The Arlington Business Parks Partnership Sells 392,000 sq ft HQ in Reading and Announces Amendments to CMBS Facility

By Goodman Group, PRNE
Wednesday, October 5, 2011

LONDON, October 6, 2011 -

Arlington Business Parks Partnership Fund (ABPP) is pleased to announce two new strategic initiatives for the Fund.

  • The completion of the sale of Verizon’s 392,000 sq ft office headquarter’s (HQ) complex at Reading International Business Park to overseas clients of RREEF

  • Amendments to CMBS loan covenants securing the option to extend the loan maturity from July 2012 to July 2014

Sale of Verizon

A sale price in excess of GBP140 million was agreed for the HQ facility, which comprises phases I and II of Reading International Business Park, and is let to global communications provider Verizon for 10 years and houses its European Headquarters.

ABPP, which is managed by Goodman and operated by Legal & General Property, will retain the adjacent land for Phase III of the Park, which will provide up to 300,000 sq ft of office space for pre-let opportunities.

Paul Edwards, Director, Legal & General Property, said: “This sale is consistent with our ongoing strategy of concentrating on providing a good balance of high quality investment assets and development opportunities across the ABPP fund to service the needs of our investors. ¬†It clearly demonstrates that despite uncertain economic times, there is still good demand from investors for high quality out of town office developments and is a resounding endorsement from an overseas investor as to the strong underlying fundamentals that the Thames Valley offers.”

Jim Johnston, Managing Director UK Business Parks, said: “Despite the challenging economic climate we are beginning to see the re-emergence of the big pre-let, with evidence of tight grade-A office supply in some locations across the UK. This sale will help to rebalance the distribution of assets in the ABPP fund, helping to maintain an efficient capital structure and a strong financial position. The proceeds will be recycled as part of an on-going strategy to enhance investor returns and help to facilitate future commercial development opportunities across our 8 million sq ft consented land bank on a pre-let basis. We are currently on site with over GBP100 million of committed development to Centrica at Oxford Business Park, Greater Manchester Police at Manchester Central Park and other opportunities are expected to come forward in the near future.”

CMBS Update

ABPP’s GBP800m CMBS, issued by Epic Opera (Arlington) Limited, in August 2007 has subsequently been paid down through a combination of voluntary prepayments and asset sales to GBP401.7m of outstanding loans as at 28 July 2011.

Under the terms of the agreement, ABPP at its election may request a two year extension of the repayment date from July 2012 to July 2014, subject to meeting criteria including Loan to Value, Interest Cover and Net Worth covenants.

Amendments to the extension conditions have been agreed at no incremental cost to ABPP and substantially reduce any risk of non compliance.

In consideration to these amendments, ABPP has agreed to reduce the outstanding CMBS loans from GBP401.7m to GBP300m by January 2012 and GBP275m by April 2012. However, the net proceeds from the sale of Verizon’s HQ at Reading International will now be applied to reduce the outstanding loans to circa GBP270m in October 2011.

ABPP will seek to further reduce the loans to GBP200m during 2013 and note that there are no default consequences if loan reductions are not delivered.

James Cornell, CFO for Goodman in the UK, said: “The proceeds of the sale reduce leverage and provide certainty that the remaining CMBS debt can be extended, if required, to July 2014. Utilising these sale proceeds, ABPP will have repaid circa GBP530m of the GBP800m CMBS issued in August 2007. The resulting financial flexibility places ABPP in a very strong position to deliver enhanced risk adjusted returns.”

Strutt and Parker advised ABPP, with the purchaser advised by DTZ and RREEF, the real estate investment management business of Deutsche Bank’s Asset Management division.

About Arlington Business Parks Partnership

The Arlington Business Parks Partnership fund (ABPP) is a UK business park fund created in 2003, which is owned by investment partners Goodman, Legal & General Property, Prudential and Adia. ABPP owns a unique portfolio of high quality business parks in a managed environment located across the UK.

About Goodman Group (ASX: GMG)

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For further information on Goodman please contact:

Joanna Spinks        +44-20-7269-9348
Richard Stocks       +44-20-7269-9355


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