Derwent London has exchanged contracts to sell Johnson Estate in London, an office complex comprising 4 adjacent buildings, including The Johnson Building, to Eurazeo Patrimoine, the real assets division of Eurazeo.
Derwent London said the headline price is £170m before rental top-ups of £2.4m for incentives and vacant space.
”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. This crystallises an IRR of 10% pa to the Group since acquisition,” stated in the statement.
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 4-minute walk from the Farringdon Over- and Underground train station which will soon, with the inauguration of the Elizabeth Line, be part of London’s Crossrail network.
The 194,000 sq ft (18,000 sqm) London office and retail complex was acquired in 2000 for £29m, 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 £7.3m pa with approximately 40% of the income expiring in 2021.
“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,” said Paul Williams, Chief Executive of Derwent London.
“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,” said Renaud Haberkorn, Managing Partner of Eurazeo, Head of Eurazeo Patrimoine.
