Landsec has exchanged to sell its Queen Anne's Gate, SW1, office block to Arora Group for £245 million, with a major luxury hotel makeover planned.
In a stock market filing, Landsec said the sale of the Westminster landmark marks significant early progress in its stated objective to release £2 billion of capital from offices by 2030, as it refocuses on investing in residential and retail. It says this is part of its strategy to focus its portfolio on assets which can "deliver sustainable income and [earnings per share] growth over the long term".
The building, also known as 102 Petty France, is a 353,000-square-foot standalone office in Victoria, Central London which was developed by Landsec in the 1970s. The building is fully let to the Ministry of Justice on a lease generating £15 million of net rental income a year which will expire in December 2028.
There is an incremental lease for the investment Landsec made in an upgrade and fit-out of the building in the mid 2000s, which generates £17 million of net rental income a year. Most of the valuation is linked to its future redevelopment potential, with the balance of value stepping down in line with the receipt of rental income over the remainder of the current lease.
Landsec first touted a sale via CBRE and Avison Young in 2021. In May this year the government announced a major acceleration of its Whitehall Campus Programme, which aims to reduce the central London government estate by 55% and create a campus of shared workspaces across the country. The Westminster offices of the Ministry of Justice at 102 Petty France were included, alongside the Department of Health and Social Care at 39 Victoria Street, which Ho Bee Land has sought to sell for £155 million, as well as the Department for Work and Pensions at Caxton House, which is owned by M&G.
They will be shut along with eight other central London buildings, with staff moved to other parts of the government estate.
The unconditional sale, for which Landsec has received a 10% non-refundable deposit, is expected to complete in early December. The £245 million sales price compares with an expected book value at that time of £256 million, taking into account the receipt of income and commensurate reduction in value since the last valuation date. All else equal, the disposal reduces Landsec's 38.4% pro-forma March 2025 loan to value by 1.3%.
Surinder Arora's Arora Group is a major hotel developer with hotels in London, provincial cities and major airports throughout the UK.
Mark Allan, chief executive at Landsec said in a statement: "This sale provides strong evidence of the continuing recovery in the central London investment market and allows us to crystallise a full value for this off-strategy asset much sooner than we had envisaged.
"Including [Queen Anne's Mansions], overall disposals since 31 March now total c. £500 million, which is ahead of our initial expectations and, combined with continued robust operational performance across the business, means we are making encouraging early progress in delivering against our strategy."
CBRE advised Landsec.