UK - The British Land Company has exchanged contracts with London & Stamford Property to sell a 50% interest in the freehold of the Meadowhall Shopping Centre near Sheffield, but it is also raising additional funds through a £740m (€819.49m) rights issue.
The decision to form a joint venture with L&S is part of British Land's drive to increase its financial flexibility in the current turbulent markets. London & Stamford Property and its joint venture partner acquired the 50% stake yesterday (11 February) for £587.7m.
Raymond Mould, the non-executive chairman of London & Stamford Property, said: "Opportunities to invest in such an asset are very rare and this transaction represents an outstanding acquisition for us and our partner."
The transaction, taking into account Meadowhall's £835m of debt, will be made up of £540.2m and a further £47.5m that will be paid once identified future lettings are completed.
London & Stamford Property's share of the cash payment of £38.6m on completion and the deferred cash payment of £14.7m will give the firm an effective 16% ownership in Meadowhall.
Meadowhall in Sheffield, South Yorkshire, is one of the UK's biggest shopping centres, with around 1.5m sq ft of retail and leisure accommodation, of which 97.4% is let. It includes 10 anchor stores, 212 shop units, 30 catering units and 11 cinema screens.
Since British Land acquired the shopping centre rental income has grown from £48m to a current annual net income of over £78m. The average contracted rent is £58.16 per sqft.
Andrew Jones, executive director and head of retail at British Land, said: "This transaction reduces our exposure to our largest retail asset whilst allowing us to retain a substantial share in the future upside from long and strong cash flows. Meadowhall is truly a unique asset with enduring occupier appeal and in which we see great value. We look forward to delivering further value with our partners in the next few years."
British Land has been appointed property managers to Meadowhall and will act as strategic adviser with LSI Management LLP.
It stopped promoting a partial investment stake in Meadowhall in October 2007 in because of the uncertainty in the financial markets.
Just one day after completing this deal, the firm today announced it would seek to raise £740m through a right issue in order to strengthen the company's balance sheet in the volatile market and take advantage of opportunities to buy commercial property.
It plans on selling approximately 341m new shares at 225p each, a 53% discount on the closing middle-market share price recorded yesterday.
The rights issue, which is subject to approval by shareholders at a meeting held on 3 March 2009, has been fully underwritten by Morgan Stanley Securities, USB Limited and an affiliate of GIC Real Estate called Euro Lights.
The Government of Singapore Investment Corporation (GIC), already a shareholder of the company, has also guaranteed the purchase of shares.
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