British Land Co PLC on Monday said it sold a 75% stake in the majority of its Paddington Central assets to GIC Real Estate Inc for £694 million.
Paddington Central is an 11-acre mixed-use campus. It was acquired in 2013 for £470 million, at the time comprising of three buildings, a retail and leisure cluster and two development sites. The campus has delivered an average total property return of 9% per year since acquisition.
The £694 million sale price is 1% below the September 2021 book value and represents a net initial yield of 4.5%.
The sale will hit earnings per share by 1.6 pence on a yearly basis, prior to any reinvestment of proceeds, the company said. Net tangible assets per share will fall ‘marginally’, and the transaction will reduce leverage by 500 basis points, British Land said.
The London-based property development company said that the transaction will establish a new joint venture between the two companies that will be 75% and 25% split. British Land will hold 25%. GIC is a Singaporean sovereign wealth fund.
The joint venture will initially include 2 and 4 Kingdom Street, 1 and 3 Sheldon Square, its Gateway development site and ‘surrounding moorings’.
The completion of the transaction is unconditional and will be within three months, British Land said.
The company added that it will continue to act as an asset manager for the campus and as a development manager for future opportunities. This includes 5 Kingdom Street for which it will earn fees.
It plans to invest the proceeds of the sale in value-accretive development opportunities it owns across its portfolio, as well as growth areas including development-led urban logistics in London.
‘Paddington has been an excellent investment for British Land and this transaction is a great illustration of our strategy in action. Since acquiring Paddington Central in 2013, we have driven significant value through asset management and development across the campus. We are pleased to enter into this innovative JV structure so that we can 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,’ Chief Executive Simon Carter said.
Shares in British Land Co were down 2.2% at 505.40 pence each on Monday morning in London.
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