UK REIT sells central London site for £250m

In an unexpected move, Land Securities has sold a speculative 310,000-sq-ft mixed-use development site on Oxford Street to Qatar’s listed development company, Barwa. Prime London assets, including development sites, remain in strong demand.

Land Securities has sold one of the largest speculative developments on London’s Oxford Street for £250 million (€299.1 million; $370.3 million).

The UK REIT said in a statement today that the Qatar development company, Barwa Real Estate, had agreed to buy the partially-completed site at Park House as well as pay for all construction costs and take part in a profit-share with Land Securities on the project’s completion.

Barwa, which is 45 percent owned by Qatari Diar, the property arm of Qatar’s sovereign wealth fund, will make an immediate payment of £225 million for the 310,000-square-foot mixed-use project and pay £25 million when the development is completed in November 2012.

We believe this transaction shows that demand for prime [London] property remains strong.

JPMorgan Cazenove’s Harm Meijer

Land Securities said it would continue to act as development manager of the project, with construction works paid for by Barwa. After the project has been delivered, Barwa will share profits of up to £50 million with Land Securities. The REIT said at current office and retail rental values the profit share was estimated to be worth £33 million.

Robert Noel, managing director of Land Securities’ London portfolio, said the sale allowed the firm to “realise the majority of our profit ahead of schedule, with significantly reduced risk and with no capital employed”. The equity would be reinvested in the firm’s “growing speculative development pipeline”.

Real estate analysts in London had not expected the news, but said the sale came on the back of rising valuations for prime London properties and “crystalize[d] a profit on the site with minimum risk. “We believe this transaction shows that demand for prime property remains strong,” added JPMorgan Cazenove’s Harm Meijer.

Last week, AEW Europe and Tristan Capital Partners sold an office asset in southwest London for £58 million (€60 million; $73 million) less than a year after originally acquiring the property for £40 million.

Wimbledon Bridge House is a development that the co-managers acquired in September. It includes 168,000-square feet of office accommodation, four retail units and a car park with 300 spaces.
The building is currently fully leased to six office tenants and four retailers. The price represents a net initial yield of 7.1 percent.