British Land completes €1b property exchange with Tesco

UK REIT British Land has completed a £733 mln (€1 bn) property exchange with retail giant Tesco.

Under the terms of the transaction, British Land has sold its 50% interest in a joint venture portfolio of 21 stand-alone foodstores to Tesco and acquired Tesco’s 50% interest in two joint venture portfolios predominately comprising Tesco-anchored shopping centres and retail parks.

The transaction is in line with British Land's 'strategy to evolve its retail portfolio', the company said in statement. 'It further reduces our foodstore weighting and increases our exposure to multi-let retail parks and shopping centres. Our full ownership of these assets will provide significant potential to add further value through asset management and development,' British Land said.

The deal involves the sale of a 50% stake in the Tesco Aqua Limited Partnership of 21 assets with a value of £352 mln. The assets, bought at a net initial yield of 4.8%, have a weighted average lease length of 13.3 years.

In exchange for these assets, British Land is taking control of a 50% stake in Tesco BL Holdings and The Tesco British Land Property Partnership comprising three retail parks, three shopping centres, and three stand-alone foodstores with a value of £381 mln, or a net initial yield of 5.1%.

The assets include Serpentine Green in Peterborough, Beaumont Leys in Leicester, Kingston Centre, Milton Keynes and Clifton Moor, York. British Land will make a net cash payment of £96 mln to Tesco reflecting the difference in net asset value.

The assets acquired within the TBLH and TBLPP joint ventures generate annual accounting net rental income of £20 mln. The assets sold within the Aqua joint venture generate £18 mln.

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