Investment manager Cheyne Capital, in partnership with Stanhope, is in talks to buy a £375M office development on London’s South Bank from Landsec.
Courtesy of Land Securities
Landsec CEO Mark Allan
Cheyne will acquire the 230K SF Red Lion Court project in Southwark for about £45M, Bloomberg reported. The scheme received planning consent in 2023.
For Cheyne, it continues a huge push into London development financing over the past 18 months.
For Landsec, the sale is part of a plan to divest £2B of office assets and reinvest the proceeds in its build-to-rent development programme. Landsec earlier this year announced plans to build 6,300 rental homes at three of its large city centre regeneration projects, part of CEO Mark Allan’s push to reposition the UK’s second-largest listed company into areas where income growth could be higher and risk lower.
The REIT has dabbled in residential before. A decade ago, it planned to convert the Portland House office tower in Victoria to posh flats for sale before changing its mind and refurbishing the offices. The 300K SF scheme is set to complete later this year but has yet to secure any tenants.
Landsec intends to start building BTR apartments on three sites in 2026 and 2027: 2,800 in Lewisham in south London, 1,800 at Finchley Road in north London, and 1,700 at Mayfields in Manchester, where a planning application has just gone in for the first 880 homes.
Landsec will spend £1B on building between now and 2030 and a further £2B by 2035, it said in a presentation. That would bring rented residential to about a third of its portfolio. There is potential for construction of another 2,700 homes at Media City in Manchester, and the company has indicated it may buy more sites as well.
Homes at the initial three schemes will generate about £200M in annual rent, make a 10% to 12% internal rate of return and provide a 5% net yield on cost, Landsec said. Rented residential income tends to track inflation better than other commercial asset classes, according to the company.
By Bisnow’s calculations, Cheyne had put out about £2.5B in the UK capital since autumn 2023 prior to this deal. The investments come as others sit on the sidelines amid market volatility.
Most of Cheyne’s transactions have been debt deals, writing big-ticket loans against large developments. Those include a £500M facility for the redevelopment of office Winchester House in the City and £400M in loans to help Dominus Real Estate convert City offices to student accommodation.
But more recently, it has moved toward becoming a developer itself. In addition to Red Lion Court, it bought City Link House in Croydon, an office building that will be converted into a £210M, 570-unit coliving scheme.