British Land squeezes a bit more out of UBS

Swiss banking giant UBS moved a step closer to occupying a new bespoke building in the heart of London's financial district after thrashing out a few fine details over leasing agreements with property owner British Land.

Real estate investment trust British Land said development of the 700,000 square foot (sq ft) building at 5 Broadgate, close to Liverpool Street station, can now go ahead, after the remaining outstanding conditions on the pre-let agreement with future tenant UBS were satisfied.

British Land said demolition of the buildings currently occupying the site is well underway and should be completed in April of 2012. The new building will be built close to UBS's existing offices in Broadgate circle.

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British Land owns the property in a joint venture partnership with Blackstone.

UBS will lease the entire building for an average of 18.2 years before the "first break" option becomes effective. It will pay an initial rent of £54.50 per sq ft subject to annual increases in line with Retail Price Index inflation (within a range of 0-4% per annum). UBS will be given a rent free period of 18 months.

As part of the agreement, UBS has also deferred exercising lease break options on 755,000 sq ft of existing space which they currently occupy at Broadgate (comprising 1-2 Finsbury Avenue, 8-10 Broadgate and 100 Liverpool Street) until 18-36 months following practical completion, to allow the new building to be fitted out.

The earliest date that UBS can break the leases is towards the end of the second quarter 2016. Deferring the lease breaks will ensure that the joint venture receives a further £74m of rent, approximately £32m of this was agreed by UBS on signing of the conditional agreement in 2010, as part of a package of negotiated lease amendments.

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