Case Studies from North and North West London
If investments from the growth strategy, through repositioning, are deemed to be strong performers for the value strategy, then these assets may be transferred to the value element of the portfolio instead of being sold.
Year of purchase: March 2011 | Cost of purchase & re-development: £1.7m
Fair Value (March 2020): £3.3m
Current rent per year: Commercial £60,000 (15 year contract expiring 2033) / Residential £76,800
3 year average gross rental yield: 13.7% on capital investment
Background: Property bought at auction after the 2008 – 2009 credit crunch. Due to the high risk nature of the tenant (sole trader restauranteur) many investors shied away from the property. This was seen as an opportunity in that re-positioning part of the commercial element to residential could better meet local demand. After purchase negotiations were entered into with the commercial tenant (who occupied three floors of the property as a restaurant) for the surrender of their lease. The asset was repositioned to provide a smaller retail unit on the ground floor and five newly refurbished flats above.
Year of purchase: March 2011 | Cost of purchase & re-development: £1.3m
Fair Value (March 2020): £3.2m
Current rent per year: Commercial £12,000 / Residential £102,600
3 year average gross rental yield: 15.3% on capital investment
Background: Property bought as a single property, combining a shop and a warehouse behind it. Upon purchase, the warehouse was demolished and 6 houses were built in its place. The shop was renovated and 2 flats were built on top. The 2 flats were sold in 2013 for £394K (allocated cost £319K). The shop and 6 houses were kept in the portfolio as part of the value strategy due to the competitive rental yield produced.