GIC, the manager of Singapore’s foreign reserves, is investing £694m (€807.9m) in the UK to buy a 75% stake in a London office-led mixed-use campus owned by British Land.
British Land said it is selling the majority of its Paddington Central assets to GIC by creating a new joint venture, adding that it will continue to act as asset manager for the campus and development manager for future opportunities.
The total consideration of £694m, is 1% below September 2021 book value and represents a 4.5% net initial yield.
British Land, which will continue to own a 25% stake in the assets via the joint venture, said the deal is in line with one of its key “strategic priorities of proactively recycling capital out of mature assets where we have created considerable value”.
The listed UK commercial property company said the proceeds from the deal will be invested into development opportunities including development-led urban logistics in London and innovation campuses.
British Land acquired Paddington Central in 2013 for £470m, at the time comprising three buildings, a retail and leisure cluster and two development sites. In 2015 British Land completed the acquisition of 1 Sheldon Square for £210m and in 2017 it completed the development of 4 Kingdom Street.
Simon Carter, CEO British Land said: “We are delighted to be partnering with GIC again and this second joint venture with them demonstrates the success of our relationship at Broadgate as well as the quality of the assets and the opportunity at Paddington Central.”
Carter said the latest joint venture will enable British Land to continue to “play a meaningful role in the development of the campus whilst also releasing capital to invest in other value accretive opportunities across our business”.
Lee Kok Sun, real estate CIO at GIC, said: “We are pleased to invest in Paddington Central, a high-quality office-led mixed-use campus with retail and leisure uses. It is very well-located with connectivity to national rail services and key transport links to Heathrow, West London and Oxford.
“Our earlier investment in Broadgate has demonstrated the high value of acquiring central London campuses and we are confident that this asset will generate resilient long-term returns.”
Tracy Stroh, Europe region real estate head at GIC, said: “We are seeing returning demand in the take-up of new office spaces that are of high quality and in prime locations. We are pleased to partner with British Land again and look forward to leveraging their best-in-class capabilities to drive value across Paddington Central.”
The decision to sell 75% of the Paddington office campus “reduces British Land’s exposure to London offices, a sub-sector that faces some significant challenges in our view”, Julian Livingston-Booth, an equity research analyst at RBC said in a note.
The venture reduces British Land’s exposure to London campuses from 70% at the end of September to 68%. To the extent that the proceeds are reinvested in the growth areas British Land has identified, London office campuses could fall to 63% of British Land’s portfolio mix, the analyst said.
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