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£1.9B Stake In 1 Of the World’s Most Successful Retail Property Companies For Sale

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Central boulevard at Bicester Outlet Village, Oxfordshire, UK
Bicester Outlet Village

If you are a Chinese tourist visiting the UK, there are three places you have to visit. Buckingham Palace. The tree outside King’s College where the poem Taking Leave of Cambridge Again, written by Xu Zhimo in the 1920s, is inscribed. And Bicester Village.

The 245K SF outlet centre 65 miles north west of London is estimated to be visited by as much as 80% of the roughly 350,000 Chinese visitors to the UK every year. The platform at Marylebone station from which trains to the nearest town depart has signs and announcements in Mandarin, and Bicester Village employs about 150 Mandarin speakers.

It receives 7 million visits overall, with shoppers from Middle Eastern royals to the average person on the street hunting for a bargain.

And now, a 39% stake in the company that owns Bicester, eight other European outlet malls and two more in China, is up for sale.

Retail REIT Hammerson is working with its advisors to explore a sale of its stake in Value Retail, which was valued at £1.9B in the company’s interim results, according to React News. A sale at this level would value the company at more than £5B, including debt. 

This portion of one of the world’s most successful retail property companies is up for sale as investors are generally steering clear of retail.

Outlet malls have fared much better than shopping centres and retail parks, and according to research from Nuveen, will continue to outperform. In Hammerson’s case, its outlet malls portfolio, which also includes assets in another company called Via Outlets, produced a return of 4.5%, compared to a -4.4% for its overall portfolio of shopping centres, retail parks and outlet centres.

Hammerson owns 25% of the overall corporate entity of Value Retail, plus stakes of differing sizes in its nine European assets, totalling 2M SF, which takes its overall ownership to 39%, React News said.

It owns 50% of Bicester Village, which is valued at £5K/SF, more than the high-end shops on Bond Street, the website added.

According to the accounts of Value Retail Ltd, the company produced revenue of £260M in 2018 and profit of £6.7M, up 19% on the previous year.

Simon Property Group also owns a 15% stake in Value Retail, but the majority owner is founder and Chief Executive Scott Malkin.

Malkin is a fascinating character. His father, Peter, headed a law firm called Wien & Malkin which in the 1950s and 1960s bought many of the most famous buildings in New York, including the Plaza Hotel and the Empire State Building. Peter’s father-in-law Lawrence Wien invented the syndication of equity for property in the 1930s.

Wien & Malkin floated a portfolio including the Empire State Building in 2013, and Scott’s brother Tony runs the company today. Scott is one of the owners of the New York Islanders NHL ice hockey team.

At an event hosted by EuroProperty in 2014, Malkin explained the appeal of Bicester Village, and how the company had so successfully fused tourism and retail: More than 60% of its visitors are from outside the European Union.

“We run a VIP service at Bicester Village,” he said. “When we get a call from the concierge at a London hotel to say it is sending members of a royal family from the Gulf to us, we make sure that by the time they arrive there is an Arabic speaker for them, and a room to provide hospitality that they would find normal in the Middle East. During their shopping trip they don’t carry their bags around, and are accompanied by an Arabic-speaking personal shopper. There are also places where these guests have the privacy to pray. The whole experience flows and ideally, it flows seamlessly.

“These guests will probably spend more on car hire and a driver than they save on what they bought, and they will probably spend at least £15K during a trip. But they come to Bicester Village not to save money or to shop with the same brands they could find at Harrods, but because it takes them outside of central London, and it is an iconic experience. When they return home, they can say they went to Bicester Village. Shopping is about a social experience, and we are hoping to deliver that social experience.”

Hammerson’s decision on whether to sell will be governed by the price it would receive, but also whether it can sell other worse-performing assets at close to book value. Under pressure from activist investor Elliott Advisers, it has said it will sell £500M of assets this year alone.

Investment banks JP Morgan and Lazard are advising Hammerson.