Knight Frank to sell two power station freeholds for GBP90 million

Knight Frank, a global property adviser, has been appointed to sell two power station freeholds, Rye House and Damhead Creek, located in Hertfordshire and Kent respectively, for a combined price of over GBP90 million.

Both properties offer a rare opportunity to acquire freehold infrastructure sites containing Combined Cycle Gas Turbine (CCGT) power stations which provide a secure, inflation-linked income stream. Damhead Creek is a 17.58 acre site located in Hoo, within the strategic Kent and Medway growth corridor, 35 miles south east of London, whilst Rye House is a 19.21 acre site situated in Hoddesdon, 18 miles north of London.

CCGTs are a highly efficient means of generating energy that combine a gas-fired turbine with a steam turbine. They are essential large-scale power generation assets providing grid services via the capacity market and support the UK’s transition to a greater reliance on renewable energy.

Both sites are to be leased back to VPI Power Limited on a 15-year lease and 12-year lease respectively, with tenant options to extend. The assets both provide opportunities for annual rent reviews linked to CPI as well as potential for alternative energy and distribution uses with on-site access to the National Electricity Grid and the National Gas Transmission Network, subject to planning.

The UK infrastructure market is gaining interest from investors who are increasingly looking to diversify their asset portfolios and are keen to gain exposure to property which will help the UK reach its net zero target by 2050. The prospect of long-term fixed income, strong risk-adjusted returns, combined with regulated and government support and resilient and anticyclical properties is only ensuring the area continues to gain momentum. European infrastructure investment volumes reached GBP125 billion in 2019 whilst UK transaction volumes are also on the rise, estimated to be around GBP44 billion, driven by renewable energy and social infrastructure sectors.

Charles Fletcher, Specialist Property Investment at Knight Frank, commented: “These power stations represent a rare opportunity to acquire leased infrastructure assets with attractive lot sizes and the potential for high value future alternative uses. We are seeing increasing investor interest in the infrastructure sector which we expect to increase further given the growth of urban populations and the world transitioning to a low carbon economy.”

Knight Frank expects to see further interest in the UK’s infrastructure sector given the UK’s net-zero target, which will require a quadrupling of renewable generation and doubling of the annual investment in the power sector, in addition to large investments in heat networks, waste management and electric vehicle charging points. The UK Government has also pledged to support infrastructure investments, committing GBP600 billion in the next five years, to support and regenerate the economy.

Knight Frank’s Specialist Investment team, which has a decade-long track record of providing market-leading advice on both acquisitions and disposals, advises on a range of operational real estate assets and has transacted on over GBP1.1 billion of assets over the last 12 months including other energy & waste assets.

Knight Frank is seeking combined offers in excess of GBP94,950,000.