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Ikea’s Owner May Spend ‘Billions’ to Develop U.K. Properties

Ikea Owner May Spend ‘Billions’ to Become Major U.K.
A customer walks past the bedding products on display at the Ikea store in Oslo. Photographer: Heidi Wideroe/Bloomberg

The owner of the Ikea retail franchise said it has “billions” of pounds to spend as it starts an expansion into the U.K.’s homebuilding and real-estate development market.

Inter Ikea Holding SA’s LandProp unit has acquired several hundred hectares near London to build 10,000 homes, Managing Director said in an interview yesterday. The company has also purchased a 50-hectare (124-acre) site in Suffolk for a non-residential project in partnership with the separate Ikea Group retail company.

“Our ambition is to be seen as one of the biggest development players in the U.K. in the coming years,” Mueller said. “We are able to invest huge sums of money -- we are talking about billions instead of millions.”

LandProp said yesterday that it completed the purchase of land to create a 10-hectare site next to the Olympic Park in east London. In January, the unit of Luxembourg-registered Inter Ikea will seek approval to build 1,200 homes, a hotel, offices, shops and restaurants on the land.

Mueller declined to give further details about the land transactions near London and in Suffolk because the information is private and the closely held company is in talks to acquire adjacent sites.

Olympic Park

Inter Ikea’s board approved the U.K. expansion plans two years ago, attracted by prospects of falling land prices and forced sales. One of the first purchases was a 5.5-hectare portion of the site near the Olympic Park in June last year in a foreclosure sale, Mueller said.

The company, which develops various types of property except malls and big box retail outlets, had focused its expansion until now on former Soviet bloc countries such as Poland, Latvia, and Lithuania as well as the Benelux countries.

LandProp doesn’t need to borrow to finance its purchases because of the cash its parent generates in franchise fees paid by the 325 Ikea stores around the world plus other sources of income, Mueller said.

“We are completely equity driven and money isn’t a problem at all,” he said.

Aside from the homes that it plans to build at its “Strand East” project in east London, LandProp will construct shops, restaurants, a 350-bedrooom hotel and 480,000 square feet (44,600 square meters) of offices. It intends to remain as manager of the development, the executive said.

LandProp is in talks to acquire more sites in east London and elsewhere in the U.K., Mueller said.

“We have come in with a strategic view and not just to jump in and jump out,” he said.

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