Meadowhall Purchase Complete
British Land Co PLC
2 November 1999
BRITISH LAND COMPLETES MEADOWHALL PURCHASE
The British Land Company PLC has exercised its option, announced on 8th July
1999, and has completed the purchase of the companies owning the Meadowhall
Shopping Centre by a payment of £599.6 million in cash.
The purchase has been funded from cash and by drawdowns from existing bank
facilities. Following the payment, committed unused facilities exceed £1.25
billion. The proceeds of property sales since 31st March 1999 amount to £184
million with an additional £61 million of joint venture sales. Further funds
will be released as a result of additional non-recourse financing now being
arranged for two of the Group's joint ventures. There is thus no requirement
to seek additional resources to fund this acquisition.
Recent rent reviews at Meadowhall have exceeded British Land's original
forecasts, and it can therefore be expected that annualised rental income will
be above the £66.1 million previously estimated for end 2000; consequently the
full reversionary income is also in line to exceed the level of £74.8 million
previously announced. The equivalent yield on cost is 6.04% and the
reversionary yield is 6.4%. There remains strong unsatisfied demand from
unrepresented retailers seeking to become tenants at Meadowhall, and from
existing tenants looking to expand their space.
We are delighted that the entire existing management involving a team of 250
people on site, under Mr. Eddie Healey as President of Meadowhall Holdings
Limited, is to remain.
On a pro-forma basis, the acquisition of Meadowhall takes the proportion of
British Land's investment property portfolio (including British Land's share
of properties held in joint ventures) invested in shopping centres at 31 March
1999 from 7% to 21%. The total for retail and retail parks, together with the
leisure element of the portfolio, rises to 50% and the office element falls to
49%.
Background notes below give details of the transaction and a description of
Meadowhall.
Enquiries
John Ritblat, Chairman The British Land Company PLC
John Weston Smith, Finance Director 0171 486 4466
Background Notes
On 8th July 1999 British Land announced that it had entered into a call option
and deposited £100 million on account in cash to acquire the companies owning
Meadowhall Shopping Centre at Sheffield.
Under the terms of the option, British Land was to acquire the freehold
interest in Meadowhall through the purchase of the entire issued share capital
of the companies owning it. After deducting the net liabilities of the
companies to be acquired, the net cash consideration for the acquisition,
including the £100 million deposit, was estimated to be approximately £700
million. The liabilities of the companies to be acquired were principally the
amounts that would have been required if the finance lease arrangements, bank
facilities and related derivatives had been closed out, totalling some £470
million.
The Meadowhall Shopping Centre
Meadowhall is the fourth largest shopping centre in the UK. It was
constructed in 1990 and is located 3 miles to the north east of Sheffield city
centre, immediately adjacent to the M1 motorway. It occupies a site of
approximately 125 acres and offers some 1,345,000 net lettable square feet of
retail and leisure space. It has 12,600 car parking spaces and excellent
transport links, being served by a passenger transport interchange for buses,
trains and a light transit rail system, as well as the M1 motorway.
Meadowhall has a catchment of 1.9 million people within a 30 minute drive and
of 7.5 million within a 60 minute drive. Though earnings are at good levels,
house prices in the Sheffield area are at around two-thirds of the national
average so disposable income is particularly strong. Following the
introduction of tighter central government restrictions on the development of
out-of-town shopping centres, Meadowhall is expected to remain one of only six
Regional Shopping Centres in the UK for the foreseeable future.
Within approximately 30 minutes drive of Meadowhall, there are some 6.5
million square feet of competing town centre floor space. Based on research
by Property Market Analysis, this equates to some 3.3 square feet per capita -
the lowest level of competition faced by any of the six Regional Shopping
Centres. The average level of competition faced by the other Regional
Shopping Centres equates to 5 square feet per capita.
Tenants
The Centre is fully let to almost 300 tenants, including BHS, Boots, C&A,
Debenhams, Gap, Hennes & Mauritz, House of Fraser, Marks & Spencer, Next,
Sainsbury and W. H. Smith.
- 80% of the income is derived from national retailers.
- 71% of net annual rental income derives from leases with 25 years or more
unexpired.
- The advanced design and flexibility of construction enable combinations of
units to be merged easily into larger sizes.
In recent years additional rental growth has been generated through active
management to meet retailers' evolving needs, particularly for bigger units.
There remain substantial opportunities to continue this process, and an
expansion of the areas attracting the higher levels of rent is already under
way. Most leases provide that tenants wishing to dispose of their premises
have to offer them back to the landlord. The present average passing rent at
the Centre is approximately £40 per square foot and is expected to rise to at
least £66 per square foot. £415 per square foot for Zone A has been achieved
in the latest letting.
Transport
- Estimated 30 million visitors each year
- Excellent transport links with adjoining M1 motorway, its own main line
train station, a light transit rail system (supertram) and bus services
- 120 bus departures per hour with 84 bus routes
- 400 train departures per day
- 104 tram departures per day
- c.2,000 coach visits per annum
- 12,600 car spaces
- 20% of families come by public transport
- Easy access and minimal congestion.
48 Acres of Development Land
The vendors of Meadowhall own 48 acres of potential development land adjacent
to the Centre. British Land's price for Meadowhall also purchases an option
to acquire these sites within 5 years of the completion of the Acquisition.
If developed, the price will be at a discounted investment value. If
undeveloped, the price will be the industrial land value.
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