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«The British Land Company PLC and J Sainsbury plc have agreed to create a £1.2 billion joint venture property partnership incorporating 39 superstores across the UK.
The superstores, currently owned by British Land and leased to Sainsbury for 20 years, form the basis of the new 50:50 joint venture partnership. It will have an initial life of 10 years, with an option to extend, and British Land will actively asset manage and administer the JV properties.
The JV value of £1.2 billion represents a net equivalent yield of 5.1 per cent. The consolidated net asset value for the new JV company is £544 million including British Land’s existing £722 million of outstanding securitised third party debt which will be retained by the joint venture.
Stephen Hester, Chief Executive, British Land, said: “Today’s agreement more closely aligns the interests of property owner and retailer to deliver value to shareholders in both companies. It acts as a catalyst to increase capital value by improving, through extensions and developments, the Sainsbury Stores.”
The JV owns 38 Sainsbury’s stores and one Waitrose store.
Average store size is 73,000 sq. ft. with a rental income of £61 million a year.
The transaction is priced off the latest reported asset and liability valuations which are generally supportedby other recent market evidence.
British Land is the largest owner of superstores in the UK, other than those owned by occupiers.
As at December 2007, British Land’s total superstore portfolio encompasses 97 stores, valued at £1.96 billion and accounts for 23 per cent of retail assets. Average lease length to first break is 19.7 years with 100 per cent occupancy rate.
Other significant UK British Land joint ventures include: Tesco, The Scottish Retail Property Partnership with Land Securities, and House of Fraser.
British Land is the largest UK REIT by assets (£14.6 billion) with total assets under management of £18.4 billion, as at December 2007.
The portfolio, focused on the growth sectors of London Offices and Out of Town Retail, has the longest leases (average 14 years) and the highest occupancy rate (99 percent) of the major UK REITs.
Retail assets account for 58.8 per cent of the portfolio, 83 per cent of which is in prime out-of-town locations. Offices account for 38.8 per cent of the portfolio of which 99 per cent is London-based and includes a 5 million sq ft development pipeline coming to fruition between now and 2011.
British Land was awarded the title Sustainable Developer of the Year at ‘Building’ magazine’s annual sustainability awards 2007» (CS delle Società).
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