Hammerson is preparing to sell a 50% stake in its Highcross shopping centre in Leicester to a Japanese bank.
The investor, fronted by M&G Real Estate, is paying close to £240m for the half-share of the 1m sq ft mall in an off-market deal. The price being paid reflects a yield of around 5.5%.
If the deal completes it will be a rare boost for the beleaguered UK shopping centre investment market that has seen depressed activity owing to occupational distress culminating in company voluntary arrangements, administrations and store closures.
Hammerson has wholly owned the centre since it bought out its 40% joint venture partner LaSalle Investment Management in 2014 in a £180m deal. Highcross is currently undergoing a major investment project, with its former 100,000 sq ft House of Fraser store being redeveloped to include Zara, JD Sports and Treetop Adventure Golf.
The sale would be the first of a £500m programme of disposals earmarked by Hammerson following from its collapsed merger with intu. The two companies had together intended to dispose of £2bn of malls before discussions ceased in April.
The potential acquisition is also the latest signal that the wave of long-awaited Japanese capital into UK property, which has been limited since the early 1990s, may soon come flooding in. The country’s super-low return investment environment is expected to prompt giant pension funds to invest increasingly in relatively high-yielding overseas real estate.
There has already been a relative uptick over the past year with Norinchukin Bank, buying the Arndale Centre in Eastbourne from Legal & General for £100m, a 5.75% yield.
Alongside M&G, Norinchukin also previously showed interest in buying a half stake in intu’s £305m Chapelfield shopping centre in Norwich last year, which was ultimately acquired by LaSalle Investment Management in November on behalf of Greater Manchester Pension Fund and West Yorkshire Pension Fund.
Japan Post, the £2tn conglomerate, has also held discussions with Royal London Asset Management to buy a minority stake in its £2.8bn UK life fund, the Royal London UK Real Estate Fund, while sovereign fund GPIF has been gearing up by appointing investment managers.
CBRE is acting for Hammerson; Lunson Mitchenall is advising M&G. All parties declined to comment.
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