Chinese property developer R&F Properties is on the cusp of buying a prime mixed-used development site in Vauxhall for £157.8m.
It has exchanged contracts with CLS Holdings for its Vauxhall Square site, which has planning permission for a 1.5m sq ft scheme, including 578 flats across two towers.
CLS has owned the 3.4-acre site for 30 years, and has revised plans as demand in the Vauxhall residential market has changed.
CLS executive chairman Henry Klotz said: “The sale of Vauxhall Square is a milestone in the history of CLS. Having bought the site nearly 30 years ago and secured planning in 2013, we are pleased now to have exchanged contracts at a price above its year-end valuation.”
R&F Properties says it will commit around £1bn to deliver the scheme.
Xia Ning, on behalf of R&F Properties, said: “The generous retail and leisure offering will supplement the hotel and office space and will bring a significant number of jobs to Vauxhall and enhance the local economy.”
Completion is expected around 4 May 2017. The company will retain the freehold interest in the Miles Street student accommodation block and residential houses in Wandsworth Road.
At the end of 2016, Vauxhall Square was valued at £100m and generated net rent of £1.9m for the year. This has since fallen to £100,000 following the expiry of a lease with Cap Gemini. CLS said it will make a profit on disposal after costs of about £40m.
JLL Residential acted as advising agent for CLS, CBRE acted for R&F Properties.
James Thomas, director, JLL said: “The interest generated by our international marketing campaign shows the continued confidence in Vauxhall, Nine Elms, and Battersea as key growth areas, where both UK and overseas parties are competing to invest capital.”
Inside the deal with CLS chief executive Fredrik Widlund
Key to the sale of the Vauxhall scheme was creating a mixed use, rather than a residential only scheme. Planning was obtained in 2013, but was amended in 2016 to increase the office component. As the residential market in Vauxhall has slowed, this helped to de-risk the scheme.
“We focus on the commercial development of properties,” says Widlund.
“We thought very early on it would make more sense to have office space, and that clearly helped, especially last year, when you saw stamp duty, etc, which had a negative impact on the residential side of it.
“To then have more office space, that was very beneficial. When Apple signed up in the Power Station, that was the next step in establishing Vauxhall Square as a commercial hub than perhaps not just a residential one. As you know a lot of the tension is on the residential side down here.
“I do think it helps that it mixed use, it probably de-risked the entire scheme, given that it has a bit of everything.”
Widlund still thinks residential is slightly more valuable in Vauxhall, while offices side has been catching up, but the demand from buyers was for both sides the scheme.
“When we started this process, at the end of last year, we have been very clear we wanted to maintain the commercial aspect of it while selling the residential side, because we were not a residential developer.
“But it became quite clear early on the interested parties would look at it as one site, and that was not just R&F, that was the same with most of the people interested.”
Widlund says that he was positively surprised by the level of interest in the scheme.
“There’s been a lot of interest for this one, and its mainly been from Asia and the US, but its still great new for UK property and the UK overall, that a lot of people are interested in investing.
CLS has been assembling the site for 30 years, and it was only completed a few years ago before planning was then obtained. Due to the long term ownership, it meant CLS were not forced to hold out for a particular sales price.
“If you are in a negotiation position where you do not have to sell and you can take a more relaxed view on it, it does help your position, absolutely.
“I think fundamentally though, this is a very good scheme, its mixed use, its next to the station. It just a good scheme with a lot of people interested in it.”
Widlund said the deal was good news for both Vauxhall and the wider London market.
“It’s a good sign for UK property, I think its also a good sign for the rest of Nine Elms. People view this area as something that is really coming along, the fact that Apple took half a million sq ft at the Power Station was a key thing, the fact the US embassy is opening up very shortly, and the fact that there is more focus on not just the residential side down here.”
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