Landsec has acquired a 75% stake in MediaCity, Europe's leading, digital, media and tech hub in Manchester, for £425.6 million

It was previously owned by a 50:50 JV 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.

MediaCity has a gross asset value of £567.5m. Landsec will pay a net purchase price of £425.6m for the 75% interest. The transaction includes £293.6m of debt (£220.2m on a proportionate basis), reducing Landsec’s equity investment to £207.6m which is satisfied in cash drawn from existing facilities. Landsec will also have an obligation to pay a further amount capped at £15m linked to building remediation works which will be completed post-transaction.

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 WAULT of just under 10 years. It generates £31.1m of net operating income per annum (100%), 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 the award-winning 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,.

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Mark Allan, Landsec CEO 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 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.

The MediaCity purchase also 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.

Steven Underwood, Peel L&P CEO said: "In the past 10 years we have created a unique destination, currently unrivalled in the UK for its breadth of offering, from global content creation and innovation, to waterside living and leisure. Our successful partnership with L&G over the past six years has made possible great strides in MediaCity's phase two delivery, seeing over 60,000 sq ft of commercial space, a 110 room hotel and 750 apartments added to MediaCity over that period.

"Our new partnership with Landsec is another exciting step towards our stated vision to double the size of MediaCity. As MediaCity enters its 11th year we look forward to working alongside Landsec whose ethos and vision are aligned with ours, to deliver MediaCity’s global potential benefitting all MediaCity’s local, regional and national stakeholders."