Big REITs Have Mixed Fortunes In £4B Sell-Off
The UK’s biggest REITs are in the process of selling nearly £4B of assets, helping them to pay back debt, to shift out of sectors they don’t like anymore or to reinvest in different markets.
They are doing it with varying degrees of success. Here’s everything you need to know about the great big REIT sell-off.
Last week it emerged that a deal for private equity firm CIT to buy Landsec’s 95% stake in the X-Leisure fund for £650M had fallen through. The fund owns 16 assets totalling about 3M SF of leisure property across the country, including Brighton Marina and the Xscape snow dome in Milton Keynes.
Retail REIT Hammerson has been selling noncore assets to refine its strategy and also pay down some debt. It has managed to sell a lot of assets, and exceeded its £500M disposal target for 2019, but not always at great prices.
It garnered £362M from the sale of the Italiue Deux shopping centre in Paris, a price around book value, but the sale of the Abottsinch and St Oswald’s retail parks were at prices 3% and 8% below book value, respectively.
With that in mind, the market will be watching the two other big sales processes ongoing for Hammerson with interest. It is selling the rest of its portfolio of retail parks for £400M, and it has appointed Lazard and JP Morgan to market the 39% stake it owns in outlet mall developer and operator Value Retail for £1.9B.
The latter is one of the largest and most complicated sales process ongoing in European real estate. It offers the chance to buy into the best outlet mall company in Europe, including its flagship asset, Bicester Village. But minority stakes of this sort do not historically have a hugely liquid market.
It is not surprising that Segro did not have much trouble selling its portfolio of noncore assets, given logistics remains highly desirable for investors, although the path to a sale was not completely smooth. Thor and Morgan Stanley Real Estate Investing were under offer to buy seven big-box logistics schemes across the UK totalling more than 2M SF for £241M, but the former pulled out. Morgan Stanley picked up the slack and took sole control of the deal, which closed in December. The assets were sold at book value.
It is more nostalgia to call Intu one of the UK’s biggest REITs, given its market capitalisation is just £230M, but old habits die hard. The company is in dire straits, with analysts at Citi saying last week that it might need to raise as much as £3B of equity from investors in order to pay down debt and fund new developments.
It has already been selling assets to try and reduce gearing and avoid loan defaults, and had some success in selling its stakes in two Spanish centres, rising a combined £643M from the sales in Zaragoza and Asturias. Given the Spanish retail market is a lot healthier than that of the UK, the sales were at book value.
For everything you need to know about capital markets, come to Bisnow's London Investment Agenda event on 25 Feb.