Hermes Real Estate is in talks to offload a 50% stake in thecentre:mk just months after it took full ownership of the Milton Keynes mall.
Hermes is in off-market discussions to sell a half share in the 1.3m sq ft shopping centre to Henderson Global Investors on behalf of a third-party investor for around £300m.
Hermes bought a 36% stake in thecentre:mk in June as part of a property swap with M&G Real Estate for £190m. The deal brought the mall fully under Hermes’ control.
Sources suggested it was easier from the third-party investor’s perspective to do the deal with its “hand held” by Henderson acting, in effect, as an adviser, rather than doing the deal with Hermes directly itself.
Hermes began drawing up plans to seek joint-venture partners on several of its shopping malls last year to raise cash after taking full ownership of Castlecourt shopping centre in Belfast, Royal Victoria Place in Tunbridge Wells, Kent, and The Friary in Guildford, Surrey, from joint-venture partner Westfield in January 2012. Together, the properties total more than 800,000 sq ft.
A source said: “Hermes is looking to rebalance its exposure to property. It currently has around 85% of its property in the UK, but it wants to trim that down to about 70% so that it has a 70/30 split between UK and international assets within a few years.”
It is understood that Hermes is keen to retain control of the asset management of the mall. In September, CBRE, MMX Retail and Lunson Mitchenall were appointed as leasing agents at thecentre:mk to spearhead a drive to attract more premium brands and bolster the catering and leisure tenants at the mall.
Chris Taylor, chief executive at Hermes, declined to comment on the deal. But on confirming its purchase of the remaining stake in the mall during the summer, he said: “We have been long-term owners in Milton Keynes and are excited at the opportunities to continue to enhance the centre and deliver sustained long-term growth through our active management and active engagement with our occupiers, shoppers and council.”
Cushman & Wakefield is advising Hermes.
All parties declined to comment.
Estates Gazette comment
The shopping centre market has sparked back into life over recent months.
Bids for Glasgow’s St Enoch Centre in the summer revealed the weight of money eyeing UK malls. Ivanhoe Cambridge sought £180m for the 850,000 sq ft centre and it sold for £190m after private equity firms jostled for the prize.
And now investor interest is being put to the test once more. Aviva Investors and Hammerson, and London & Associated Properties are this week examining strong shortlists of parties interested in Queensgate, Peterborough and King Edward Court, Windsor, respectively. Land Securities, already busy with a potential sale of its stake in Bristol’s Cabot Circus, has also begun marketing the 420,000 sq ft Overgate shopping centre in Dundee with a price tag of around £125m – a 7.5% yield.
No wonder Knight Frank predicts mall investment could reach £4bn this year – far exceeding last year’s £2.7bn.
A word of caution, however. Some senior retail property figures have expressed surprise that the buoyant sentiment appears to overlook the improving but still fragile occupier market.
