The Great Debate UK
British Land is in a good position to take advantage of opportunities. We know because the chairman told us. Why then, is he supposed to be contemplating selling a stake in London office complex Broadgate to Blackstone?
Given how far prices have fallen, the timing looks odd, especially for a company that claims to be in a solid financial position. However, it may make more sense than it appears to. Bank lending and property markets are soft, but the peculiarities of Broadgate's debt structure may make it worth while for both sides.
Broadgate, now over 20 years old, is showing its age and, at 2.2 billion pounds, is an uncomfortably big lump in British Land's portfolio. Selling a stake would allow the company to reduce risk and diversify its business.
For a buyer, the attraction lies as much in the quality of Broadgate's liabilities as those of its assets. The estate may need some work, but it has a state-of-the-art pre-credit crisis debt structure, which any buyer would inherit.
Sir John Ritblat, founder of British Land, was a believer in “buy and hold.” Fortunately for shareholders, Stephen Hester, brought in as chief executive ahead of Ritblat’s retirement in 2006, took a more active view of asset management.