British Land Co. bought offices, stores and land next to London’s Paddington Station for 470 million pounds ($707 million), anticipating that more tenants will be drawn to the area by a new high-speed rail line.
The properties at Paddington Central were purchased from Aviva Plc and other investors, British Land said in a statement today. The U.K.’s second-largest real estate investment trust will own 1 million square feet (93,000 square meters) of space once the site has been fully developed. It will be the company’s fourth-largest single asset by value.
Developers including Derwent London Plc and Great Portland Estates Plc are seeking to profit from the construction of the Crossrail high-speed rail line connecting London’s east and west. Paddington will be one of three Crossrail stations in the West End district when the rail line opens in 2018, said British Land, which is based in the city.
“Bigger users who want the location just can’t get space, let alone space at the sort of price that we can offer,” Chief Executive Officer Chris Grigg said by phone.
British Land has permission to build 355,000 square feet of office space on the two Paddington Central development sites. The company may seek planning approval to construct as much as 30,000 square feet of additional space, Finance Director Lucinda Bell said by telephone.
British Land was up 7 pence, or 1.2 percent, at 591.50 pence at the 4:30 p.m. close in London. The shares have gained 5.3 percent this year, while the FTSE 350 Real Estate Investment Trust Index has added 9.5 percent.
Paddington Central “is the most significant acquisition we have made since the equity placing in March, and we are confident that investment of those proceeds will now be accretive to 2014 earnings, ahead of our original objective,” Grigg said in the statement.
British Land raised 493 million pounds in a share sale in March and has since spent more than 750 million pounds on acquisitions excluding future property development spending, according to today’s statement.
The existing office buildings at Paddington Central will give British Land a yield of 6.2 percent when fully leased, Grigg said. That compares with 3.5 percent for office buildings in the West End district that includes Mayfair and St. James’s, broker Savills Plc said in May.