August 2006

Draco ends first year on high

Private investment group Draco has crowned its first full year in business by closing £80m of deals.

The transactions, which all completed in the first half of 2006, include the acquisitions of the London headquarters of advertising agency McCann Erickson for £28.5m; a 55,000 sq ft (5,110 sq m) vacant office building on Solent Business Park in Southampton for £9.2m; and a 35,000 sq ft (3,252 sq m) multi-tenanted retail property in Manchester for £20.5m.

It has also sold a 31,300 sq ft (2,908 sq m) office building at 55 Newman Street to the north of London's Oxford Street to Insight Investment for £23m - £4.5m more than it paid for the building in August last year.

Rob Greacen, managing director of Draco, which is backed by Irish stockbroker Davy, said: "We bought 55 Newman Street expecting to see a rapid rise in value driven by rental growth but were surprised by how quickly this came through combined with rapid yield compression."
"We were happy to sell it on because we can redeploy the funds into other projects we have in the area and we expect that market to continue to perform well over the next few years."

The McCann Erickson headquarters is let until 2020 at £28/sq ft (£301.39/sq m), reflecting a net initial yield of 5.1%.

The Manchester retail property is let to Habitat, Aquascutum and David Robinson and the purchase price reflects a net initial yield of 5.25%. Newman Street is let to advertising group FCB London on a 10-year lease at £1.05m a year, representing a net initial yield of around 4.3%.