By Saira Zaki
Lovells and Linklaters & Alliance have advised on a ground-breaking £457m 'property outsourcing' deal for Abbey National – one of the first transactions of its kind.
Under the terms of the deal, structured by accountants Ernst & Young (E&Y), Abbey National sold its property portfolio, comprising 1,300 properties, for £457m to Mapley Columbus, a company linked to financier George Soros. Abbey then leased back the properties, netting itself £70m in profit. It is the first large sophisticated outsourcing deal in the private sector to hit the property market.
Lovells, led by head of property Bob Kidby, advised Abbey – a first-time client. The firm won the instruction following a beauty parade last November.
It beat three other firms: Nabarro Nathanson, Slaughter and May and Linklaters & Alliance.
Linklaters, led by property partner James Knox, was eventually pulled into the deal when Mapley then instructed it, winning Linklaters a new client too. The deal's advisers, including Kidby and Mike McNamara, a partner at E&Y, predict that the transaction will revolutionise the property deals market for corporates with large property portfolios.
The BBC has shortlisted two consortia to take forward plans for a similar deal. Abbey was not only able to dispose of its property risk, minimising its exposure and taking the costs off its balance sheet, but was also able to fix its property costs for the next 20 years.
Although the deal is said to be the first in the private sector it follows a handful of government-related sale and leasebacks under schemes from the Inland Revenue and the Department of Social Security.
McNamara said: "The corporate deals differ from the Government-oriented ones because they are even more innovative."
He added: "This deal paves the way for others who have previously been more fearful of this type of deal."