British Land sells €280m of assets to LGP in portfolio restructuring

UK REIT British Land has sold a retail and office portfolio to Legal & General Property for £219.6 mln (€280 mln) in an off-market deal.

Although financial details were not disclosed, British Land said the portfolio was sold at a premium to its September book value. The deal reflects a blended net initial yield of 6.3%.

LGP bought the assets on behalf of its £2.2 bn Managed Property Fund, an open-ended fund available to occupational pension schemes.

The portfolio comprises the Kingswood retail park in Hull, which was sold for £58 mln, at a 5.7% net initial yield; the 490,000 sq ft House of Fraser in Birmingham, which was sold for £71.4 mln, at a 6.8% NIY; and the Grenfell Island office, leisure and retail block in Maidenhead, divested for £90.2 mln, at a 5.9% NIY.

In addition, Green Lanes Shopping Centre in Barnstaple was sold before Christmas to a private client of Rockspring Property Investment Managers for £36.1 mln, also ahead of September book value, reflecting a net initial yield of 6.5%. Strutt & Parker and Savills advised Rockspring while British Land was represented by Lewis & Partners.

The 140,000 sq ft scheme, which comprises 40 units and 500 car park spaces, was acquired by British Land in 2011 for £30.3 mln. Rockspring’s plans for redevelopment include the completion of a new TK Maxx anchor store in the summer of 2015.

'This activity is in line with our strategy to evolve the portfolio to meet the needs of our occupiers and their customers,' the UK listed property giant said in a statement. The latest deals bring British Land's total sales of UK income-generating assets to £620 mln over the last 12 months, reflecting a total net rental income of £16.6 mln. Proceeds will be used to repay bank facilities, the company added.

'Our focus in retail is to allow consumers to shop in a way that suits them, so we are evolving our portfolio to match their expectations,' commented Charles Maudsley, head of retail for British Land.

Mark Russell, senior fund manager of the Managed Property Fund, added: 'The assets acquired provide a long-term income stream which is supported by a high quality tenant line up. There are numerous opportunities to enhance value in the short and medium-term and forthcoming infrastructure improvements to Maidenhead and Birmingham will further enhance these asset fundamentals without cost to our investors.'

British Land was represented by CBRE on Hull and Birmingham, CBRE and Knight Frank on Maidenhead and Lewis & Partners on Barnstaple. LGP was advised by Knight Frank, Morgan Williams and CBRE.