Real estate investment trust Picton has completed a freehold takeover of a mixed-use space in Hammersmith for £13.7m.
Charlotte Terrace, on Hammersmith Road, includes four adjoining buildings, with a total of 28,500 sq ft of office space and 4,400q ft of retail space.
The office space was redeveloped in 1990 behind a Grade II listed period façade, which means there are no business rates payable on void units.
Michael Morriss, Picton chief executive, said the area was set to be “significantly enhanced” over the next few years after the completion of a £1bn redevelopment of Olympia.
Plans for the area include the creation of a new creative district, featuring a new theatre and entertainment venue.
“We have taken advantage of our diversified approach to invest in a mixed-use asset where we believe we can unlock significant income and value with our occupier focused asset management approach,” Morris added.
The current annual rental income is £0.5m, the equivalent of £34 per sq ft, Picton said in an update to the London Stock Exchange on Monday.
It was anticipated this would surpass £1.1m when the site’s remaining units were leased.
Picton promised an office upgrade and to introduce flexible lease offering, SwiftSpace, in order to woo future occupiers.
Seven occupiers are using the site’s office space while two businesses are occupying the retail space.
The purchase price was reflective of a net initial yield of 3.3 per cent, rising to over 8 per cent once fully let and reflecting a low capital value of £417 per sq ft, which is below its estimated replacement cost, Picton added.
While shares had outperformed the sector by 8 per cent on the year to date, they were down 7.5 per cent on an absolute basis, Stifel analyst, Sam King, commented.
King added: “They currently trade at a 20 per cent discount to NTA and offer a 3.6 per cent dividend yield. We view the recent share price weakness as a good buying opportunity, with the shares down c.9 per cent since the beginning of the month.
“This was largely driven by comments from Amazon in relation to over expansion, which significantly impacted Industrial REIT share prices, with Segro now down c.23 per cent for the year, which given its weighting in the index has led to the sector significantly underperforming the All Share.”
Picton shares were down slightly by 0.32 per cent on Monday afternoon.