Palace Capital PLC, the property investment company that focuses on commercial property outside London, announces that it has exchanged contracts to acquire the freehold of Boulton House, Chorlton Street, Manchester for a consideration of £10.95 million. This is potentially subject to a downward adjustment of up to £0.4 million for rent guarantees and other costs. Completion is set for 30 September 2016. The acquisition is being funded by a new debt facility from one of Palace Capital's existing lenders and credit committee approval has been received.
Boulton House is a 75,000 sq ft multi-let 1970s office building in the centre of Manchester in the popular Portland Street corridor. This sits within the Midtown district of Manchester within a few minutes' walk of Manchester Piccadilly Station. The building is in an area where considerable regeneration is underway and the Company view Boulton House as a medium term development opportunity.
The property is situated on a large corner site with a site area of approximately 26,000 sq ft and is currently producing a net income, after all deductions, of circa £625,000 per annum. This represents an initial net yield of 5.5% after deductions for empty rates, service charge and insurance shortfall on 13,500 sq ft which is currently vacant. There are currently leases with rent free periods in place which will increase the net rental income to approximately £775,000 per annum in the short term representing a yield of 6.9%. The Company will be instructing agents to let the 13,500 sq ft of empty space which will give the Company the opportunity to increase further the net income per annum and the net yield.
Bilfinger GVA represented Palace Capital and CBRE represented the vendors.
Neil Sinclair, the Chief Executive of Palace Capital, commented:
"This acquisition continues our strategy of purchasing assets in growth locations. We have been interested in Manchester for some time but up until now we were not able to secure a property which fulfilled our acquisitions criteria and rental return. We believe Boulton House will respond to our brand of asset management to maximise the value of this property. Initially this will be achieved by letting the vacant space whilst in the medium term there is considerable development potential."