Land Securities Group (LSE:LAND) has launched an equity issue to raise approximately £500m, funding its acquisition of Metrocentre and a further consolidation of its existing retail holdings.
The FTSE 100 real estate investment trust has exchanged contracts to buy 100% of Metrocentre, a top-10 UK shopping centre near Newcastle, from Tynehawk Holdings (Jersey) for net cash consideration of £516m.
It has also agreed heads of terms to acquire a further roughly £100m stake in its existing retail portfolio, consolidating ownership it already partly holds.
The equity issue comprises a non-pre-emptive placing to institutional investors via accelerated bookbuild, a retail offer through RetailBook, and a subscription of roughly £70,000 combined from chief executive Mark Allan and the chief financial officer, all at the same placing price.
Proceeds will cover the Metrocentre and additional acquisition considerations, with the balance of the purchase price funded from Landsec's existing debt facilities.
Metrocentre draws more than 16m visitors a year and generates retail sales of approximately £650m, with 282 stores across 1.86m square feet plus an adjacent retail park, and tenants including Apple, Zara, M&S and Primark.
Based on in-place net rental income of £41m, the £516m price implies a net rental income yield of 7.9%, with Landsec expecting a further circa 40 basis points of near-term upside from platform efficiencies.
The additional retail consolidation is expected to generate a net rental income yield in the mid-7% range.
"Our acquisition of Metrocentre represents a rare opportunity to obtain 100% control of a top-10 UK shopping centre," said Allan, adding that it offers "the scale, relevance and quality of catchment where demand from brands is highest."
Following completion, major retail destinations will account for approximately 46% of Landsec's annualised rental income, and the group will own three of the UK's top 10 and eight of its top 30 shopping centres.
The deals and equity issue are expected to be accretive to EPRA EPS from the first full year of operation, though neutral to EPS for the remainder of the current financial year due to integration timing, with accretion flowing through from FY28.
That lands against Landsec's existing guidance for broadly stable EPRA EPS in the year to March 2027 versus the 51.4p reported for FY26, with high single-digit percentage growth expected in FY28 and a FY30 target of approximately 62p.
On a pro forma basis as of 31 March, the combined transactions are expected to cut net debt/EBITDA by 0.5x to 7.9x and reduce loan-to-value by 1.0 percentage point to 37.7%, building on the 38.7% LTV and 8.4x net debt/EBITDA reported at the full year.
Completion of the Metrocentre acquisition is conditional on the dissolution of a legacy Intu Properties entity, expected on 9 October, and bondholder consent to a restructuring of Metrocentre Finance PLC's outstanding bonds, with bondholders representing more than 80% having already indicated support.