Knight Frank - Retail Other - UK
Date: 05 Aug 2008
- Seven shopping centre assets were transacted during Q2 2008, equal to the number transacted in Q1. By value, however, Q2 transactions had a combined value of £572m, more than twice that of Q1, albeit still considerably below the levels witnessed prior to the downturn in 2007
- While private property companies dominated the buyer profile during the previous two quarters, two opportunity funds accounted for five of the seven transactions in Q2, or 69% of the total by value. With the cost and availability of finance remaining a significant issue, the emergence of investors with strong equity positions will be key to market activity in the short-term
- The Carlyle Group's £286m purchase of three shopping centre assets from the Mall Fund, at Chester, Epsom and Edgware, was central to activity in Q2. Taken as a single portfolio transaction, the deal was unusual for its sheer size, as it represented the largest transaction since Propinvest's £386m purchase of East Kilbride shopping centre in Q2 2007
- Five assets were under offer at end of Q2, with a combined quoted sales price of £703m, an 11% increase on the comparable figure of Q1 2008. This includes Henderson's prospective purchase of the McArthur Glen factory outlet portfolio comprising three schemes at Swindon, Bridgend and Cheshire Oaks. Completion of this deal, rumoured at £360m and reflecting a net initial yield of 6.65%, is expected imminently
- There were 13 assets available for purchase with a combined quoted sale price of £1.43bn, a 39% increase on the previous quarter. Notably, one prime asset also came to market; Land Securities' 33% stake of the Bullring Shopping Centre in Birmingham for a quoted sale price of £300m, reflecting a net initial yield of 4.85%
- The limited transactional evidence in Q2 confirmed that yields have continued to soften across all sub-sectors. The situation for prospective debt-backed purchasers has deteriorated further over the period, evidenced by the fact SWAP rates moved out by close to 100 basis points, to stand at 6.0%. Encouragingly, however, the three month LIBOR remained relatively static during Q2
- Yields for secondary product continued to experience the strongest outward shift of the sub-sectors and at end Q2 2008 net equivalent yields were circa 7.50%
- Concerns about the outlook for consumer spending among retailers, combined with particularly high build costs is threatening the viability of key schemes in the pipeline. Consequently, development activity has slowed and is projected to remain restrained in the short-term
For the full report contact Knight Frank
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