British Land has bought 23 department stores from Debenhams for £495m.
The deal for the 3.28m sq ft of freehold and long leasehold stores brings the value of British Land’s retail portfolio to over £6.4bn.
The stores are located in prime positions on UK high streets, including Oxford Street in London, Manchester, Cardiff and Chester.
They are leased to Debenhams for a term of 30 years from March 2004 (35 years in the case of Oxford Street and Manchester) at a total rent of £27.9m pa from March 2005.
The rent increases annually by 2.5%, with a review in March 2019 and five-yearly thereafter.
Debenhams has the option to renew at the end of the lease for a further 25 years with a rent reviewable at five-yearly intervals to market rent.
The transaction will be financed at rates of around 5.1% from existing cash and debt facilities, including the £500m additional long-term bond finance being finalised as part of the Broadgate refinancing.
BL chief executive Stephen Hester said: “This well-let portfolio has guaranteed annual uplifts throughout a minimum term of 30 years, and potential for additional rental growth, plus an initial income return of 5.6%.”
He added: “We believe the 23 stores, leased to one of the leading department store operators in the UK, provide an excellent addition to British Land’s retail portfolio.
“The secure income growth is expected to be increasingly valuable with various asset management opportunities on top and in a sector well known to us.”
British Land was advised by Dalgleish. Lazard acted for Debenhams.
References: EGi News 14/02/05
