Investor interest picks up as St Enoch looks set to be latest mall to change hands. By Bob Serafini.
Glasgow’s St Enoch shopping centre is expected to go on the market in the next few weeks, priced at up to £250 million, according to trade conference reports.
The 850,000 sq ft complex will become the latest in a line of Scottish centres changing hands over the last 12 months as the investment market starts to pick up. Those with new owners include Inverness, Clydebank, Ayr, Dumfries, and Motherwell.
Eastgate in Inverness was purchased by asset manager Scoop and Harbert European Real Estate for £117m (6.4 per cent), Clyde shopping centre in Clydebank by Edinburgh House and Cerberus for £70m (7.75 per cent) and Ayr Central by M&G for £34m (6.02 per cent).
A portfolio including Aberdeen’s Trinity and Falkirk’s Howgate was also purchased by community shopping centre investor Ellandi last Christmas.
At the start of 2015, as the economy improved, there was a great mood of optimism about the start of the major redevelopment of big shopping centres in Glasgow and Edinburgh.
In Edinburgh, TH Real Estate has achieved planning permission for its £850m reinvention of the St James Quarter, but there will be no start until at least next spring and completion is five years away. A public spat has seen anchor tenant John Lewis complain about possibly having to lose a third of its department store floor space as it remains open during reconstruction.
Over the summer, Land Securities’ ambitious £400m scheme to double the size of Buchanan Galleries ground to what is hoped to be a temporary halt, citing an increased level of risk due to upgrading work on the adjacent railway station and track. It was believed to be more than 40 per cent pre-let to retailers including M&S, a cinema operator, and restaurants. In the meantime, at the other end of hugely successful Buchanan Street, owners Blackstone and asset manager and developer Sovereign Land are apparently about to seek buyers for St Enoch shopping centre, which they acquired only two years ago for £190m from Canadian firm Ivanhoe Cambridge.
The mall, which attracts 20m visitors a year for tenants including Debenhams, H&M, Superdry, Mothercare and Hamleys, has performed well under the ownership, securing 15 food and retail lettings last year and heading for a similar target this time round. In the same holding, the 23,500 sq ft former GAP premises on Argyle Street, has been secured on a long lease by Colliers for a JD Sports flagship store.
Indications from this month’s British Council of Shopping Centres conference suggest St Enoch’s could now be valued at up to £250m, a six per cent yield. Large US private equity firms were among the under bidders last time round and are expected to compete this time also.
It could well be time to cash in on the high flying UK shopping centre market. Research from Cushman & Wakefield says more than £3 billion of property is on the market and Savills forecast deal volumes in this sector could top £6bn by the year end. It is thought JLL are likely to be appointed advisers.
Meanwhile, there are a number of other interesting moves in the retail sector.
Retail investor Pradera is understood to be under offer to buy the 170,000 sq ft Forge Retail Park at Parkhead, Glasgow from one of Sports Direct owner Mike Ashley’s companies for more than £85m.
In Aberdeen, Hammerson is seeking to remove the “retail park” element of its Union Square shopping centre after deciding the “hybrid” approach has not really worked. The plan involves expanding the range of conventional shops and food and beverage facilities on this highly successfully scheme.
And in Edinburgh, Colliers report George St has overtaken Princes Street now in terms of rents. “Now the tram system is in place and working, it has gone from being a big negative into a positive,” said retail partner John Duffy. “Princes Street is definitely making a bit of a comeback, though not up to George Street levels yet. It is certainly busier and will continue to grow – there is no other obstacle in the way of that.”
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