Development Securities to Buy Property as Owners Face Financial Pressure

Development Securities Plc (DSC), the builder of London’s Paddington Central business center, plans to spend about 100 million pounds ($161 million) buying property by August as debt pressures owners to sell cheaply.

The company spent 234 million pounds in the past 18 months and may purchase six sites by the summer, Chief Executive Officer Michael Marx said in an interview in Cannes, France. Development Securities is bidding for a mixed-use site valued at 50 million pounds in west London, he said. The deal should be completed by the end of April and will include about 50 apartments as well as shops, Marx said.

Development Securities has raised about 200 million pounds in two share sales since July 2009 to buy discounted real estate. The company may dispose of assets in the second half to realize gains from renovating its properties. No further share sale is planned, the CEO said.

Marx said he plans to work with companies that are under pressure to repay debt and need help upgrading their holdings into prime real estate.

“We’re trying to turn frogs into diamonds,” he said.

Development Securities aims to sell acquired properties to within two to three years of purchase to institutional investors attracted by the steady returns of property rents, the CEO said.

There are “unprecedented,” opportunities now because the limited availability of bank finance is forcing owners to offer properties at attractive prices, Marx said. Returns generated by acquisitions will outweigh the dilution of share value caused by selling the new stock, he said.

To contact the reporter on this story: Tim Barwell in London on tbarwell@bloomberg.net

To contact the editor responsible for this story: Ross Larsen at rlarsen2@bloomberg.net.

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