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Westbrook Weighs £850M Dolphin Square Sale In PRS Megadeal

Dolphin Square

The largest single-asset rented residential deal in UK history could be coming to market, as Westbrook explores the sale of the famous Dolphin Square estate for £850M or more.

According to React News, the U.S. private equity firm has appointed Knight Frank to quietly sound out interest in Dolphin Square, about a 20-minute walk from the Palace of Westminster in Pimlico. Options being looked at include a full sale — the preferred option — the sale of a stake in the asset or a refinancing.

Dolphin Square is the prototype for rented residential in the UK, having been built in 1937. With 1,233 flats across 12 blocks totalling 1M SF on a 7.5-acre site, only Delancey’s East Village in Stratford and Quintain’s Wembley Park, with 1,400 and 7,000 apartments, respectively, are bigger.

But Dolphin Square is very different, and any sale will be watched with interest by the growing build-to-rent sector. The scale would appeal to big global institutions looking to allocate significant amounts of capital to UK rented residential. But it is a complex asset.

As well as about 850 apartments let on standard assured short-hold tenancies, there are 165 serviced apartments, and 215 tenants who have fixed rental payments of 50% of market level on leases that run until 2034.

These tenants are a loud and vocal minority, and almost all protested against a major redevelopment proposed by Westbrook that would have seen it invest £400M in the asset. This would create 275 new apartments, taking the total to 1,395, principally through the addition of another storey on top of the existing structure and also by splitting larger flats down into smaller units.

More serviced apartments and new gym facilities and cafés would also have been added. Westminster Councillors turned the application down even though planning officers recommended it for approval.

Westbrook has launched an appeal against the decision, React said, and any buyer would have to decide whether to press ahead with the plans, draw up new ones or simply seek to manage the apartments in their current form. The building produces income of £35M a year, and has £514M of debt secured against it.

Its history is storied, not least Westbrook’s battle to secure full ownership of the site. Famous residents include prime minister Harold Wilson and Christine Keeler and Mandy Rice-Davies, the women at the centre of the Profumo affair that helped bring down the Conservative government of the early 1960s.

A sale at £850M or more would represent a big profit for Westbrook, but over a long time. When it originally bought into the scheme in 2006, it paid £190M for a head lease running until 2034. It then used a legal process called enfranchisement to get to a position where it could forcibly buy the freehold from insurance company Friends Life in 2015 for £176M. This took more than five years of legal wrangling, with Friends Life trying to block the process. Westbrook has invested £40M in renovations, taking its total investment to about £400M.

“Dolphin Square has always been a middle-market proposition, and we want to keep it that way,” Westbrook UK Head Mark Donner told Bisnow when plans for the redesign were unveiled. “When the majority can afford to rent with you, the asset will be fully occupied, and we like the property fully occupied. When you move rents out of reach of the deep middle-market, demand goes down.”