Native Land ahead in bid for iconic Covent Garden offices
Native Land, the Quatari supported residential property developer, has become the preferred bidder of a £165m office block in London’s West End, having seen off stiff competition from CapCo and British Land.
Heads of terms are to be finalised in the next few days, with the deal representing a net yield of over 5.5% for the previous owners, a consortium between US property investor Steven Witkoff and wealth fund managers DCD.
It is thought that the property’s 195,000 sq ft of office space - at 90 Long Acre in Covent Garden - will be converted to residential usage, as international demand for residential property in the relatively safe London market skyrockets.
The bidders are thought to have already applied for planning permission for the conversion, which will see a series of premium flats installed following the conclusion of the property’s office lease in five years’ time.
Native Land sold a 45% stake in the company to a Qatari group, including an Islamic bank, earlier this year, and is thought to be pursuing this redevelopment in the capital’s commercial heartland at the group’s behest.
The investment would cap off a watershed year for Native Land, which has invested over £175m in property since 2009 with 1.1m sq ft of further developments earmarked, earning them a place at the top table of European investors.
The investment was made possible by £120m of debt, of which £108 was provided by the Lehman Brothers and scrutinised as part of their pre-recession property drive.
Capital & Counties (CapCo) and British Land fund manager Wainbridge also hoped to seal the contract, with all parties thought to be attracted by the “optionality” of the purchase terms.
CapCo are thought to have been considering a mixed-use retail and residential conversion to sit alongside its extensive Covent Garden portfolio.
The news comes despite calls from Westminster Council’s deputy leader, Robert Davis, who believes curbs should be put on the levels of office to residential conversions. His stance is contrary to the main government line, which insists such projects will act as a catalyst for economic growth.
Davis was quoted in Property Week as saying: “We are concerned that there has been too much conversion into residential, resulting in a loss to the West End”.
“If all the existing [office to residential] planning permissions are implemented, it will wipe out all the gains we have made in office space over the last 20 years. We want people to live in Westminster, but we also want people to work here.”
Despite the recent proposals from Communities and Local Government secretary Eric Pickles for a relaxation in the laws surrounding office to residential conversions, Davis intends to initiate consultation with property stakeholders from January 2013.
Figures published in February suggest that between 2001 and 2010, 3.1m sq ft of office space has been converted into residential property in the borough of Westminster.