LAND SECURITIES, Britain’s biggest quoted property company, said yesterday that it had entered exclusive talks with Slough Estates, its smaller rival, to swap most of its industrial portfolio for the bulk of Slough’s retail portfolio.
The two companies refused to disclose details until the deal is signed, but it is understood that Land Securities has agreed to swap about £250 million of its industrial assets for four of Slough’s shopping centres. The centres are at Surrey Quays and Lewisham in South London; Welwyn Garden City; and Taplow, near Maidenhead.
The move is unusual in the property sector, because swap deals are typically hard to do.
However, during the past three years, rival property companies have increasingly tried to co-operate with one another, rather than engage in cut-throat competition.
Land Securities recently agreed to form a joint venture in Scotland with British Land, one of its biggest competitors, and worked with Hammerson and Henderson Global Investors to redevelop the Bull Ring shopping centre in Birmingham.
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Mike Prew, analyst at Citigroup Smith Barney, said the Land Securities and Slough deal was a logical and complementary fit for both parties.
The deal comes after Land Securities’ decision earlier this year to put its £350 million industrial portfolio up for sale, having decided that it would prefer to focus on retail and office investments and on Trillium, its property outsourcing business.
Meanwhile, Slough, which predominantly focuses on industrial and office space, was happy to dispose of most of its retail assets in return for a one-off opportunity to buy more industrial assets. However, Slough will keep its stake in the Buchanan Galleries shopping centre in Glasgow.
Analysts said that the deal comes at a time when it is difficult for property companies to find good-quality assets to buy in a highly competitive market.
Commercial property investment is expected to reach record levels by the end of the year as private investors, institutions and property groups vie to buy good-quality assets.