Dutch pension fund APG is to unlock one of the UK’s most long-awaited regeneration projects, the St James Centre in Edinburgh, by buying a three quarters stake in the £1bn scheme.
Ten years after purchasing the shopping centre, TH Real Estate is now close to bringing in the €433bn (£391bn) investor as partner for its retail-led redevelopment, which when complete will include 850,000 sq ft of shops, a 210-bedroom W Hotel, 250 flats, 20 restaurants and a 30-screen cinema.
The high level of investment needed to develop city centre shopping centre projects makes such a deal rare and illustrates APG’s long-term investment horizons.
Construction of the project will cost close to £450m on top of a current site value of around £180m. This would take APG’s total investment to more than £400m.
The Henderson UK Shopping Fund, managed by TH Real Estate, will retain the remaining ownership and manage the development.
TH Real Estate appointed Cushman & Wakefield to find a partner to fund the project in May last year.
It was close to securing a deal with parent company TIAA and Australia’s largest pension fund AustralianSuper in March to take one-third stakes in the project, but a deal was never agreed.
The project achieved revised planning permission last July and over the past few years the scheme’s income has eroded as retailers have moved out in anticipation of the redevelopment.
Department store John Lewis will remain as the anchor tenant and will trade throughout construction.
Demolition work was scheduled to begin in May, but has not started. The redevelopment is due to be completed by 2020.
Since the initial purchase of the centre, plans for the site, known as one of Edinburgh’s biggest eyesores, have faced a series of financial and planning complications.
The financial crisis hit shortly after the original plans were approved in 2009.
TH has also had to undertake an arduous land assembly battle. One appeal against the CPO on the site is still outstanding, but the process is otherwise close to completion. Negotiations have since progressed for outstanding land acquisitions.
Savills is advising APG.
10 years of St James
2006 Henderson UK Shopping Centre Fund buys St James Centre from Irish investor Donegall Place Investments for £184m
February 2009 City of Edinburgh Council grants outline planning permission for 1.1m sq ft project
August 2012 Investors in Henderson’s £650m UK Shopping Centre Fund vote to extend fund by seven years
September 2014 CPO process begins
May 2015 TH Real Estate appoints Cushman & Wakefield to find development partner
July 2015 Council grants consent for updated plans that include 850,000 sq ft of shops, a 210-bedroom hotel and 250 homes
March 2016 Funding deal comes close with TH Real Estate parent TIAA and AustralianSuper to take two one-third stakes but deal not agreed
April 2016 TIAA Henderson Real Estate agrees £61m infrastructure funding from City of Edinburgh Council
October 2016 APG agrees funding deal
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