Royal Mail has sold the freehold rights for one of its main office buildings in West End,London, to Great Portland Estates (GPE), a London-based property investment and development
company, for a sum of £120 million to cut cost and streamline business operations.In addition, the entire site was leased back to Royal Mail Group for the period up to 2013, withGPE receiving a total net rent of £4.6 million. After the leasing period expires, Royal Mail willgive it back to GPE to start “a major mixed-use redevelopment”.
In May 2011, Royal Mail had submitted its own planning application for an area of approximately35,662 sqm to convert it into offices while also considering residential, retail and substantialpublic realm improvements.
After the acquisition of the building is finalised, however, GPE plans to withdraw Royal Mail’scurrent application to start working on a new proposal for the site. It expects to submit a newapplication during 2012.
Should GPE redevelop the site via an overage arrangement, Royal Mail would share future profitsafter GPE has received a priority profit equating to a compounding 12% return on all capitalexpended. If that is the case, the next 1.5% (or £10 million if higher) of return will be paid toRoyal Mail, with any surplus thereafter split 80:20 in GPE’s favour.
