Derwent London plc (LON:DLN) has announced that its 25 Baker Street W1 development, located within a 10-minute walk of Bond Street Elizabeth line station, recently reached practical completion. This marks an important milestone in realising value from one of the Group’s major developments, delivering a yield on completion of 7.5% and an ungeared IRR of 11.3%.
25 Baker Street strengthens the Group’s long-dated income profile, with its average unexpired lease term (to break) of 13.5 years, more than 70% of which is on 15-year leases without break. The successful pre-letting of all the offices also demonstrates strong occupier appeal, giving us additional confidence in our 50 Baker Street scheme opposite. Together, these developments will create a significant cluster, enhancing the local area.
Leases commenced in September for the fully pre-let 204,000 sq ft office element (annual headline rent £21.2m, agreed on average 16.5% above the appraisal ERV) and the three pre-let retail units (combined rent £0.4m). This new income stream will make a positive contribution to 2025 earnings.
Contracts have been exchanged on £115.9m of private residential units (before transaction costs) at 100 George Street W1, developed in partnership with Native Land. These sales represent more than 70% of the residential space. Of this, £94.2m has now completed with a further £21.7m expected over the coming months. In addition, a further £11.0m has been received from the freeholder, The Portman Estate, in relation to the Loxton Walk retail units and the Gloucester Place offices. Prior to redeployment of all proceeds received to date, net debt/EBITDA reduces by c.0.6x (June 2025: 9.7x).
The project’s embodied carbon intensity is c.600 kgCO2e/sqm, in line with our 2025 target and GLA requirements, and it will be our first NABERS-rated building. With BREEAM Outstanding certification expected and a strong focus on design-led sustainability and wellbeing, the project sets a benchmark for responsible development. This reflects Derwent London’s commitment to delivering high quality, low carbon buildings.
Paul Williams, Chief Executive of Derwent London, said:
“Achieving completion with the offices 100% pre-let and over two-thirds of the residential element pre-sold highlights the ongoing strength of the West End market and the quality of the space we have delivered. 25 Baker Street showcases our ability to deliver best-in-class, future-proof buildings that meet occupier demand. Proceeds from the residential sales have further enhanced our financial flexibility, and our disciplined approach to capital allocation reinforces our long-term value creation strategy.”
