The centuries-old St John's Wood Barracks will be put on the block next week, in one of the largest sales of a prime central London property since a Qatari-backed consortium bought Chelsea Barracks four years ago.
The sale will test the strength of the prime property market, which has suffered recently from a lack of financing for big developments.
Prime London house prices have nonetheless climbed 33 percent since March 2009, against a 7 percent rise in the wider national market.
The St John's Wood site has been occupied as a barracks since 1804, most recently by the King's Troop, Royal Horse Artillery, which will move to a new location in Woolwich.
The land originally formed part of a farm purchased in 1750 by the current owners, the Eyre Estate.
The estate, a private family trust, has asked for offers of more than £225 million, although Knight Frank, the agent handling the sale, expects the bidding to exceed £220 million.
The barracks site has planning permission for 117 new homes that could have a total sale value of more than £1 billion.
The 5.5 acre (2.2 hectare) site is located in exclusive St John's Wood near Regent's Park and Primrose Hill. St John's Wood is one of London's so-called "golden postcodes".
"This is as prime a site as you can get and will be the biggest sale for this type of property since the Chelsea Barracks," said Ian Marris, head of residential development at Knight Frank. Chelsea Barracks sold for £1 billion in 2007.
Planning permission has been granted for 12 apartment blocks, eight semi-detached villas and seven terraced town houses, to provide a mixture of private and affordable homes.
The proposal includes the refurbishment of 16 flats in Queen's Terrace. The site's Grade II-listed riding school building must be preserved, but can be converted into a private leisure centre.
The largest semi-detached villa to be built will reach close to 10,000 sq ft.
"There is huge demand for the large houses that we have on the site, particularly from the international market," said Ted Johnson of the Eyre Estate.
"The key question is how to finance the scheme, and we expect to see overseas sovereign wealth, private equity and institutional money all competing.