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Land Securities has struck a deal to pay £490mn for a majority stake in Liverpool One, one of the UK’s biggest shopping centres, in a bet on the future of bricks-and-mortar retail.
The Abu Dhabi Investment Authority and the Duke of Westminster’s property company Grosvenor, which built and still manages the mall, have agreed to sell a combined 92 per cent stake in the centre.
Physical retail properties have been out of favour with investors after suffering a brutal blow from the rise of online shopping.
But Mark Allan, Landsec chief executive, has targeted flagship shopping malls in a bet that these properties have seen the worst and will now start to outperform.
“We have now turned that corner” for the “very best assets, of which this is unquestionably one”, he said, noting that retail rents had begun growing again this year.
The deal means the FTSE 100 landlord owns or controls seven of the top-30 shopping centres in the UK. “That is where the retailers want their stores to be,” Allan said.
He said mall values had fallen so far that they now cost significantly more to build than they were worth. This was likely to mean there would be no supply of new shopping centres, which would help to boost the recovery in value of existing malls.
Located in the heart of Liverpool’s city centre, the open-air Liverpool One attracted 22mn people a year, Landsec said. Some £35mn of the total payments to ADIA will be deferred for two years, and the sovereign wealth fund may also receive future payments depending on how the property performs.
Grosvenor spent just over £900mn to develop the shopping centre, which opened in 2008.
Tuesday’s deal steps up Landsec’s interest in the sector. The company announced a deal in June to acquire a 17.5 per cent stake in the Bluewater shopping centre in Kent from Singaporean sovereign wealth fund GIC for £120mn.
The move increased its overall ownership share to two-thirds — and implied a value for the whole centre of £686mn, almost exactly the same as 2021’s price, according to Green Street analysts.
A decade ago, Landsec paid £656mn to acquire just 30 per cent of Bluewater, showing how far the value of flagship malls has fallen.
The company’s shopping centre investments increased in value by 4.2 per cent in the six months to September, it reported last month. It has been selling off what it considers “non-core” assets — including its £400mn hotel portfolio this year — to fund more investments in retail and new office developments.
