EXCLUSIVE: ADIA Ends £350M Retail Sale As Shopping Centre Leasing Market Improves
One of the largest shopping centre sales listings active in the UK has been taken off the market, Bisnow can reveal, as the rental performance of the sector continues to improve.
The Abu Dhabi Investment Authority has terminated the process to sell a 69% stake in the 1.6M SF Liverpool One shopping centre for about £350M, ending a yearlong marketing effort. Landsec, the UK’s second-largest REIT, had been in advanced talks to buy the stake since the autumn.
ADIA said in a report to investors it has decided to keep the majority ownership in Liverpool One because the rental income from the asset is proving resilient, with rents growing in some instances. But this improvement in operating performance is not leading to buyers willing to pay higher prices for big malls. The prices being offered for even the best UK malls remain near record lows.
A report to bondholders that own debt in another large centre, the Metrocentre in Gateshead in the north-east of England, outlined the situation in the shopping centre market more broadly — and in relation to Liverpool One specifically.
“Total [2023 investment volumes] are estimated at c. £1.2B, down from the £1.5B reported in 2022, and the market was dominated by small lot sizes and opportunistic buyers who were generally not reliant on securing debt,” the report says. “There is a clear disconnect between the outperformance occupationally in the larger dominant assets and the lack of investor demand.
“A good example of this is ADIA’s decision to curtail its discussions with Landsec on the sale of Liverpool One, the dominant city centre asset. The decision was made to withdraw the sale due to the underlying improvement in the asset and unwillingness to sell at a historically high yield, but low price point in the market.”
Liverpool One was developed by Grosvenor at a total cost of nearly £1B, including site acquisition and construction. The open-air scheme was completed in 2008 and features 170 stores, an Odeon cinema and a Hilton hotel. Grosvenor still owns a 23% stake in the fund, and the last 8% is owned by a collection of minority investors.
In a retrospective last year, Grosvenor said the centre had generated £4.1B of economic activity for the Liverpool region in its 15-year history and supported about 4,700 jobs annually. In its 2022 annual report, Grosvenor said the vacancy rate at the scheme was in the low single digits.
Landsec has been vocal in its desire to sell out of fully leased London office assets and reinvest the proceeds in other sectors, and CEO Mark Allan has said shopping malls are a great investment target because of the low values, improving income and opportunity to invest and add other uses. Liverpool One would have been its first new shopping centre acquisition under this programme.
ADIA declined to comment. Landsec did not respond to a request for comment.
