British Land has exchanged on the sale of 12 superstores from its joint venture with UK supermarket group Sainsbury’s for £429m, representing a net initial yield of 5.0%, to Realty Income Corporation.
Its share of the proceeds will be £193.5m, representing a modest premium to September 2018 book value.
This, said British Land, is the latest example of how it is delivering against its long-term strategy to build an increasingly mixed-use business focused on three core elements: campus focused London offices; a smaller, refocused retail business and residential, principally build to rent. As part of this, it expects retail to comprise circa 30-35% of the assets of its business, down from around half today.
Alongside investment into its campuses and progressing development opportunities such as Canada Water, it is focused on further sales of retail assets which are not aligned to its strategy and continues to “make good progress”.
The company stated: “We have a clear view of the value of our assets and despite the clear challenges currently in the retail market, we remain opportunistic and proactive. As a result, we have exchanged or completed on nearly £1bn of retail assets sales (£646m our share) since April 2018 at an average yield of 5.7% on terms marginally ahead of book value. This activity has included the sale of Debenhams Clapham and the Spirit pubs portfolio.
“Once the transaction completes, which is expected at the end of May, our superstores exposure will fall to 1.3% of our portfolio based on September 2018 valuations with 6 standalone stores remaining. Net proceeds to British Land are expected to be circa £95m following the repayment of debt and associated break costs.”
RPA Perspective It’s been a busy month for British Land. Earlier in April it confirmed that the food and drink offering at Paddington Central and along the Grand Union Canal continues to grow with three new brands committing to the campus. London Shell Co, the independent seafood restaurant and Vagabond, the wine merchant and bar will add to the mix of restaurants and bars along the canal-side while Pure, the healthy food chain will take space at 2 Kingdom Street.
Following the success of its cruising restaurant aboard the Prince Regent barge, London Shell Co is increasing its presence at Paddington with a second barge called the Grand Duchess located next door. The restaurant aboard the Grand Duchess will be static, providing an all-day food offer, as well as a bar and outside area.
Vagabond is the first wine bar to open at Paddington and has committed to 300 sq m of space along the Grand Union Canal, complementing the existing canal-side pubs and restaurants including Beany Green and Darcie & May Green.
Since acquiring Paddington Central in 2013, British Land has invested nearly £100 million into the transformation of the campus including upgrading the public realm, developing 4 Kingdom Street and boosting the retail and leisure offering, with 10 new retailers added to the campus in the last 18 months. These changes have attracted tenants including Microsoft, Sasol and Vertex Pharmaceuticals. Storey, British Land’s flexible workspace brand, also operates from Paddington with clients including HMD Global and BAI Communications UK.
Tim Haddon, Head of Paddington Central, British Land said: “Our investment into Paddington continues to attract exciting, new brands, further enhancing the neighbourhood’s vibrancy for the local community, customers and visitors to enjoy. London Shell Co’s expansion and Vagabond’s arrival will provide further enlivenment along the canal and boost the neighbourhood’s seven day-a-week offering.”
