Land Secs' £750m Trillium sale prompts PFI uncertainty

Uncertainty surrounds the future of Land Securities’ PFI interests after the sale of  Trillium, its PFI and outsourcing arm, to rival property giant Telereal this week.

The £750m sale, was brokered in the face of spiralling property prices, falling short of the £1bn LandSec was looking for when it went to market a year ago. Telereal, part of the £6bn private William Pears property empire, agreed the £750million deal for Trillium with the proviso that only £444m is an upfront cash payment.

LandSec chief executive Francis Salway said: "We are pleased to have concluded this sale in a challenging economic environment. The cash proceeds will strengthen our balance sheet in the current market and subsequently put us in a stronger postion as the market turns."

Telereal will pay Land Securities a final £25million in cash within two years and take on £49million of debt. The final £232m of the £750m deal is made up of cash generated by Trillium since April 2008, after its sale was announced, through property sales. Telereal became sole bidder in November after a Middle Eastern consortium fronted by PCP Capital Partners withdrew a £1.1bn offer last autumn.

Graham Edwards, CEO of Telereal said: “Bringing together Telereal and Trillium will benefit our customers, our staff and our shareholders. Trillium and Telereal are a great fit – we are two of the leading players in the real estate sector whose businesses are highly complementary.”

However Telereal declined to discuss its commitment to the PFI market. Trillium pulled out of a major PFI deal to deliver the MoD’s £1bn Defence Technical Academy in December last year, after raising concern about rising costs.

Trillium is also shortlisted alongside Bovis Lend Lease for the £1.2bn Birmingham City Building Schools for the Future deal. The award of preferred bidder was due in December but was delayed by the council until this month in lieu of the sale.

A £2bn PFI plan to upgrade Northern Ireland's government buildings was also postponed last autumn after it emerged that Land Sec and Telereal, the two shortlisted bidders, were negotiating the sale of Trillium.

A Telereal spokeswoman said: “We cannot discuss any plans until the sale is finalised.”