Derwent London has exchanged contracts to acquire two properties in London’s Knowledge Quarter, totalling 182,100ft² for €253.2m (£214.6m) inclusive of costs.
The largest property being acquired is 250 Euston Road NW1 which totals 165,900ft² and sits on a 1.6 acre site. This freehold office building is let in its entirety to University College London Hospital on a lease expiring in 2039. The passing rent is €5.5m (£4.7m) and is subject to 2.5% fixed annual increases compounded every five years. The next uplift is due in April 2024 when there is also a tenant break with breaks every 5 years thereafter. In the longer term, there is an opportunity to create a larger scheme on this potential Life Science site. The total consideration is €224m (£189.9m) inclusive of costs, and the initial yield is 2.5% reflecting the low passing rent.
The second property acquisition is 171-174 Tottenham Court Road W1 which lies opposite our Network Building. The purchase is a freehold office and retail building totalling 16,200ft² and is multi-let, producing an income of €0.7m (£0.6m). This property, together with adjoining UCLH and UCL interests, forms an important strategic holding in a larger block with longer-term development potential. The total consideration is €29.1m (£24.7m) inclusive of costs providing a net initial yield of 2.6%.
In addition, the company have signed a deal with Lazari Investments to establish a new 50:50 joint venture which is expected to acquire three properties already owned by them in Baker Street W1 totalling 122,200ft². Derwent London’s initial consideration for the joint venture will be €76m (£64.4m) inclusive of costs and our share of passing rent will initially be €3m (£2.6m). The joint venture adds an exciting development opportunity opposite our 19-35 Baker Street project due to start later in 2021.
Paul Williams, Chief Executive of Derwent London, 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.”
