Private equity set to move in on Broadgate as Blackstone seals £150m British Land deal

Published 18th Aug 2009

Blackstone, the American private equity group, is set to buy half of the Broadgate Estate in the City of London from British Land.

The deal could be announced as early as today when British Land discloses its results for the three months to June 30, which are expected to show a further fall in asset values.

People familiar with the negotiations said that Blackstone’s real estate investment division is poised to pay £150 million for a 50 per cent share of the 16 office buildings close to Liverpool Street Station.

Rivals who are understood to have lost out to Blackstone include a consortium headed by Nochi Dankner, the Israeli billionaire. The consortium’s bid amount was pitched lower, at £100 million.

Blackstone, which was unavailable for comment last night, is understood to have beaten a number of other potential suitors to reach agreement with Britain’s second-biggest commercial property owner.

The private equity group raised £2.7 billion at the beginning of July to invest in distressed European real estate, aimed at taking advantage of falls in the value of commercial property of about 45 per cent from their 2007 peak.

The Broadgate deal is understood to also involve the taking on of £2 billion in loans secured on the 32-acre estate, one of the largest prime commercial areas in London, which includes Broadgate Circle — best known for its open-air winter ice rink — Exchange Square, Finsbury Avenue Square and Broadgate Plaza.

A British Land spokesman would confirm last night only that the company had been involved in talks with several interested investors. British Land has insisted over recent months that it is not under any pressure to sell a share in the development, although analysts have pointed out that such a move would reduce its over-exposure to the City office market.

Analysts said that a buyer of a stake in Broadgate would have to spend more money to update some of the buildings.

In a note published yesterday, Mike Prew, of Nomura, said: “Broadgate is the sort of asset that probably appeals to overseas money, which is interested in asset profile more than performance, but it is not a simple ‘thin equity’ to take advantage of the recovery of the City market. The first-generation buildings on the estate are becoming obsolete. This will require considerable capital expenditure.”

The move comes days after British Land was named as the target of a possible £10 billion takeover bid by a consortium of Indian and Middle Eastern buyers, including Lakshmi Mittal, the billionaire who runs ArcelorMittal, the steel group.

In eight months at the helm, Chris Grigg, the chief executive, has cut the company’s debts from more than £5 billion to £3.24 billion through a £740 million rights issue in March and from the sale of assets. These included a 50 per cent stake in the Meadowhall shopping centre in Sheffield, South Yorkshire, for £587.7 million to London & Stamford Property.

The Broadgate development, started in 1985 by British Land and Rosehaugh Stanhope Developments, is one of the biggest commercial spaces in London at 4.8 million sq ft. The most recent additions — 201 Bishopsgate and Broadgate Tower — were built under the watch of Stephen Hester, the former chief executive who is now at Royal Bank of Scotland, and were completed last year.

Source: ' Times '

View All Latest News