Derwent London has bought two properties in London’s Knowledge Quarter and formed a joint venture with Lazari Investments.
The London-based developer’s half-year results, published today, showed a slight uplift in its portfolio value to £5.4bn and 93% of rent collected.
Derwent has paid £189.9m for 250 Euston Road, NW1, which spans 165,900 sq ft on a 1.6-acre site. The building is let to University College London Hospital until 2039 for a passing rent of £4.7m, or £28 per sq ft. Derwent said the low rent was offset by “an opportunity to create a larger scheme on this potential life science site”.
It has also bought 171-174 Tottenham Court Road, W1, for £24.7m. The 16,200 sq ft office and retail building is multi-let, generating £600,000 in rent, a net initial yield of 2.6%. Again, Derwent said it offered “considerable opportunities for asset management and longer-term development opportunities”.
The developer has also signed a detailed memorandum of understanding with Lazari Investments to establish a 50:50 joint venture. The jv is expected to take on three leasehold properties already owned by Lazari in Baker Street, W1, totalling 122,200 sq ft.
Derwent London’s initial consideration for the jv will be £64.4m inclusive of costs and its share of passing rent will initially be £2.6m. But again, it is the potential for development that makes sense of the deal. “The joint venture adds an exciting development opportunity opposite our 19-35 Baker Street project due to start later in 2021,” Derwent said.
Together with a fourth property owned by the Portman Estate, the buildings form a one-acre island site “capable of significant redevelopment”, which Derwent believes could be up to 240,000 sq ft. If planning permission is secured, along with a regear of the headlease, Derwent will invest an additional £7.25m. It wants to start work on site at the end of 2024.
Derwent has valued its share of the Lazari jv at £50m, but expects this to “rise significantly upon a successful planning and headlease regearing outcome”.
Derwent chief executive Paul Williams said: “These are exciting acquisitions in a strong market. We are further investing in central London’s Knowledge Quarter with potential life science opportunities and extending our development pipeline.
“We are confident that combining our skills with our strong long-term relationships with Lazari Investments, UCLH and the Portman Estate will ensure these growing West End areas continue to benefit from the provision of best-in-class, high-quality and sustainable business accommodation.”
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