Royal London to buy Hermes' stake in Bluewater shopping centre

By Kasmira Jefford - Monday, September 11, 2017 14:50

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The UK’s largest mutual life insurance, Royal London, has exchanged contracts to buy Hermes’ 7.5% stake in Bluewater shopping centre in Kent for around £155m, CoStar News can reveal.

Coady Supple is understood to be advising Royal London Asset Management while HP4 is acting for Hermes. The investment manager began the sale process in January, with an original asking price of £167m.

The deal comes as Lendlease and GIC prepare relaunch the sale of their combined 42.5% stakes in the 1.8m sq ft mall later this month, for in excess of £900m.

The pair followed Hermes in deciding to sell their respective 25% and 17.5% shares in June and July, independently of each other. GIC, advised by Knight Frank, was initially seeking around £400m for its share while Lendlease’s 25% stake was valued at £600m.

After separate efforts, the two companies have now joined forces and are believed to be approaching parties later this month. Offering a single large in a major shopping centre - currently the largest stake being marketed in the UK - is likely to be viewed as more attractive to investors, particularly international wealth funds seeking to allocate larger amounts of cash. 

Lendlease is pursuing the sale as part of a wind down of its £900m closed-ended fund, Lendlease Retail LP, which expires in November.

In October last year, it held a vote seeking extend the life of the fund until 2024. The vote was passed but Lendlease was unable to secure the capital required from new investors to match those that wanted to leave.

Royal London Asset Management is a significant investor in the fund alongside Lendlease, which owns a 4.3% stake, LandSec, Aviva Investors the Dorset County Council Pension Fund, and The Greater Manchester Pension Fund, among others. By acquiring Hermes' stake, Royal London will be able to retain its ownership in Bluewater.

Lendlease Retail also has full ownership of Touchwood shopping centre in Solihull although it is understood that it will retain the £300m mall for the time being as a stand-alone asset.

A sale of Bluewater, one of the UK's biggest and most visited malls, will act as a barometre for the shopping centre investment market, which has seen subdued levels of activity this year due to wider political and economic uncertainty, wider structural issues, and a bearish outlook on consumer spending. 

Opened in 1999, Bluewater is home to over 330 retailers, cafes, bars and restaurants, including John Lewis, House of Fraser, Marks and Spencer, American Eagle, Victoria’s Secret, Tommy Hilfiger, Jack Wills, H&M and Zara.

It attracts 27m visitors a year and has a catchment of 6.6m people, one of the most affluent in the country, with the highest spend per group of £191.

In 2014 Landsec bought a 30% stake in the Kent shopping centre, together with 110 acres of surrounding land, from Lendlease for £696m, reflecting a 4.1%. Analysts considered Landsec to have overpaid although the deal did include the coveted rights to manage the centre.

LandSec and the remaining owners – M&G Real Estate (17.5%), Aberdeen Asset Management (2.5%) – are retaining their stakes.

All parties declined to comment.

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