British Land closes first-ever zero percent convertible bond by a UK REIT

The senior, unsecured bonds – guaranteed by the British Land – carry an maturity date of 9 June 2020. The funds raised will be used to repay bank borrowings . 

The bonds will be convertible into ordinary shares of British Land, at a premium 27.5% above the volume weighted average price of the shares between launch and pricing. British Land’s share price closed yesterday at 868p.

Bondholders are only motivated to convert their bonds into equity when the share price rises above the agreed premium threshold, which in this case, will be £11.03. The conversion price translates to an unlevered total return at the property level of around 7% per annum over  the next five years. 

British Land’s share price has fallen 15.5p since markets opened this morning.

British Land acquired One Sheldon Square for £210m in April 2015 from Malaysia’s Employees Provident Fund and Surrey Quays Leisure Park for £135m from Aviva Investors. The remaining net proceeds are earmarked for committed development spending.

The £210m acquisition of One Sheldon Square was a strategic acquisition to increase British Land’s ownership interest at its Paddington Central office-led campus. One Sheldon Square is fully let on a total annual contracted rent of £9m. Positioned at the entrance to the campus, it gives the British Land control over a key point of access to Paddington Central.

The Surrey Quays Leisure Park acquisition completes a 46-acre site at Canada Water, assembled in four transactions over five years. This is one of the most important regeneration projects in London which could comprise up to 7 million sq ft (gross floor area) of office, retail, residential, leisure and community space alongside significant public realm.

In a statement, British Land said that “the offering contributes to the company’s existing strong financial position while also taking advantage of the current favourable market conditions to diversify its medium term sources of finance and keep its cost of debt low”.

Goldman Sachs International, Morgan Stanley & Co. and UBS Limited are acting as global coordinators and Goldman Sachs, Morgan Stanley, The Royal Bank of Scotland and UBS are acting as joint bookrunners. Morgan Stanley and UBS are acting as corporate brokers and advisers to the company.

About CoStar News

Finance Editor, CoStar News
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