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£600M Sales Will Test The Market For Big Shopping Centres

The Oracle shopping centre in Reading

Stakes in two big regional shopping centres are set to hit the market imminently, testing the appetite of investors for big malls as the retail sector continues to be rocked by falling income.

The Abu Dhabi Investment Authority has appointed JLL to market its 50% stake in the 760K SF Oracle shopping centre in Reading, with a price of more than £200M being sought, according to CoStar. ADIA owns the centre in a joint venture with Hammerson, which manages the scheme.

Tenants include Zara and Apple and there is a Vue cinema in the scheme. The owners are in the process of converting a 130K SF House of Fraser department store unit into a food hall and bowling alley. 

The giant Middle Eastern fund is also pulling back from retail in nearby Slough, where it is in the process of amending plans for its giant retail and residential scheme, to replace the retail element with offices, according to Property Week.

Elsewhere, Lendlease is holding a beauty parade of advisers to sell its 25% stake in the 1.8M SF Bluewater shopping centre in Kent. 

The stake is likely to be put up for sale for £400M, React News said, which would represent a 6% yield. That is a big drop from the £600M Lendlease sought for the stake in 2017. AXA Investment Managers - Real Assets had been under offer to buy the stake in 2018 but pulled out as the turmoil in the retail sector ramped up. GIC had also tried to sell its 17.5% stake in the centre at about the same time.

The stake in Bluewater is owned by a fund manager by Lendlease, which is in the process of being wound up. 

Very few stakes in large dominant regional shopping centres have traded in the past two years, because investors don’t know how secure the income is from tenants that are struggling, and so don’t know how much assets are worth. 

In February last year Cale Street purchased a 40% stake in Intu’s Derby shopping centre at a valuation of £458M, although that was a deal structured so that Cale Street received a guaranteed amount of income if the rents on the scheme dropped.