Landsec Buys A Whole Company To Find New Development Opportunities

Landsec said last autumn its strategy to make money would be selling fully leased assets and buying big, complex developments that offer the potential for high returns to anyone with the skills to pull them off. To achieve that aim, it is now taking private a listed peer that has floundered in recent months. 

The UK’s second-largest REIT has a deal to buy U+I, the regeneration and development specialist, for £190M, approved by 35% of U+I's shareholders. A full shareholder vote to approve the deal is still required.

Of interest is the part of the business that U+I describes as its "core regeneration assets," one mixed-use development in Manchester and two in London, where planning is already in place or well advanced. 

Landsec said these three schemes give it the opportunity to deploy £600 to £800M of capital in the short-to-medium term and have a potential end value of £2.5B. All of the schemes are public/private partnerships that are being built on publicly owned land. 

Mayfield, Manchester is a 24-acre site in Manchester city centre, adjacent to Manchester Piccadilly railway station, which consists of approximately 2M SF of office, retail and leisure space and 1,500 new homes set around a 6.5-acre public park. The site is currently owned in a joint venture with Manchester City Council, Transport for Greater Manchester and London and Continental Railways. U+I has a 50% share in the Mayfield JV and acts as development manager for the site.

For the past few decades, Landsec has focused exclusively on London offices and regional retail. The Mayfield scheme will be its first foray into regional offices in living memory. 

At Morden Wharf, on Greenwich Peninsula, U+I has a conditional development agreement with Morden College, a charitable trust with significant land holdings on the Greenwich Peninsula. U+I has achieved a resolution to grant planning consent for 1,500 new homes, 200K SF of warehouses and 50K SF of retail across a 19-acre site on the western edge of the peninsula.

Finally, Landmark Court is an office-led development site located within walking distance of London Bridge station and Borough underground station, with planning permission for 200K SF of offices, retail and workspace, plus 36 new homes. Landmark Court will sit in a joint venture (conditional on receipt of development funding) of subsidiaries of U+I and Transport for London, held 51:49 respectively. TfL and Network Rail are freeholders of the site, with a new 299-year lease now agreed for development.

Another site in Cambridge is also of potential interest, Landsec said, adding a number of other sites and existing assets will likely be sold off over time. 

U+I undertook a strategic review in May to define the future of a development business hit by a lack of income during the coronavirus pandemic. Earlier this year, the company subleased its HQ to save money. 

There was no confirmation as to the fate of U+I’s management team as part of the deal, but Landsec did say that the deal gave it “an attractive pipeline of mixed-use urban development opportunities along with complementary skills and expertise”.