David Goldstone, Regalian's chairman, said that the joint venture would convert seven houses on Colosseum Terrace into 35 flats, with an estimated value of more than pounds 5m compared with a pounds 1m purchase price.
'The encouraging forecasts of rises in residential values in central London enable us to view the future with confidence,' he said.
Recent forecasts that residential property prices could rise by about 5 per cent in 1994 were backed up yesterday by Jones Lang Wootton, the property agent, which said that total returns from the commercial property funds it manages had been over 20 per cent during 1993.
Regalian has already collaborated with Sincere on the conversion into flats of a 1960s office block alongside the Thames. Sincere will provide the new project's funding, with Regalian managing it. After construction costs of about pounds 2m, the profits will be split evenly.
The deal marks the latest stage in Regalian's recovery from near collapse under the weight of sky-high debts and a portfolio of unsold London properties. In the year to March 1993 it made a pre-tax loss of pounds 84m, but has since reduced borrowings from pounds 140m to less than pounds 15m. Interim losses fell to pounds 869,000.
The shares have also bounced from a low of 3p last August to 33.5p. At their peak in 1987 they were worth 306p.