The Daily Telegraph gets quite excited this morning over a deal done by American private equity group Bain Capital to take 37 000 sq ft of space in Devonshire House for £90 sq ft. This is pretty much the same deal as the one reported by EG in July 2008 as being nearly done at £120 sq ft.
Presumably that deal fell apart after the collapse of Lehman Brothers last September. Maybe because everyone got very scared: but maybe because Lehman had an interest in the former headquarters of Land Securities?
In March 2007 Lehman's backed the purchase fronted by American Steven Witkoff and DCD partners to buy the 190 000 sq ft block by Green Park tube station from Land Securities at a 4% yield. How Land Securities must have laughed. Three months after becoming a REIT, and no longer subject to CGT, they sell a building owned since 1955 for more than a quarter of a billion.
The 15 year lease has 32 months' rent free says Guy Taylor of C&W who did the deal for Witkoff. So that drags the real rent down to well under £80, even further if you include the free refurbishment being thrown in. Even so, a good deal that will cheer up West End agents no end: especially perhaps the recently fledged H2SO who are trying to fill 100 000 sq ft for D2 in Savile Row.
Will Witkoff and DCD be cheered? A bit, perhaps. But not until the peak of the next cycle will anyone pay 4%. Meanwhile, it would be interesting to know if the administrators of Lehman still have an interest in Devonshire House: because right now the 2007 deal on the former home of the Dukes of Devonshire House is around £100m under water.