French private investor Eurazeo Patrimoine and Arax Properties have reached an agreement with Derwent London to acquire the Johnson Estate office complex in the UK capital, consisting of four adjacent buildings for a headline price of £170 mln (€190 mln).
The buildings are located in the Farringdon district, an up-and-coming area for office space especially appealing to tenants from the TMT sector. It is only a five-minute walk from Farringdon over- and underground train station which will soon, with the inauguration of the Elizabeth Line, be part of London’s Crossrail network.
Th estate provides 194,000 sq ft (18,000 m2) of space and is 94%-leased. It represents the second investment of the partnership set up with Arax Properties in March 2019 following the acquisition of Euston House, a multi-let office building totaling 119,000 sq ft located in Central London.
The partners said that they will actively manage and invest in the asset to fully capture the estate’s rental potential.
Renaud Haberkorn, managing partner of Eurazeo, head of Eurazeo Patrimoine, said: ‘This second acquisition in London reflects our capacity to source opportunities in complex environments and our strong convictions in the London real estate market which we believe offers today very interesting value opportunities. The Johnson Estate features significant upside potential associated with a safety net arising from day-1 income generation and we will endeavor to capture rental reversion in the coming years for this well connected property which is ideally located for companies from the fast-growing TMT sector.’
Derwent London said that it bought the office and retail complex in 2000 for £29 mln, and in 2006 the group completed a significant refurbishment designed by architects AHMM which increased the lettable area by 53%.
The total rent passing from the multi-let buildings is £7.3 mln per annum with approximately 40% of the income expiring in 2021.
The sale price represents a net initial yield of 4.1% on the passing rent, which will fall to 2.5% allowing for 2021 lease expiries. The disposal price, net of incentives, is 4% below the June 2020 book value before costs.
Paul Williams, chief executive of Derwent London, said: ‘The refurbishment of the Johnson Building was one of our first generation of schemes and the sale continues our strategy of disposing of mature assets. The proceeds will be reinvested into new developments with superior growth prospects, such as 19-35 Baker Street W1 which is scheduled to start on site in 2021.’
