Hammerson has exchanged contracts for the sale of a 50% stake in its Highcross shopping centre in Leicester to Japan’s Norinchukin Bank for £236m.
First revealed by EG, the deal creates a new £472m joint venture with the investor. The buyer was fronted by M&G Real Estate.
The price represents an initial net yield of 5.5%. The deal reflected a 5% discount to the asset’s book value in December 2017.
At 30 June, Highcross’ occupancy was 96.7% with an annual passing rent of £26.7m. It is anchored by John Lewis & Partners, Debenhams and a Showcase Cinema de Lux.
The shopping centre owner recently increased its disposal target for 2018 to £600m, as part of its reshaped strategy. The deal takes Hammerson’s total disposals in 2018 to over £530m, including the sale of four retail parks earlier this year in line with its plans to exit the retail park sector over the medium term.
David Atkins, chief executive of Hammerson, said the landlord has now achieved close to 90% of its 2018 disposal target.
“This latest transaction is at a price that underpins the underlying strengths of our flagship destinations. It is clear there are institutional investors that continue to have the appetite to buy into top-tier centres and see value in creating joint ventures with skilled operators,” he said.
“We are taking advantage of the current valuation disconnect with equity markets using proceeds to both buy back our own shares at a significant discount to NAV and reduce leverage, while also continuing to selectively invest in higher growth markets.
“We are single-mindedly focused on shareholder value and will continue to pursue further disposal options that would allow us to achieve prices that reflect the underlying value of the asset.”
John Duxbury, head of retail and leisure at M&G Real Estate, added: “This is a significant investment into a high quality, strategically located, well-let regional asset, which provides a great place for people to shop, dine out and be entertained.
“The retail sector has its challenges, but prime assets in the right locations will be resilient to the changing retail landscape and continue to deliver attractive risk adjusted returns for our investors. With a strong line up of retail and leisure brands, we are confident that Highcross has an exciting future.”
The deal is expected to complete later in the year, subject to EU competition clearance and joint venture finance.
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