Corporate real estate: Telereal closes deal to manage BT properties

Telereal, the joint venture between Land Securities Trillium and The Pears Group, has exchanged binding contracts with BT for the £2.38bn sale and leaseback of the telecoms giant's 6,700 properties.

Under the terms of the 30-year agreement, to be completed on or before 14 December, Telereal will provide accommodation and estates management services for BT.

As a result, BT will be able to be more flexible about office requirements and has the option to vacate an agreed percentage of space annually, without paying a penalty.

The properties have been split into two groups. The Specialised Estate includes telephone exchanges and technical buildings, and accounts for 75 per cent of the total estate.

The remaining 25 per cent are part of the General Purpose Estate, which includes offices and other property.

Almost 95 per cent of the 6,700 properties are freehold or valuable leasehold with five per cent on short leasehold. BT Tower and BT Centre in Newgate Street, London are not included in the transaction.

BT will pay Telereal £355m a year — this will increase three per cent per annum — for use of the freeholds, plus an initial extra payment of £190m, which analysts believe will be offset by lower interest payments on the company's debt.

LS Trillium and Pears will invest up to £200m in Telereal as equity finance for the deal. Telereal will finance the deal through a £1.8bn asset-backed securitisation, secured against the Specialised Estate and a £400m bank debt secured against the General Purpose Estate. Almost 350 BT employees will transfer to LS Trillium Telecom Services.