Royal Mail to sell Central London building for £120m

Royal Mail Group has agreed to sell one of its main office buildings in Central London for £120m, as part of its efforts to trim costs and improve business flexibility. The freehold rights on the building at 35-50 Rathbone Place have been acquired by property developer Great Portland Estates.

It has also been leased back to Royal Mail Group for the period up to 2013.

Great Portland Estates said it will net £4.6m out of the deal, after which Royal Mail will hand over the building for re-development.

Royal Mail had submitted a planning application to redevelop the site itself, with just over 380,000 square feet of space to be converted into offices, residential and retail uses.

However, once the building purchase is completed, the new buyers intend to withdraw the proposals and submit new plans for redevelopment.

Under the deal, Royal Mail would share future profits from the redevelopment of the site, a project that is expected to benefit from the major rail transport link being built underneath Central London, called Crossrail.

Great Portland Estates chief executive Toby Courtauld said yesterday: “We are delighted to have added this important West End site to our medium term development pipeline. Its redevelopment will accelerate the regeneration of the East End of Oxford Street, one of London’s most exciting submarkets, which is set to benefit significantly from the opening of Crossrail.

“We look forward to working closely with both Royal Mail Group and Westminster City Council to maximise the benefit the site can bring to this part of the Capital.”

Rationalisation

Royal Mail Group did not immediately respond to a request for comment on the sale of its Rathbone Place building.

However, in its most recent annual report, for 2010-2011, the company said it has been taking a number of steps to preserve its financial flexibility, including property disposals.

Last year, Royal Mail Group made £131m from the sale and operating leaseback of mail centres and its property at London’s Old Street.

The Rathbone Place site has become one of the most sought-after properties in the UK this year, because of its proximity to major retail centres of Oxford Street and Tottenham Court Road.

Royal Mail plans to relocate management and administrative staff from the location to its Mount Pleasant site in the Clerkenwell area of East London by 2013. The move is part of the company’s Greater London rationalisation programme, which is expected to bring annual savings of £30m.