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Hines seeks £80m sale of prestigious Mayfair block

By James Buckley - Friday, June 29, 2012 12:20

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Hines is about to put one of the most sought after office developments in Mayfair up for sale for nearly £80m, CoStar News can reveal.

The US developer and investor has instructed Knight Frank to prepare 1 Grafton Street, W1, for sale for more than £77.8mm reflecting an initial yield of 4.09%, reflecting a capital value of £2,079 per sq ft overall. The building is expected to be formally brought to market next week.

The 37,422 sq ft office and retail asset, which was completed in 2010, has proved to be one of the most expensive buildings in Mayfair for occupiers since its launch nearly two years ago.

Dering Ltd. is paying the highest rent in the building, having agreed to occupy 2,373 sq ft on a ten year lease from 13 May 2011 at £107.50 per sq ft.

Last November, Tony Hayward’s company Genel Energy UK signed a ten year lease on the 4,732 sq ft fourth floor at £102.22.

The sale of One Grafton Street has long been anticipated, but was always thought to be dependant on the majority of the office space being let. Last month, private equity firm Levitan Investments selected the building for its first office, paying £97.22 for 4,893 sq ft on a ten year lease.

The building produces a total income of £3.24m per annum assuming a landlord rental top up on the remaining accommodation. This represents an average of £101.73 per sq ft on the office floors. The block also comprises four self-contained shops at ground and lower ground floor levels totalling 7,065 sq ft and one luxury residential apartment.

The anchor shop on the corner of Grafton Street is let to French designer Vanessa Bruno.

The West End Investment market remains robust with a shortage of good quality stock maintaining prime yields at record low levels, particularly for the rare Mayfair freehold commodity. The continued imbalance between supply and demand for assets continues to drive pricing as a range of investors compete for best in class opportunities in a market that provides a safe haven in current times of uncertainty.

The loss of stock to residential and the changing nature of purchasers buying with a view to holding assets long term, has resulted in a market with a diminishing pool of stock. The result has been further pressure on pricing, and a rebasing of long term yields in the West End.

jbuckley@costar.co.uk