Derwent London, the specialist central London property investment and regeneration REIT, has exchanged contracts for the acquisition of Central Cross, 18-30 Tottenham Court Road and 1-2 Stephen Street, London W1 for £146 million before costs.
Situated on a 2.1 acre (0.85 ha) site, the 251,000 sq ft freehold property comprises 216,000 sq ft of offices, 24,000 sq ft of ground floor retail space fronting onto Tottenham Court Road and an 11,000 sq ft cinema. The annual rental income is £8.1 million from 21 leases to 10 tenants with an average rent of £34 per sq ft and an average lease length of six years. The net initial yield is 5.5%. 33% of the rental income is secured beyond 2020 whilst 38% is subject to lease expiries or breaks before December 2011. Both the property’s office and retail elements offer significant opportunities for future refurbishment and improvement.
The three principal tenants, who account for nearly 90% of the rental income, are: FremantleMedia Group, one of the largest creators and producers of entertainment brands in the world and who are 90% owned by Bertelsmann AG; Ascent Media, a global media company; and
S Technologies, the owner of Skype.
The transaction involves the acquisition of the units in Merbrook Central Cross Property Unit Trust, a Jersey Property Unit Trust which holds the property. The units will be acquired from TCR 1 Limited and TCR 2 Limited, Guernsey registered companies. The acquisition will be financed from Derwent London’s existing bank facilities.
John Burns, Chief Executive, Derwent London, commented: “We are delighted to have acquired Central Cross which is an excellent addition to our central London portfolio. This acquisition provides strong income at economic rental levels, together with opportunities for active management, future refurbishment and improvement of the office space which Derwent specialises in. We will also be looking to enhance the retail units fronting Tottenham Court Road, which will benefit substantially from nearby infrastructure improvements including Crossrail. This transaction increases our holdings in the north of Oxford Street and Fitzrovia areas of W1 where we will now own 1.5 million sq ft.”
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