Derwent London (LON:DLN) has exchanged contracts on the sale of five freehold properties in Covent Garden, London to fellow FTSE 250 real estate group Capital & Counties (LON:CAPC) (Capco) for £68 million, before costs. The deal comes on the same day that Derwent launched an offering of £175 million of convertible bonds due 2016 with an option to increase the offering to up to £200 million. The company said the cash would be used to help fund its development pipeline and increase resources for future acquisition opportunities. The move also takes advantage of current favourable market conditions to diversify Derwent’s medium-term sources of finance. In an update on trading for the first three months of 2011, Derwent said it was seeing increased opportunities to add to its portfolio. It noted that the central London office market had continued to perform strongly and it was making “excellent progress” on lettings, especially at its landmark Angel Building, EC1.

Commenting on the first quarter, John Burns, Derwent’s chief executive, said: “The central London office market continues to perform strongly. We have made excellent progress on lettings, especially at the Angel Building, and we are advancing projects in the development pipeline. We are seeing increased opportunities to add to our portfolio and, underpinned by the capital raising we have announced today, will continue to pursue these. We remain confident of the prospects for our operating market and our group.”

The latest deal with Capco comprises 19a and 19-26 Floral Street, 26 and 27-32 King Street and 34 Rose Street. The adjacent properties, which front King Street and Floral Street, provide 71,900 sq ft of office, retail and residential accommodation around a central courtyard. There are 10 tenants, producing an annual rental income of £2.5 million. The acquisition reflects a net initial yield of 3.5% and equivalent yield of 4.9%. Derwent said the properties had shown good capital appreciation since they were acquired in 1999 but the company had taken the opportunity to recycle capital with the sale realising a value significantly above the December 2010 valuation.

Ian Hawksworth, the chief executive of Capco, said: “This acquisition is in line with our strategy to increase our ownership in Covent Garden through the acquisition of key properties and brings the value of our estate to over £700 million. This deal will allow us to continue to…

Unlock the rest of this Article in 15 seconds

or Unlock with your email

Already have an account?
Login here