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British Land completes £733m Tesco property swap

British Land has agreed a £733m property swap with Tesco, in a move to focus its portfolio on prime location shopping centres.

Under the deal, British Land has sold its 50 per cent interest in a joint venture portfolio of 21 standalone foodstores to Tesco and acquired Tesco’s 50 per cent interest in two other joint venture portfolios, including Tesco-anchored shopping centres and retail parks.

British Land head of retail and leisure Charles Maudsley said: “This mutually beneficial transaction clearly demonstrates the great relationship we enjoy with Tesco.

“It plays to our strengths of managing multi-let assets and gives Tesco more control of their standalone portfolio.

“We see significant opportunity to add value and drive returns through asset management and development.”

EC Harris head of retail Colin Turner said contractors should “take note and adapt their retail offer to reflect the structural shift from new-build investment to refurbishment, renewal and repositioning”.

He added: “The dominant theme for the UK’s major food retailers and their retail landlords over the next decade is stick to your core business and invest in your core assets.

“For British Land this means focusing on shopping centres in prime locations and for Tesco this means focusing on existing stores – as exemplified by the swap deal just announced.”

Key transaction terms:

  • Sale of 50 per cent stake in The Tesco Aqua Limited Partnership, comprising 21 standalone food stores; portfolio value £352m.
  • Acquisition of 50 per cent stake in Tesco BL Holdings Limited and The Tesco British Land Property Partnership comprising three retail parks and three shopping centres, all anchored by Tesco stores, and three standalone foodstores; combined portfolio value £381m.
  • British Land will make a net cash payment of £96m to Tesco reflecting the difference in net asset value for Aqua (£81m) and the combined TBLH and TBLPP joint ventures (£177m).

As a result, British Land’s standalone foodstore portfolio will be reduced from 10 per cent of its total assets to 8 per cent.

At the same time, the developer has increased its focus on multi-let assets.

The deal means British Land has also reduced the number of assets held in JVs by 30.

Overview of assets in swap arrangement

Acquisition of 50 per cent share of TBLH and TBLPP

3 shopping centres:

  • Serpentine Green, Peterborough: 320,000 sq ft shopping centre anchored by 140,000 sq ft Tesco that includes Arcadia, Next, River Island and H&M. Potential for expansion of retail offering through development.
  • Beaumont Leys, Leicester: 310,000 sq ft shopping centre anchored by a 150,000 sq ft Tesco.
  • Lisnagelvin, Londonderry: 100,000 sq ft scheme anchored by a 60,000 sq ft Tesco and a 25,000 sq ft Primark.

3 retail parks:

  • Kingston Centre, Milton Keynes: A 270,000 sq ft open A1 retail park anchored by a 140,000 sq ft Tesco and including Next, Marks & Spencer, Boots and Mothercare.
  • Clifton Moor, York: 240,000 sq ft mix of open A1 and bulky planning consents anchored by a 120,000 sq ft Tesco. Recently completed terrace let to DFS, Wren, Oak Furnitureland and Harveys.
  • Woodfields Retail Park, Bury: 150,000 sq ft retail park anchored by an 85,000 sq ft Tesco and including Next and Boots.

3 standalone foodstores (on open market rent reviews):

  • Bursledon, Southampton: 120,000 sq ft store, affluent catchment and lease recently re-geared to 15 years.
  • Grove Green, Maidstone: 60,000 sq ft store with five unit shops and an affluent demographic.
  • Bromley by Bow, London: 70,000 sq ft store.

Sale of 50 per cent share of Aqua

  • A portfolio of 21 geographically diverse standalone foodstores (c.25 per cent South).
  • All leases have 13.3 years unexpired term and are subject to annual RPI increases.

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