British Land snaps up 17 Virgin Active racket club properties

Friday, Jul 08 2011 by
British Land snaps up 17 Virgin Active racket club properties

British Land (LON:BLND) , the FTSE 100 real estate group, has agreed a deal to buy a portfolio of freehold and leasehold racket clubs from Societe Generale for £179 million. The portfolio consists of 17 premium racket clubs which will be let on new, 25 year leases to Virgin Active pending its acquisition of the Esporta fitness business. The move is a departure from British Land’s core retail and London office focus but the company said it was an example of ways in which it could add incremental value. The British Land share price responded with a rise of 1.5p to 606.5p.

The properties have been acquired at a net initial yield of 7.3% and an equivalent yield of 8.4% and will generate an initial annual net rental income of £13 million. The leases are subject to a fixed uplift at year five, compounded at 2.5% pa, followed by annual RPI uplifts of between 1% and 4% for the remainder of the term. The average rent on the new leases is £8 per sq ft. The properties acquired have a total of 1.7 million sq ft of leisure and gym facilities spread over 380 acres of land. The purchase price represents a capital value of just over £100 per sq ft. The purchase is conditional on the Office of Fair Trading’s approval of Virgin Active's acquisition of the Esporta business and will be funded through British Land’s existing facilities.

Nearly 85% (by value) of the clubs acquired are located in the south-east of England, with nearly half of the clubs by value within the M25. Offering an extensive range of facilities, the clubs are all well located on the edge of major towns, are highly accessible and dominant in their catchment areas. Virgin Active will be the second largest provider in the UK with 124, mainly mid to high end market clubs and over 425,000 members. The acquisition of the Esporta business will provide Virgin Active with a strong presence in the premium health club sector where membership and revenues have remained resilient. The Esporta clubs are expected to benefit from Virgin Active’s proven management skills alongside significant new investment.

The purchase of the Esporta properties brings British Land’s total acquisition spend over the last 18 months to £784 million. The acquisitions, which include Drake Circus shopping centre in Plymouth, Green Lane's shopping centre in Barnstaple and Hutchinson 3G's UK head office in Maidenhead, as well as a number of development properties, generate annualised incremental rental income of £46 million.

Chris Grigg, Chief Executive of British Land said, "While we remain focused on our core retail and Central London office markets, this acquisition demonstrates British Land's ability to work with banks to unlock opportunities to create incremental value. These high quality assets will be operated by a strong, established management team and provide us with a secure and growing income stream. The acquisition further underlines the strength of our property, structuring and financing skills and we expect more opportunities will continue to emerge in the coming year."


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The British Land Company PLC is a real estate company. The Company owns, manages, develops and finances a portfolio of commercial properties focused on retail locations around the United Kingdom and London offices. It creates and operates places for people to work, shop and live in. Its segments are Offices and residential, Retail and leisure, Canada Water and Other/unallocated. Its three principal sectors are Offices, Retail and Canada Water. Its portfolio of commercial property is focused on retail locations around the United Kingdom and London offices. Its Retail and Leisure portfolio is focused on regional and local multi-let assets. The Office sector includes residential and the Retail sector includes leisure. The Company's properties include Canada Water Masterplan; Broadgate, Regent's Place, Paddington Central, The Leadenhall Building, 100 Liverpool Street, Ealing Broadway, Broadgate-201 Bishopsgate and Broadgate-155 Bishopsgate, among others. more »

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