The Xmas Gift That Keeps On Giving: Fancy Footwork In Birmingham

Just before Christmas, a present for all budding property investors: a masterclass in how to flip a property.

The lesson comes from Palace Capital, whose masterclass in property management focuses on the 63K SF Priory House, Gooch Street North, Birmingham.

In May 2019 Palace Capital negotiated a lease surrender on the 63K SF block. Forensic Archive Ltd agreed to surrender its lease which runs to December 2027 at a rent of £322K a year, and to pay effectively all rent due to expiry, totalling £2.85M.

In the end Palace received £2.875M, less seven months holding costs of £99K, therefore it has effectively disposed of its entire interest for £2.78M which is 25% above the £2.1M book value as at May 2019.

So far so good, and very profitable.

Now Palace has surrendered its short leasehold interest at Priory House to landlord The Gooch Estate for the nominal sum of £25K, saving the company approximately £170K a year in empty property rates, insurance and security.

Not only that, but removing 63K SF of vacant space from its portfolio has inflated its portfolio occupancy rate by 2%, which looks great.

“This is a strong example of our team’s asset management skills,” Palace Capital Chief Executive Neil Sinclair said.

“In May 2019 a significant sum was received from the tenant but the crucial element was then to dispose of the leasehold interest in this vacant building which was costing the company, on an annualised basis, approximately £170K largely in empty rates, insurance and security.

"Moreover, by removing 63K SF of non-core, vacant office space, our portfolio occupancy has increased from 84% to 86%, with the remainder mostly comprising tactical vacancies as we progress our value enhancing capital expenditure strategy.”

Palace Capital acquired the leasehold from Quintain in October 2013 as part of the Sequel Portfolio.