UK REIT Hammerson has exchanged contracts for the sale of a 50% stake in Highcross shopping centre in Leicester for £236 mln (€269 mln), creating a new joint venture with an Asian investor introduced by M&G Real Estate.
Hammerson will manage the centre for the new joint venture and said that the sale price represents a net initial yield of 5.5%.
'We have now achieved close to 90% of our increased 2018 disposal target of £600 mln,' said David Atkins, chief executive of Hammerson.
'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,' Atkins added.
Hammerson said that the deal represented a 5% discount to December 2017 book value, allowing for capex associated with the reconfiguration of the centre's former House of Fraser store.
Highcross, a 110,000 m2 centre, attracts 18 million visitors a year and is anchored by John Lewis & Partners, Debenhams and a Showcase Cinema de Lux.
According to the business, Debenhams has recently invested £5 mln in store improvements as well as introducing new brands to Leicester through concessions including Maisons du Monde, Murad and Kat Von D. As at 30 June, Highcross’ occupancy was 96.7% with an annual passing rent of £26.7 mln.
Hammerson said it had made a significant number of improvements and transformed the retail line-up as part of its strategy to reduce reliance on department stores and enhance the retail mix. In 2016, the House of Fraser space was proactively taken back to accommodate an upsized flagship Zara store, which has recently opened, alongside an upsized JD Sports and additional restaurant and leisure space. The REIT recently increased its disposal target for 2018 to £600 mln as part of its reshaped strategy.
This transaction takes Hammerson’s total disposals in 2018 to over £530 mln, 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.
