British Land Reduces Balance Sheet Risk With Blackstone JV

British Land (BLNN.L), the UK property firm, has further de-leveraged its balance sheet in response to the sharp falls in commercial property values over the past 18 months.

A key step in that de-risking process was achieved on Friday on news the firm had agreed a partnership with Blackstone Group (BX), in which Blackstone is to buy into a £2.13bn joint venture incorporating the substantial Broadgate complex neighbouring Liverpool St. Station in the City of London.

Blackstone will acquire 50% of the JV which includes £987m of third party debt (half of the total JV debt of £1,973m secured against Broadgate assets). The total debt has an average maturity of 16 years at an average rate of 5.04%.

The development represented 27% of British Land’s total portfolio. The transaction will reduce concentration exposure to 16% and City of London exposure from 31% to 21% of the group’s portfolio.

Blackstone should add value to the JV not least as it has long term relationships with many of Broadgate’s tenants. The agreement follows a successful capital raising program in which Blackstone secured commitment of Euro 3bn for its European fund. Broadgate’s tenants include Royal Bank of Scotland, UBS and Deutsche Bank. Rent from the complex is currently £180m per annum and the weighted average lease length is 11 years.

The deal still requires shareholder and regulatory approval though obstacles are not anticipated. British Land’s loan to value ratio will stand at 30% post transaction.

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