UK telecoms giant BT is set to raise over £2bn through the UK’s biggest-ever corporate outsourcing deal.
To realise the value of the estate it will transfer the ownership and facilities management of its entire UK property portfolio, comprising 6m m2 across 7,500 properties.
More than 70% of the portfolio is operational property, mostly telephone exchanges, of which BT will retain the freehold with the preferred bidder taking a long leasehold. Non-operational buildings will be sold to the preferred bidder, with BT taking leases of an initial period of up to 30 years.
BT’s property director, Alan White, has been preparing the outline for the deal for nearly two years. He said: “It is the most radical option we looked at during a long consideration process, but we feel it will be the best option. We needed to do something about the debt and by providing 20% of [BT’s] planned £10bn debt reduction, we feel we are doing our part.”
Industry sources say that Trillium, the outsourcing specialist recently bought by Land Securities, George Soros’s Mapeley and the Nomura-backed Servus are all preparing bids. White would not reveal any names but confirmed that he has already held negotiations with a number outsourcing specialists: “It is at a very early stage but we have held talks with a handful of potential bidders. It is too early to say exactly how much rental income the future partner can expect but that is something that will be calculated as the process continues. We will present bidders with details of everything we require other than rent and the preferred party will be chosen on the basis of the highest bid price and lowest rent demand.”
It is thought that rental income from the contract would be less than BT’s current £400m pa (including the computed rent for the freehold portfolio) and the £200m pa it pays for facilities management services, and will include more than 100 development opportunities for the chosen partner.
One corporate outsoucing expert said: “BT has acquired a reputation for being set in its ways. This will show the world that it is actually a trailblazer. It highlights the need for non-property companies to break away from the burden of owning and managing its buildings. Frankly, if BT can do it, anyone can and I think you will see a flood of similar deals in the coming months.”
A preferred bidder is expected to be chosen by the summer with the deal being completed by the end of the year.
Under the terms of the proposed contract, BT’s 1,000-strong property services department – including White – will be transferred to the chosen partner and the company does not anticipate any redundancies. DTZ Debenham Tie Leung and Schroders are advising BT on the property and corporate elements respectively.
