Bloomberg News

Virgin Media, Morrison Hire Lease-Breakers to Cut Bill

February 24, 2012

(Company corrects final paragraph to show that Jones Lang LaSalle advised SPS.)

Feb. 24 (Bloomberg) -- Virgin Media Inc. and William Morrison Supermarkets Plc became the latest companies to seek outside help disposing of surplus rental properties in the U.K. to cut costs.

Virgin Media, the broadband provider that’s the U.K.’s second-largest pay-television company, agreed to transfer 28 surplus offices to Legacy Portfolio Ltd., according to an e- mailed statement from Cushman & Wakefield Inc. that didn’t disclose the financial terms.

Morrison, the U.K.’s fourth-largest supermarket chain, transferred 28 surplus stores and other commercial properties to Surplus Property Solutions Ltd., or SPS, in a multi-million- pound transaction, Cushman said. The U.S. property broker advised Virgin Media and Morrison.

The deals “demonstrate how the market is continuing to mature,” said Matthew Stone, a London-based partner at Cushman. He referred to lease liability transfer deals struck in the past 18 months involving Wolseley Plc and Carillion Plc.

Under the transfers, London-based Legacy Portfolio and Glasgow-based SPS will assume the costs relating to the rented properties from the tenants and try to reduce them as quickly and as cheaply as possible. They will receive an upfront fee covering only part of the total costs until the leases expire for the properties, which include insurance, security, taxes, maintenance and utilities in addition to rent.

Legacy will take over 530,000 square feet (49,240 square meters) of office space across the U.K., allowing Virgin Media “to focus on adding value to our operational estate of over 650 properties,” Paul Harris, Virgin’s executive director of property, said in the statement.

The outsourcing companies make money by keeping whatever is left over from the upfront fee. They seek to dispose of the unwanted leases, removing lease-related costs for Virgin and Morrison.

Jones Lang LaSalle Inc. advised Legacy on the Virgin deal and acted for SPS on the Morrison transfer.

--Editors: Andrew Blackman, Ross Larsen.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.


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