Heron unloads seven buildings: Derwent Valley keeps vendor as tenant in pounds 33.4m purchase

HERON International gave its property disposal programme a boost yesterday with the sale of seven buildings for pounds 33.4m.

The deal marks the latest stage in a spending spree by Derwent Valley Holdings, the property investor, which is part-funding the acquisition with its second cash call in nine months.

John Burns, Derwent's managing director, said: 'We believe that the conditions for property investment remain favourable.' He said that increasing Derwent's equity base would allow it to borrow further to finance more acquisitions.

One of the portfolio's four central London properties is Heron's headquarters in Marylebone Road, which the troubled property company is renting until 2010.

Heron, which completed a pounds 1.3bn refinancing six months ago, is paying its first year's rent of pounds 310,000 up-front.

Derwent played down the risk of taking on Heron as a tenant, saying that in the context of the group's pounds 8.2m rental income, it was insignificant.

Income from the seven properties amounts to pounds 3.45m a year, although lease renewals will reduce that to pounds 3.18m in September. The yield is 10.3 per cent, falling to 9.5 per cent. As well as the four London properties - a mixture of office, retail and residential space - the deal includes an industrial estate in Reading and two office buildings in Oxford and Cheadle, Manchester.

Derwent plans to raise pounds 18.6m of the price with a one-for-three rights issue at 500p a share. A one-for-one scrip issue will follow to improve the shares' marketability.

Last July Derwent raised pounds 17m through a placing and open offer, since when it has spent almost pounds 24m on property acquisitions.