Hines has completed its circa £60m acquisition of the long leasehold over Grain House on Drury Lane, WC2, from Savills Investment Management on behalf of the Diageo Pension Fund.
The vacant property, which is bounded by Drury Lane, Dryden Street, Arne Street and Shelton Street, has planning approval to combine the existing four buildings on the site to create a circa 90,000 sq ft mixed-use scheme.
Behind a retained facade, approximately 70,000 sq ft of office space and 20,000 sq ft of retail is potentially deliverable. The scheme has been designed by architect Barr Gazetas.
The refurbishment of the site will begin later this year, Hines said.
The purchase is the fourth made by Hines for its Hines European Value Fund 2, bringing the amount deployed by the fund to €350m.
Hines recently announced the first closing of the fund, after securing €637m of equity commitments three months after its launch. The final target for the closed-ended fund is €1.25bn.
Paul White, HEVF 2 fund manager, said: “Following closely after the fund’s acquisition of our flagship retail and office scheme at 80 New Bond Street, we’re once again able to capitalise on the investment pricing discount that has opened up between prime London and prime continental European markets since 2016.
“Occupier market fundamentals have held very strong in the West End in particular. We have high conviction now that the certainty provided by Brexit and medium-term political stability makes London a timeless, attractive location for our strategy. We’re very pleased to have secured another off-market investment here.”
Lucy Winterburn, director of investment at Savills Investment Management, added: “We are sad to say goodbye to an asset that has served the fund so well both in terms of income and capital return over a number of years but is now ripe for redevelopment.
“Our client’s decision to sell is motivated by their conservative attitude to development risk on this scale.”
Hines were represented by Colliers and Savills acted for Savills Investment Management.
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