Commercial Property News

Land Securities today announced that it has agreed to forward sell its proposed 310,000 sq ft retail, office and residential development at Park House, 453/497 Oxford Street, London, W1 to the Qatari-based Barwa Real Estate Q.S.C. Construction of the scheme started on site in May 2010, with completion of the development due in November 2012.

Barwa will pay £250million for the site, all of the construction costs and a profit share on completion.  Of the £250million site price, £225million will be paid immediately and £25million will be paid on practical completion.

"The investment demonstrates our commitment to Europe as part of our growth strategy and signals our interest in strengthening our portfolio interests in London," Barwa Chairman and Managing Director Ghanim bin Saad Al Saad said.

Land Securities will act as development manager responsible for delivery of the project with construction works paid for by Barwa.

A profit share will be paid by Barwa within 12 months of practical completion.  Based on current expectations as to office and retail rental values this profit share is estimated to be c£33million and is capped at £50million. The development, comprising a total of 330,000 square feet, includes 163,000 square feet for offices, 88,000 square feet of retail space and 70,000 square feet of residential accommodation.

Barwa, which is currently in the process of taking over Qatar Real Estate Investment Co QREC.QA, is 45% owned by Qatari Diar, the property unit of country's sovereign wealth fund, the Qatar Investment Authority. Barwa was formed 5 years ago and it's ownership had been focussed first at home and later in the Middle East, but it bought 4 investment properties in Paris as it's first foray into Europe and has now moved on to London. It acts as both developer and property manager, and will manage the Park House scheme itself.

Commenting on the transaction, Robert Noel, Managing Director of Land Securities' London Portfolio, said: "Park House is the largest speculative development in Mayfair for a generation and this sale enables us to realise the majority of our profit ahead of schedule, with significantly reduced risk and with no capital employed.  We will recycle the capital to invest into our growing speculative development pipeline targeting the further return opportunities offered to our shareholders through early delivery into a forecast supply constrained market."

Land Securities acted directly and CB Richard Ellis advised Barwa and PCP Capital Partners in the transaction.

News of Barwa's acquisition of Park House comes just days after global real estate adviser Jones Lang LaSalle said Qatar was likely to be the largest source of capital to global real estate markets in 2010.

Qatar Holding, another unit of the Qatar wealth fund last month acquired  Harrods in a deal reported to be worth around £1.5 billion.