Landsec has bought a majority stake in Salford’s MediaCity for £425.6m.
Under the deal Landsec will partner with Peel L&P, which will retain a 25% stake and continue to serve as asset and development manager.
The 37-acre media, digital and tech hub in Salford, Greater Manchester was previously owned by a 50:50 joint venture between Legal & General and Peel.
MediaCity has a gross asset value of £567.5m. Landsec will pay a net purchase price of £425.6m for the 75% interest. The transaction includes £293.6m of debt, £220.2m on a proportionate basis, reducing Landsec’s equity investment to £207.6m, which is satisfied in cash drawn from existing facilities. Landsec will also have an obligation to pay a further amount, capped at £15m, linked to building remediation works which will be completed post-transaction.
The waterside destination is home to the BBC’s northern operations, ITV and Ericsson, as well as more than 250 creative and tech businesses, along with schools and universities. It is the UK’s biggest tech and media hub outside London, producing 50,000 hours of content every year.
Phase one was completed 10 years ago and comprises 1.48m sq ft across 11 buildings, including workspace, studios, incubator labs, residential as well as ancillary leisure and retail. It is 96% let with a WAULT of just under 10 years. It generates £31.1m of net operating income per annum, reflecting a 5.8% net initial yield. More than half of the income has rent reviews linked to RPI, with collars and caps guaranteeing future rental uplifts.
Phase two has already seen the completion of two residential towers – the Green Rooms and the Lightbox – as well as the mixed-use Tomorrow building. In addition, the site has outline planning consent for an additional 1.6m sq ft including office and residential, with an estimated GDV of £750m.
Landsec chief executive Mark Allan said: “Mixed-use developments with a clear sense of place are becoming an increasingly important ingredient in the fabric of cities. Opportunities to participate in large-scale, established mixed-use developments are scarce and MediaCity is one such opportunity.”
He added: “This acquisition presents us with the opportunity to deploy capital immediately into high-quality, income-producing assets and also to invest further over time through the development of phase two. MediaCity is a compelling addition to our portfolio, providing the opportunity to invest and further develop the estate with the potential to be onsite from the first half of 2023. I am particularly excited to be able to work alongside Peel, whose experience and expertise complements our own.”
The acquisition demonstrates further progress with Landsec’s “grow through urban opportunities” strategic pillar, following its bid for U+I earlier this week.
Peel chief executive Steven Underwood said: “Our new partnership with Landsec is another exciting step towards our stated vision to double the size of MediaCity. As MediaCity enters its 10th year, we look forward to working alongside Landsec whose ethos and vision are aligned with ours, to deliver MediaCity’s global potential benefitting all MediaCity’s local, regional and national stakeholders.”
Wes Erlam, director of urban regeneration at L&G said it would recycle the funds into new opportunities. “As MediaCity now reaches its next stage of maturity, this sale enables us to release growth capital for deployment into new opportunities, as we continue to identify early-stage projects and ventures where we can create significant value.”
Addleshaw Goddard acted as legal advisor to both Peel and Legal & General.
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