Land Securities has finally managed to sell its Trillium outsourcing unit, but has had to settle for a lower-than-expected headline price of £750m.
Trillium will be acquired by the privately held William Pears Group, more than a year after the business was first touted to potential suitors, as the miseries in the property market have crimped companies' ability to sell real estate assets.
Trillium, which manages the property of large public and private sector occupiers, has been sold to the property investment and services firm Telereal, a subsidiary of William Pears founded in 2001.
The William Pears Group was formed in 1952 by the entrepreneur Bernard Pears and his son Clive, and is still owned and managed by the Pears family. It owns properties and investments worth more than £6bn. Trillium had gross assets of almost £1.3bn at the end of September.
The sale, which does not include the Accor Hotels arm, is expected to complete on Monday. Telereal will pay £444m in cash, and the balance of the £750m is based on Trillium's balance sheet.
Land Securities' chief executive, Francis Salway, said yesterday: "The sale leaves the group with a stronger balance sheet and with a simpler property investment and development company with market leading positions in the London office and retail sectors."
The unit was put up for sale in autumn 2007, when Land Securities outlined now defunct plans to demerge into three retail, London property and real estate outsourcing businesses.
At the time, some experts said the cash-generative unit, which posted underlying operating profits of £102m in the year to 31 March, could fetch as much as £1.5bn, but a sharp decline in credit and property market conditions dampened buyer interest.
Land Securities said the sale price represented a loss of £306m on a 30 September valuation, but that the transaction would generate £444m of cash which it would use to reduce group debt by around 10 per cent. "We clearly have to accept that pricing of assets has changed since early autumn with the very substantial change we have seen in the economy and with asset pricing generally," Mr Salway said.
Land Securities shares, which have lost more than half their value since mid-2007, fell another 1.6 per cent to 984p yesterday.
Analysts said the Trillium sale would hit earnings but resolution of the protracted sales process was to be welcomed, particularly since recession had put Trillium's future earnings under increased pressure.
Mr Salway said the Department of Work of Pensions, one of Trillium's biggest clients, was continuing to vacate space and the value of the business had diminished significantly since March.Reuse content