British Land, Blackstone JV To Develop London Building For UBS

2nd Aug 2010 10:56

By Anita Likus Of DOW JONES NEWSWIRES LONDON (Dow Jones)--The U.K.'s second largest landlord and developer, British Land Co. PLC (BLND.LN), and its private equity partner Blackstone Group LP Monday confirmed they will develop a new London headquarters for Swiss bank UBS AG (UBSN.VX). The new building at Broadgate Estate will be the biggest in London's financial district, The City, with 700,000 square feet of space, and will be built bespoke to UBS requirements, including office space and trading floors. It will not be a tower, in keeping with other buildings on the estate. In order to make space for the giant building, British Land and Blackstone's joint venture company, Bluebutton Properties, will demolish two existing buildings at 4 and 6 Broadgate, on the estate by Liverpool Street Station. The development, which is subject to planning approval, will cost some GBP340 million, excluding land and interest costs, with both JV partners sharing the costs. The deal will be seen as a coup for the owners, and in particular for Blackstone, which bought a 50% stake in Broadgate last summer, close to the bottom of the market. The deal is also crucial for the partners because they will retain their largest tenant at the Broadgate Estate. It will also be seen as good news for other property owners in the wider City of London leasing market because a major bank has decided to commit to London in the long term. UBS and the British Land joint venture partners have been talking about this contract for some time and in May signed a non binding agreement but details of the deal were undisclosed at the time. UBS will pay initial headline rent of GBP54.40 per square foot and, more importantly, the bank will defer any lease breaks in existing UBS lease agreements on other Broadgate buildings. The Swiss bank will move most of its operations, currently spread across about one million square feet in a number of properties in London, to the new building. JP Morgan analyst Harm Meijer said that, while the terms of the deal are in line with expectations, UBS deferring its break options on 755,000 square feet of occupied space elsewhere at Broadgate will generate additional income of GBP68 million to the joint venture partners. British Land Chief Executive Chris Grigg said "the new building will enhance the overall quality of Broadgate while generating an attractive development return." Construction is expected to begin in the middle of next year and the shell and core of the building is scheduled to be finished in the second half of 2014. -By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; [email protected] (END) Dow Jones Newswires August 02, 2010 05:56 ET (09:56 GMT)