Lone Star Buys £110M UK Shopping Centre

Opportunistic investor Lone Star has bought the Union Square shopping centre in Aberdeen for about £110M after a deal for the asset at a higher price fell out last year. 

Lone Star has bought the 556K SF scheme from Hammerson, React News reported. The price would represent a yield of about 12%. Lender NatWest could co-fund the deal. 

Brookfield entered negotiations to buy the centre for £140M in late summer 2022, but no deal came to fruition. 

A deal would represent a boost for the shopping centre investment market. While the office sector grabs all the headlines for its problems, shopping centres remain a tough sell. 

Investment volumes in the sector were just £1.2B in 2023, according to Savills data, 22% below the 2022 figure and well below the peak of more than £6B in 2014.

This year, all eyes in that market are on whether stakes in large assets like Liverpool One and Meadowhall find buyers.

Bisnow revealed last week that Lone Star has raised $2B (£1.6B) of equity for a new opportunity fund. The fund has made retail one of the top asset class targets.

The Union Square deal would mark a return to a sector that saw Lone Star get its fingers burned in the UK. In 2019, it ceded control of a major UK shopping centre portfolio after a sharp fall in value.

Lone Star bought the Tiger portfolio of shopping centres from Rockspring for £260M in November 2014. At that point, the portfolio comprised seven assets totalling 1.3M SF in Grays and Romford in Essex, Gloucester, Southampton, Gateshead, Falkirk and Aberdeen.

The deal was secured by a £200M loan from Citi, putting the loan-to-value at 75%. Austrian bank BAWAG Group took a senior mezzanine portion of the debt, with OZ Real Estate taking a junior mezzanine portion.

Lone Star sold two of the centres in Grays and Gateshead and was trying to sell the other five before the portfolio reverted to BAWAG.