Sept. 18 (Bloomberg) -- Blackstone Group LP agreed to buy 50 percent of Broadgate, the largest office complex in London’s main financial district, from British Land Co. in a transaction that values the properties at 2.1 billion pounds ($3.4 billion).

The sale of Broadgate, built next to Liverpool Street station in the City of London in the mid-1980s, is the biggest in the U.K. capital since the commercial-property slump began two years ago. British Land said the deal will reduce its debt and make acquisitions easier, according to a statement today.

“We’re very cautious about the fragile state of the recovery and by no means believe that the market has bottomed out,” said Peter Rose, a New York-based spokesman for Blackstone. “But this was a unique opportunity to acquire a first-class asset and partner with an experienced operator.”

Blackstone, the world’s biggest private equity firm, will pay 77 million pounds for the stake and assume 987 million pounds of debt, British Land said. The London-based real estate investment trust sought a Broadgate partner after raising more than 1 billion pounds this year to bolster its balance sheet. Broadgate is the company’s largest asset and about 2 billion pounds of the complex’s value is in securitized debt.

“Strategically, it’s good news for British Land,” said Harry Stokes, a London-based analyst at Evolution Securities Ltd. with a “reduce” rating on the stock. “It reduces their exposure to old City of London offices.”

Shares Climb

British Land, the U.K.’s second-largest REIT by market value, rose 17 pence, or 3.3 percent, to 528 pence in London. The shares gained 32 percent in the six months through yesterday, the second-worst performance among the 17 stocks in the FTSE 350 Real Estate Index, which climbed 64 percent.

Broadgate’s office buildings, stores, restaurants and ice- skating rink account for about a third of British Land’s rental income. About 30,000 people work in the complex’s 4.4 million square feet (408,773 square meters) of space for companies including UBS AG, the biggest tenant, Royal Bank of Scotland Group Plc and law firm Herbert Smith LLP.

A venture between New York-based Blackstone and British Land will own the 14 securitized buildings as well as 201 Bishopsgate and the Broadgate Tower, the other properties in the complex. British Land said it was in talks to sell part of Broadgate in June, without naming potential buyers.

Sinking Value

Broadgate’s value fell 32 percent during British Land’s last fiscal year, according to the company’s annual earnings report, as the U.K. commercial-property market declined. That led to a net loss for the 12 months ended March 31 of 3.88 billion pounds.

British Land and Blackstone plan to refurbish Broadgate during the next five years at a cost of about 100 million pounds, said Tim Roberts, head of the U.K. company’s office unit, on a conference call with reporters today.

“Broadgate is a fantastic strategic location in the City, but it needs to be modernized,” said Stokes. “One hundred million isn’t going to do it.”

To contact the reporter on this story: Chris Bourke in London at cbourke4@bloomberg.net.

Last Updated: September 18, 2009 11:59 EDT