UPDATE: London & Stamford To Buy HBOS Radial Fund

Opportunistic landlord and investor London & Stamford Property Ltd. (LSP.LN) is buying Radial, a distribution fund owned 50-50 by Warner Estate Holdings (WNER.LN) and HBOS PLC (HBOOY), for just under GBP215 million, a person familiar with the deal said Wednesday.

The person said London & Stamford will buy 16 properties as part of Radial. The properties' tenants include building materials supplier Travis Perkins PLC (TPK.LN), supermarket Tesco PLC (TSCO.LN) and logistics company Eddie Stobart.

The deal, which will cost just under GBP215 million including all costs, is expected to close this week, the person said.

HBOS, which is owned by Lloyds Banking Group PLC (LLOY.LN), is also providing financing for the acquisition as London & Stamford is expected to use its GBP150 million revolving credit facility it has with HBOS to finance part of the deal, with the remainder to be paid in cash.

London & Stamford, led by real estate veterans Patrick Vaughan and Raymond Mould, was the first property company to start buying assets at the bottom of the market in January last year.

Investors are likely to welcome the acquisition, when it is confirmed, as they have been eagerly awaiting London & Stamford's next move after the company spent some GBP500 million in 2009.

"This is encouraging news for London & Stamford as our underperform recommendation rests on the significant cash drag on the potential returns for the business," said Seymour Pierce analyst Sue Munden.

London & Stamford told Dow Jones Newswires in an interview in January that it has raised its spending target to GBP1 billion, from GBP750 million, for the year ending March 2012.

The sale is in line with Lloyds' strategy to sell properties inherited when it bought HBOS to reduce its exposure to commercial real estate. A person familiar with Lloyds' strategy told Dow Jones Newswires previously that the bank is going through commercial real estate loans on an asset-by-asset basis and deciding whether to sell the loans or to refinance them and keep them on its books.

As part of this strategy, Lloyds has also taken on Andrew Wilson, business development manager at Land Securities PLC (LAND.LN), on a six-month secondment to help it assess commercial property loans, Land Securities said in January.

-By Anita Likus, Dow Jones Newswires; +44 20 7842 9407; anita.likus@dowjones.com

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