Mixed Use Leisure Investment: Clarence Street, Kingston, UK

– Client property (UK PPP)
– Purchase (Mar 2011): £3.80m
– Sale Price (Oct 2019): £7.98m
– Total Net Profit: £6.43m
– Hold period: 8.50 years
– IRR: 13% p.a. (unlevered)

We acquired this mixed-use building totalling 31,100 ft2 in March 2011 on behalf of UK Pension Property Portfolio LP at an initial yield of 7%. Just over half of it was let to pub operator JD Wetherspoon. The upper floors were let on a long lease to a church and a small retail unit on the ground floor was let to a sole trader.

In 2011 we restructured the lease to JD Wetherspoon by incorporating fixed rental uplifts of 7.5% into the 2021 and 2026 rent reviews, instead of open market rent reviews. It was partly this which prompted JD Wetherspoon to offer to buy the property from us before the first rental uplift became effective. The price offered was at a yield of 3.4%, equating to £7.95 million and resulting in a capital gain of £3.9 million, a 97% increase on our purchase price of £4 million. The IRR over the period of investment was 13% per annum (ungeared).