Great Portland enters development arrangement with Eurohypo

Central London investor-developer Great Portland Estates has announced the acquisition of two developments in the West End of London and the formation of a profit share and debt structuring arrangement with Eurohypo to develop the properties. GPE has acquired the SPV entities which own Marcol House, 289-295 Regent Street and 23/24 Newman Street, W1 from Istithmar World for £10 mln (EUR 11 mln) upfront and a share of potential future profits.

Marcol House is a Grade II listed, office and retail development site with planning consent for 10,300 m2t, located on the corner of Regent Street and Margaret Street, 150 metres to the north of Oxford Circus. Newman Street is an existing office building of 2,300 m² with planning consent for conversion to 22 residential apartments (16 for private sale and six affordable units) and provides the residential planning requirements for the Marcol House site.

Simultaneously with the acquisition, GPE has agreed with Eurohypo to restructure the existing debt facility on Marcol House in exchange for a profit share arrangement in the developments. Under this arrangement, GPE will commence the development of the two properties early in 2010, providing all of the funding for the development costs, some of which come from the new debt facility, which together are estimated at £78.1 mln. GPE will act as development manager and receive a priority return of up to £26.3 mln. The next £51 mln of profit will be split equally between GPE and Eurohypo whilst the excess over a combined property valuation for the two schemes of £165 mln will be shared 50:50 by GPE and Istithmar.

Marcol House is scheduled to complete by the summer 2012, with Newman Street 12 months earlier. Both buildings have existing tenants, some of whom will vacate prior to the start of the development. The properties provide an initial income of £405,750 per annum.