Australian developer Westfield has long harboured ambitions to break into the Croydon market and is now in exclusive talks to become development partner on the Whitgift Centre in the south London suburb. But, as EG revealed last week, a row is breaking out over the long-awaited town centre redevelopment.
Tensions were exposed shortly after Westfield announced its exclusive talks, when one of the centre’s owners issued an angry statement claiming that the Australian giant had been brought in behind its back.
The story goes to the heart of the problem Westfield must solve if it is to secure a coveted foothold in Croydon’s under-served town centre: how to gain a majority interest in Whitgift to drive forward a lucrative redevelopment.
Exclusive position
Westfield’s exclusive position, understood to last for three years, extends to only one of Whitgift’s owners: the Whitgift Foundation, a Croydon-based charity which owns the freehold and 25% of the leasehold.
The rest of the leasehold interest is owned 50% by Anglo Irish Bank through the Whitgift Trust, and 25% by Royal London Asset Management. Together, they control the management and redevelopment of the run-down mall, which contains 633,400 sq ft of retail and extends to 1m sq ft in total.
It was RLAM that reacted so angrily to Westfield’s announcement. The fund manager implied that AIB was also in the dark over Westfield’s involvement, saying: “This has taken place without prior consultation with Royal London or, to our knowledge, the Whitgift Trust.”
However, both AIB – now part of the Irish Bank Resolution Corporation – and RLAM have been trying for months to come up with viable plans of their own to attract a partner. AIB appointed Jones Lang LaSalle early this year to look at options including an outright exit.
Westfield’s bullish statement was therefore unwelcome, but it can hardly have come as a surprise. The Australian developer has been looking to buy into Whitgift since at least 2005, when it teamed up with RLAM to bid for the 50% stake that was ultimately sold to Howard Holdings, backed by AIB. The UK arm of Howard Holdings was wound up in 2009.
“In reality, the reason Royal London and Anglo are disappointed about Westfield and Whitgift Foundation’s agreement is that it reduces the chances of them getting competition on their stakes should they go to market with them,” one source suggested this week.
“If people think the redevelopment is tied up with Westfield, the likes of British Land, Land Securities and Hammerson might not bother so much. Then you are looking at more passive investors who have to be in discussion with Westfield.”
Nama
To further complicate the situation, Ireland’s National Asset Management Agency has an interest in the AIB stake as a result of loans held against units in the trust. This opens up the possibility that Westfield has held discussions, if not with AIB, then directly with Nama about buying out the Whitgift Trust’s 50% stake.
Such a deal, coupled with the agreement with the Whitgift Foundation, would mean Westfield could essentially represent 75% of the ownership.
Meanwhile, sources suggest that Westfield’s now very public discussions with the Whitgift Foundation have galvanised AIB and RLAM into accelerating their own parallel plan for the shopping centre. Their wish-list of potential buyers is likely to include Hammerson, which recently bought the Centrale centre in Croydon, and Lend Lease, which has been looking at Croydon opportunities including Whitgift and the abandoned Park Place scheme for several years. Together the three sites could create a 2.5m sq ft town centre retail hub (see map).
AIB and RLAM are working towards coming to market with a stake sale or a partnership opportunity within the next two to three months.
But as Westfield’s announcement last week shows, the Australian developer is adept at moving more quickly than that to get what it wants.
