S&N sells freehold of Edinburgh headquarters in £24m leaseback deal

Published on Sunday 10 June 2007 00:12

SCOTTISH & Newcastle is selling the freehold of its central Edinburgh headquarters to investment group Foreign & Colonial in a £24m deal.

The brewer of beers including Kronenbourg 1664 and John Smiths will leaseback 28 St Andrew Square and sublet several floors to new tenants including oil and gas explorer BowLeven.

The historic grade one listed building is the former head office of Scottish Equitable and is opposite Harvey Nichols and the Royal Bank of Scotland's former headquarters.

Tony Froggatt, chief executive of S&N, has ruthlessly cut costs since taking over in April 2003, and has used property disposals as a key driver for hitting his targets.

The group shut its historic breweries at Fountainbridge in Edinburgh and Newcastle and sold the HQ of UK brewing and distribution business, Scottish Courage.

At the group's AGM in April, chairman Sir Brian Stewart said the group would find 50m in cost savings over three years in its European businesses.

A spokesman for S&N said the sale and 15-year leaseback of 28 St Andrew Square was "a good deal for shareholders. We are a branded beer company not a property business."

It is thought an announcement could be made this week, confirming the deal.

S&N moved to St Andrew Square in 2005 but has never occupied the entire 48,000 sq ft property.

An S&N spokesman said the company would retain the amount of space it currently occupies and around 80 staff, including the executive team and legal staff, would continue to be based there.

Scotland on Sunday revealed in October 2005 that S&N was moving to the location in an unusual swap deal proposed by Trevor Hemmings, one of the brewer's biggest individual shareholders.

Hemmings struck an asset swap which saw him acquire S&N's former Ellersly Road HQ near Murrayfield Stadium, with the brewer moving to its current base.

The St Andrew Square property lay empty for years after Scottish Equitable moved out in 1996.

It was bought by Delma Developments - owned by Hemmings - in 2002 from US leisure group Destinations Europe for more than 8m.

The property was refurbished into one of the most prestigious office buildings in the capital.

The building was officially reopened in March 2004 following a glitzy launch party attended by the banker Sir Angus Grossart. But agents struggled to find a tenant until S&N moved in.