British Land in joint venture with Soros: Deal seen as confirming upturn pounds 500m to be spent on British property - Shares are given a boost

GEORGE SOROS, the speculator who made more than dollars 1bn by betting against sterling before its exit from the exchange rate mechanism, yesterday set property shares alight by striking a joint venture with British Land that will spend more than pounds 500m on British property.

The City took Mr Soros's interest in property as confirmation that the market, which has been showing tentative signs of recovery, had bottomed out. Shares in the sector were marked sharply higher - British Land itself gained 46p to 344p while rivals such as Hammerson, Brixton Estates and Frogmore also gained substantially.

Mr Soros's Quantum Fund and British Land, the country's fourth-largest property company, are to invest up to pounds 250m each in a partnership, to be known as the British Land Quantum Fund. The partnership will be managed by British Land, which will earn a fee of pounds 3.5m in the first year, rising to pounds 5m thereafter. The profits will be distributed equally.

As part of the deal the Quantum Fund is subscribing for 11.3 million new British Land shares at 298p each, yesterday's opening price, giving it a 4.8 per cent stake. This will be quickly reduced by the pounds 132m rights issue launched yesterday by British Land to help to finance its investment in the partnership.

John Weston Smith, British Land's managing director, said the group had been keen to attract an overseas investor for some time and had contacted Mr Soros along with a number of others two months ago. The partnership idea had been British Land's, based on arrangements already in operation in Dublin with the Irish government and in the Netherlands.

He said that the arrangement would allow British Land to consider larger deals than it could on its own. And, although shareholders would take only half the profits, he added: 'Half a big cake is possibly just as good as all of a small one, and may even be better.'

No decisions on the type or location of property to be purchased had been taken, although it was unlikely the partnership would acquire rival companies.

It was likely that nearly all British Land's purchases would be made through the partnership until the pounds 500m was invested by the end of 1997.

The agreement stipulated that all acquisitions considered by British Land should be offered to the partnership unless they enhanced the value of British Land's existing portfolio. The terms of that exclusion had still to be finalised but it was likely to cover acquisitions adjacent to an existing British Land property, for example.

Mr Soros had also insisted that John Ritblat, British Land's chairman and chief executive, bought another 1.46 million shares, taking his stake to 4.3 million or 1.4 per cent.

An employee trust will also be given options over 4 million of Quantum's shares, exercisable at 298p from 2004, depending on the partnership's performance. This would reduce Quantum's direct stake to 2 per cent of the enlarged share capital.

The deal came as the group revealed its results, which also indicated that the market may be bottoming out. Net asset value fell just 15p to 307p and the value of City offices dropped just 11.4 per cent compared with 31 per cent last year.

Mr Ritblat will subscribe for all his entitlement to the four- for-17 rights issue, which is priced at 245p a share, a 20 per cent discount to net asset value.

Earnings per share were up 0.8p at 12.3p and the dividend is increased to 7p (6.35p) after a 4.72p (4.28p) final payment.

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