Derwent London disposes of under-construction Copyright Building
Derwent London announced on Monday that it exchanged contracts on the sale of its long leasehold interest in the Copyright Building, 30 Berners Street W1 to Union Investment Real Estate.
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The FTSE 250 company said consideration was £165.0m, or £148.7m net of top-ups relating to rent free periods and a rent guarantee on the vacant retail space.
It said the building, which is currently under construction, would comprise 87,150 sq ft offices let to Capita Business Services for £7.4m per annum and three retail units totalling 20,000 sq ft which were currently vacant.
The estimated rental value of the three retail units was £960,000.
Derwent said there was a ground rent payable equivalent to 12.5% of gross rents.
Completion of the sale was expected in the fourth quarter, after the building had been completed.
The group acquired a 68-year leasehold interest in 25-27 and 29-33 Berners Street W1 in late 2012 for £36.5m.
It subsequently regeared its head lease with the freeholder - the Berners-Allsop Estate - incorporating a third property, extending the lease to 127 years and enabling the property's redevelopment.
The disposal price represented a 4.2% initial yield to the purchaser and a significant premium to book value, which the board said “crystallised” the development profit.
“The disposal of the Copyright Building to this established international investor endorses the strength of the central London office investment market,” said CEO John Burns.
“Derwent London has over a third of its portfolio in Fitzrovia including its major 80 Charlotte Street development where we recently pre-let 42% of the office space.
“This transaction takes net sale proceeds to £670m over the past twelve months and, on average, 8% above the previous December book values.”
Martin Schellein, head of investment management in Europe at Union Investment, said Fitzrovia was currently “one of the most dynamic” areas of London's West End.
“Once completed, the Copyright Building will be one of the district's highest-value office complexes and is let on a long-term basis to an office tenant with an excellent credit rating.
“As a result, this core investment is in line with the defensive strategy for expanding our portfolio in the UK and demonstrates that we are still pursuing attractive investment opportunities in the current market cycle,” Schellein added.