Land Securities (LAND) has acquired a 75% stake in MediaCity, the 37 acre media, digital and tech hub home to the BBC in Salford, Greater Manchester, for £425.6m.
The site was previously owned by a 50:50 joint venture between Legal & General and Peel L&P. Landsec will partner with Peel L&P who will retain a 25% stake and continue to serve as asset and development manager.
The transaction includes £293.6m of debt (£220.2m on a proportionate basis), reducing LAND’s equity investment to £207.6m which is satisfied in cash drawn from existing facilities. LAND will also have an obligation to pay a further amount capped at £15m linked to building remediation works which will be completed post-transaction.
The waterside destination is home to creative, tech and media brands, from BBC North and ITV to Ericsson, The Hut Group, Kellogg’s and over 250 creative and tech businesses as well as schools and universities. The biggest tech and media hub outside London, MediaCity produces 50,000 hours of content every year, and is home to 8,000 residents and workers.
Phase one was completed 10 years ago and comprises 1.48m sq ft across 11 buildings including work space, studios, incubator labs, residential as well as ancillary leisure and retail. It is 96% let with a weighted average unexpired lease term (WAULT) of just under 10 years. It generates £31.1m of net operating income per annum, reflecting a 5.8% net initial yield. Over half of the income has rent reviews linked to RPI, with collars and caps guaranteeing future rental uplifts.
Phase two has already seen the completion of two residential towers – ‘The Green Rooms’ and ‘The Lightbox’ as well as mixed-use commercial space, the ‘Tomorrow building’. This second phase has outline planning consent for an additional 1.6m sq ft including office and residential, with an estimated Gross Development Value (GDV) of £750m, bringing the total space for phase two to 2.3m sq ft.
Mark Allan, LAND’s chief executive, said: “Mixed-use developments with a clear sense of place are becoming an increasingly important ingredient in the fabric of cities. Opportunities to participate in large scale, established mixed-use developments are scarce and MediaCity is one such opportunity.
“This acquisition presents us with the opportunity to deploy capital immediately into high quality income producing assets and also to invest further over time through the development of phase two. MediaCity is a compelling addition to our portfolio, providing the opportunity to invest and further develop the estate with the potential to be onsite from the first half of 2023. I’m particularly excited to be able to work alongside Peel, whose experience and expertise complements our own.”
The group said the acquisition “demonstrates further progress with Landsec’s ‘grow through urban opportunities’ strategic pillar, which is focused on providing long-term income generation and development optionality through mixed-use schemes in London and other major UK cities”.
It added the purchase “underscores Landsec’s strategic approach to investing in regional cities where it believes it can acquire significant scale. Greater Manchester is well placed to support Landsec’s strategy – it is the UK’s largest regional economy, the largest regional office market, in terms of stock, take-up and transactional liquidity, and is at the forefront of the emerging institutional build to rent market”.
LAND : Land Securities pays £425.6m for majority stake in MediaCity