British Land in £470m Paddington purchase
British Land has spent £470m on buying up most of the Paddington Central estate, a 1.2m sq ft office-led, mixed-use estate near Paddington Station in West London. The group says the investment “offers an attractive blend of income and capital return, with major development potential and significant future opportunity to improve the estate through asset management.”
In a complex transaction arranged with majority owner Aviva Investors, British Land has acquired three of the existing seven buildings in the estate plus a retail/leisure cluster totalling 610,000 sq ft let to major corporates with an average lease length of nearly 11 years and 91% occupancy. British Land has also acquired two sites with 355,000 sq ft of consented office development at an effective price of £175 per sq ft, plus another 80,000 sq ft of potential development currently occupied by Crossrail that will revert to British Land by 2018. 
The group points out that the area is poised to gain from improvements in local infrastructure and regeneration schemes; in addition to Paddington station, a major London rail and tube interchange that is also connected to Heathrow via the Heathrow Express service, the area will also benefit from the new Hammersmith & City line station in 2014 and the Crossrail station in 2018. Paddington will be one of only three Crossrail stations in the West End – the new line will improve connections from the West End to the City and Canary Wharf.
More proactive management of the properties in future will provide “significant future opportunity to drive returns,” the group says, including letting remaining vacant space; by improving public spaces and the retail and leisure provision; and by developing the remaining sites to complete the estate. “The current office rent which averages £49.50 per sq ft is attractively priced relative to the West End, and we therefore believe the prospects for growth in rents from these levels is good,” British Land notes.
British Land says the purchase is in line with its strategy to increase its focus on London property and on West End property in particular, and to replenish its development pipeline. The deal raises the weighting of West End offices in its offices portfolio to 57% from 52% and increases the group’s near-term development pipeline by £250m.
Chris Grigg, Chief Executive, British Land, said: “This is the most significant acquisition we have made since the equity placing in March [through which the group raised £493m] and we are confident that investment of those proceeds will now be accretive to 2014 earnings, ahead of our original objective.”
