LaSalle Investment Management has agreed £120m in forward-funding for the regeneration at Milburngate in Durham.
The £160m Northern Quarter scheme on the banks of the River Wear spans six acres, with 450,000 sq ft of mixed-use development.
Joint ventures partners Durham-based Arlington Real Estate and the Richardson family are developing the former passport office building, which will include around 230,000 sq ft of offices, 153 build-to-rent flats, 60,000 sq ft of retail and leisure space and a 92-bedroom hotel.
LaSalle will forward-fund the first phase of the scheme, comprising more than 53,000 sq ft of offices, the BTR flats, the retail and leisure and the hotel.
Retail and leisure space has been prelet to boutique cinema Everyman, restaurant brands Marston’s Pitcher & Piano, Bar + Block and Miller & Carter.
The developers will select the contractor for the build in the coming weeks, with construction to begin shortly afterwards and phase one completion expected in early 2021.
Ben Holmes, on behalf of the Richardson family, said: “This is one of the biggest investment deals in the North East of England in the past 10 years. It will have a significant positive impact on Durham City and the wider region and demonstrates investor appetite for this type of project.
“Securing this funding from LaSalle, which will ensure the delivery of the first phase of this ambitious project, also demonstrates the confidence this respected financial institution has in the North East and the benefits of regenerating this unique part of this historic city.”
Allan Cook, managing director of Arlington Real Estate, said: “It is a testament to both the vision of the team and quality of the scheme that we have secured LaSalle as our funding partner and I am sure delivery of phase one will set a new benchmark, not only for Durham City but also for the region.”
Robin James, head of long-income transactions at LaSalle IM, said: “This mixed-use commercial and residential development will create job opportunities in Durham and is an excellent example of where our client’s capital can be used to deliver major city centre regeneration schemes.”
Arlington and the Richardson family acquired Carillion’s jv share at Milburngate in December 2017 , as the construction giant made divestments from its commercial property development portfolio. The duo picked up the site with a resolution to grant planning and demolition in process.
Durham City Council granted planning permission for the first phase of the scheme, which makes up 70% of the project, in March 2018. In December revised plans saw the office allocation increased as the number of apartments fell from 291. This followed downsizing from original plans for 441 homes to include the hotel. The developers said the changes reflected Durham’s growing demand for grade-A office space.
Arlington and the Richardsons are also developing Freemans Reach in Durham city centre, and Arlington is delivering the 60-acre DurhamGate regeneration in the south of the city.
Lambert Smith Hampton advised LaSalle Investment Management.
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