Hines acquires office scheme in London's Covent Garden
International real estate firm Hines has secured the purchase of Grain House on Drury Lane in the heart of Covent Garden from corporate pension fund clients of Savills Investment Management.
The vacant property, which has been acquired on behalf of the Hines European Value Fund 2 (HEVF 2), has existing planning consent for a landmark repositioning which will combine four interlinked period buildings to deliver one consolidated modern office scheme, with street-level restaurant and retail amenities.
In a central London market where demand for high quality office space, particularly from the burgeoning technology, media and creative sectors, is outstripping supply, the 91,000-square-foot scheme designed by leading architects Barr Gazetas is expected to attract significant and early occupier interest.
The refurbishment programme will begin later this year and will incorporate the addition of a two-storey roof extension across the whole site, with flexible office floorplates ranging from 6,222 square feet to 15,791 square feet arranged around an atrium with character finishes including exposed concrete, steel and brickwork.
The building will also provide extensive external terracing and has been designed to achieve BREEAM ‘Excellent’, WELL Building’ accreditation as well as enhanced digital connectivity standards with ‘WiredScore’.
This is the third landmark acquisition Hines has secured in central London recently, following the purchase of two prime flagship retail led-mixed use properties on Oxford Street. The project also follows one of Hines’ global strategies in which the firm is currently investing in and developing highly functional creative office projects in the United States, Canada and Australia.
Furthermore, the purchase represents the fourth for the flagship HEVF 2, bringing the amount of equity allocated by the fund to EUR350 million. Hines recently announced the first closing of the fund, securing EUR637m of equity commitments in just three months after its launch, exceeding 50% of the final EUR1.25 billion fundraising target. When factoring leverage, HEVF 2 is expected to have total purchasing power approaching EUR3 billion, making it Hines’s largest closed-ended fund in Europe to date.
Paul White, HEVF 2 fund manager, says: “Following closely after the fund’s acquisition of our flagship retail and office scheme at 80 New Bond Street, we’re once again able to capitalise on the investment pricing discount that has opened up between prime London and prime continental European markets since 2016. Occupier market fundamentals have held very strong in the West End in particular. We have high conviction now that the certainty provided by Brexit and medium-term political stability makes London a timeless attractive location for our strategy. We’re very pleased to have secured another off-market investment here.”
Lucy Winterburn, Director of Investment at Savills Investment Management, says: “We are sad to say goodbye to an asset that has served the Fund so well both in terms of income and capital return over a number of years but is now ripe for redevelopment. The planning consent that has been secured offers the purchaser an opportunity to comprehensively regenerate the island site by combining four distinct buildings into one. The scheme should deliver classic Covent Garden office and retail space with plenty of character and style. Our client’s decision to sell is motivated by their conservative attitude to development risk on this scale. We will watch the development with interest and wish the Hines’ Team well in their development and leasing phase.”
Jake Walsh, Managing Director, Hines UK, says: “New office schemes of this scale and quality in central London are very rare, and with Covent Garden rapidly evolving into a dynamic commercial hub alongside its reputation as a premiere retail and leisure hot spot, this represents a fantastic investment for HEVF 2. We are very excited to get started on delivering such an exemplar project.”
Hines were represented by Colliers and Savills acted for Savills Investment Management.