000 as part of the acquisition of Rugby REIT. During Picton’s ownership, it secured planning consent to change the use from industrial to leisure, completed a full refurbishment, acquired adjacent land for car parking and subsequently let the transformed asset to The Gym Group Limited until 2031 at an annual rent of £150,000.
The sale price reflects a net initial yield of 6.4% and a 10% premium to the 31 December 2016 external valuation. Net of the £0.8 million of costs incurred since acquisition, the asset was sold at an 80% profit.
Michael Morris, Chief Executive of Picton Capital Limited, commented: “This is a good example of how we used our knowledge of the local market and asset management expertise to double the income and capture a significant increase in value. The proceeds can be used, together with existing funds, to opportunistically acquire assets in larger lot sizes that we believe will generate attractive future returns.”