Galliard buys three suburban offices from Brockton Capital for PDR

Housebuilder Galliard has bought three offices from Brockton Capital in a portfolio deal for £27m as it looks to take advantage of residential opportunities outside of London. The sites, in Chesham, Witney and Woodford Green, have a combined floorspace of 156,000 sq ft and could accommodate 350 to 400 units. While Galliard has traditionally focused on London, chief executive Stephen Conway says they have always been “pretty opportunistic”. Earlier this year it made its first moves into the Birmingham market. “We think London generally got overheated. We think the stamp duty increases made London a difficult place to play, so we are looking around the M25 in commuter distances and reasonable travelling times back into London, and two of these assets fitted the bill.” The intention is to convert the 34,000 sq ft Chiltern Court in Chesham and 68,000 sq ft Bourne Court in Woodford Green to residential using permitted development rights. Restrictions for the 54,000 sq ft site at Thorney Leys Park in Whitney however mean it is more likely to be sold on as is. Conway said Galliard will look at sales to the homeowner and institutional PRS markets. “The business at the moment is not getting any easier, because your building costs are rising, your capital values are flattening out, and there is lots of competition with the funds, particularly the PRS fund coming in. “We are trying to sell to the PRS fund where we can.” Brockton bought the units as part of its 8m sq ft multi-let industrial portfolio jv with Dunedin. Portfolio acquisitions from Hansteen and Columbus meant it also picked up secondary office assets in the portfolio surplus to requirements. Co-managing partner David Marks said these were the first three of 10 assets identified that could be sold for housing development. “It’s not the biggest transaction on the planet, but what is interesting is the larger trend this transaction embodies – former brownfield industrial or secondary office pitches now being more valuable as residential land for houses,” he said. Conway says that residential development though PDR remains attractive, despite many offices already being bought. He said: “With the lack of government interference and the lack of local authority powers to impart ridiculous conditions on residential schemes, from start to finish we can take an office building and have residential units of optimum size available for sale within 15 months. “What is happening now with PDR though, as the office rents jump, it probably will become less and less possible to develop these schemes.” Marks said Brockton has been on the other side of the PDR trend, picking up the remaining office assets  in towns performing well – Orpington in Kent, Newbury in Berkshire, and zone 3 and 4 locations in London. Brockton, despite doing prime residential development at Buckingham Gate, SW1, Oxford Street, W1, and Curzon Street, W1, did not intend to hold onto the sites, and Marks said it could not start up its own residential rent fund as time frames were too long and returns too low. “You are talking about much more longer term institutional money, with a lower cost of capital and lower risk profile that can afford to invest in PRS. Its never really worked as far as we have seen for the more opportunistic investors,” he said. Galliard has a pipeline of 7,000 homes under development through partnerships or on its own. To send feedback, e-mail alex.peace@egi.co.uk or tweet @egalexpeace or @estatesgazette