UK REIT Landsec has acquired a majority stake in MediaCity, a 37 acre media, digital and tech hub in Salford, Greater Manchester for a net purchase price of £425.6 mln (€502 mln).

MediaCity

Mediacity

The world’s first BREEAM sustainable community, MediaCity is managed by Peel Media, part of Peel L&P, and owned in a 50:50 joint venture with Legal & General. The acquisition sees Landsec purchase L&G’s share plus 50% of Peel’s share, totaling 75% of the joint venture.

Landsec will partner with Peel L&P who will retain a 25% stake and continue to serve as asset and development manager.

The transaction, which values the entire asset at £567 mln, includes £293.6 mln of debt, reducing Landsec’s equity investment to £207.6 mln which is satisfied in cash drawn from existing facilities. Landsec will also have an obligation to pay a further amount capped at £15 mln linked to building remediation works which will be completed post-transaction.

The waterside destination is home to a number of creative, tech and media brands, from BBC North and ITV to Ericsson, The Hut Group, Kellogg’s and over 250 creative and tech businesses as well as schools and universities.

Phase one was completed 10 years ago and comprises 1.48million sq ft across 11 buildings including work space, studios, incubator labs, residential as well as ancillary leisure and retail. It is 96% let with a weighted average unexpired lease term of just under 10 years. It generates £31.1 mln of net operating income per annum (100%), reflecting a 5.8% net initial yield. Over half of the income has rent reviews linked to RPI, with collars and caps guaranteeing future rental uplifts.  

Phase two has already seen the completion of two residential towers – ‘The Green Rooms’ and ‘The Lightbox’ as well as the award-winning mixed-use commercial space, the ‘Tomorrow building’. This second phase has outline planning consent for an additional 1.6 million sq ft including office and residential, with an estimated Gross Development Value (GDV) of £750 mln, bringing the total space for phase two to 2.3 million sq ft,.
Mark Allan, Landsec CEO said: 'This acquisition presents us with the opportunity to deploy capital immediately into high quality income producing assets and also to invest further over time through the development of phase two. MediaCity is a compelling addition to our portfolio, providing the opportunity to invest and further develop the estate with the potential to be onsite from the first half of 2023. I’m particularly excited to be able to work alongside Peel, whose experience and expertise complements our own.'

The MediaCity purchase underscores Landsec’s strategic approach to investing in regional cities where it believes it can acquire significant scale.

Wes Erlam, director of Urban Regeneration, L&G, said: 'Working in close partnership with Peel, and leveraging our combined deep sector expertise, since our investment in 2015 we have together added over 600,000 sq ft of built accommodation and are in a position today where MediaCity has welcomed over 2,500 residents and 8,000 workers to this landmark media and tech hub.  And in Greater Manchester as a whole, we have invested over £400 mln into new homes, life sciences and media and technology. As MediaCity now reaches its next stage of maturity, this sale enables us to release growth capital for deployment into new opportunities, as we continue to identify early stage projects and ventures where we can create significant value.'