Istithmar loses out on West End properties

The Istithmar unit of Dubai World sells two buildings in London's West End for a fraction of what it paid for them two years ago as it seeks to raise cash and trim costs.

The Istithmar unit of Dubai World has sold two buildings in London's West End for a fraction of what it paid for them two years ago as it seeks to raise cash and trim costs. Istithmar World, which is part of Dubai World, sold the buildings to Great Portland Estates (GPE), a UK property company. The disposal coincides with a major restructuring exercise at Dubai World, which is owned by the Dubai Government. The conglomerate has already cut about 12,000 jobs and merged some of its operating units as the emirate seeks to reduce its debt burden.

GPE paid £10 million (Dh61.4m) plus a share in future profits for a building on Regent Street and another near Oxford Street. Istithmar paid about £80m two years ago. Istithmar World declined to comment. The property company will start redeveloping the buildings early next year and invest £78m. "This is the first major central London development transaction undertaken with a bank and adds two developments to GPE's development pipeline to take advantage of the expected recovery in rental levels from next year onwards," Miranda Cockburn, an analyst at JPMorgan Cazenove, said in a note to investors.

The two buildings, Marcol House, a 10,363 square metre office and retail development site, and 23/24 Newman Street, a 2,341 sq metre office building, were acquired by Istithmar in early 2007 when the market was stronger. Newman Street is scheduled for completion by mid-2011 while Marcol House is expected to be completed a year later. "The commercial real estate market in London has been rallying massively. There is a perception from investors today that they don't want to miss the boat," said Fadi Moussalli, the regional director of International Capital Group at Jones Lang LaSalle. "The capital values are going up now. As a result, the yields are compressing again." London had become a target for funds with cash to spare, he said.

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