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Ted Baker confirms sale and leaseback on London HQ

Lauretta Roberts
23 March 2020

Ted Baker has confirmed the sale and leaseback of its HQ; the Ugly Brown Building in North London has been sold to a wholly owned subsidiary of the British Airways Pension Trustees for £78.75m.

The sale, which is subject to completion of a customary completion accounts adjustment mechanism, will result in the cash being injected into the company immediately upon expected completion in June. The net proceeds of the sale of at least £72 million will be applied to repay existing indebtedness to significantly de-lever the group.

Rumours of the sale first emerged a month ago as the group sought to recover from a bruising 2019 in which its founder and CEO Ray Kelvin was obliged to stand down due to harassment claims from staff, which he denies, and a string of profit warnings.

Ted Baker has entered into a short-term lease of the Ugly Brown Building for a period following completion, and at completion will enter into an option with the purchaser to take a long-term lease of part of the adjacent newly developed property, to be known as Bowline, Tribeca, St Pancras Way.

Ted Baker

The Ugly Brown Building

Annual rent for the Ugly Brown Building will be £3.25 million (the "Short-Term Lease") until Bowline is fully fit for purpose as the group's headquarters. Once the Bowline is completed, Ted Baker has the right to take a lease, which can be optioned until June 2021, for an annual rent of £4.2 million based on the square footage required.

The Ugly Brown Building had previously been owned by Big Lobster Ltd, a wholly owned subsidiary of Ted Baker, which leased it back to the rest of the group. The company said it had received the reassurance from founder Kelvin, who still owns 34.87% of the shares in the company, to vote for the sale.

At £78.75m, the sale price represents a premium of approximately 39.1% to the last published book value of the Property as at 26 January 2019 of £56.6 million.

In addition the company's said its lenders had agreed to increase the headroom under the group's facilities by £13.5 million until 18 December 2020. The extra cash will help the business as it, like all of retail, battles the fallout from the COVID-19 crisis.

Most of its global stores and concessions (384 locations closed out of a total 416 locations globally) are closed temporarily, representing 68% of its total sales. Its e-commerce business, which remains operation, has seen a 16% increase year-on-year for the financial year to date (8-week period) but there had been some volatility in recent weeks.

Over the weekend reports suggested the group was close to appointing a new chairman, rumoured to be John Barton of easyJet who used to be chairman of Next. However some non-executives are said to prefer Helen Mahy, a non-executive director at energy giant SSE and a member of the Equality and Human Rights Commission.

Ted Baker lost its previous chairman David Bernstein who left last year along with Lindsay Page, the former COO, who had briefly been appointed CEO to take over from Kelvin. Rachel Osborne, who was brought in as CFO from Debenhams last autumn, has been acting as CEO.

Reports suggest that Kelvin favours the appointment of Barton as chairman and is keen for Osborne to be appointed permanent CEO.

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