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Bluewater Deal Shows Institutions Still Want Prime Shopping Centres Ahead Of £1B Sale

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Bluewater shopping centre

The U.K. shopping centre investment market has been moribund of late, but one deal this week highlights how U.K. institutional investors still have appetite for the prime end of the market.

Royal London Asset Management, the investment arm of the insurance company, paid Hermes Real Estate £155M for a 7.5% stake in the 1.8M SF Bluewater mall in Kent, a yield of slightly more than 4%. The deal values the whole centre at about £2.1B.

"As one of the biggest shopping centres in the U.K. and Europe, this new holding provides us with a good opportunity to invest in one of the region’s most popular shopping destinations," Royal London head of retail Michael Lawrence said.

U.K. institutions have been pulling out of the secondary retail sector, leaving U.S. private equity firms with few options when looking to sell their holdings. But the deal shows they are still interested in prime malls.

A much larger chunk of the ownership of Bluewater is expected to sell later this year — GIC and Lendlease appointed brokers to sell a 42.5% stake for close to £1B.

Bigger U.K. institutions like M&G or Legal & General could be interested in the sale along with global funds like Norges Bank, ADIA and CPPIB. The latter is a good bet as a buyer, as it has been one of the major buyers of U.K. prime shopping centres in the past 12 months. It is in talks to buy 50% of Brent Cross in North London and has bought 50% of Grand Central in Birmingham for around £170M.