TH seeks investors for St James development in Edinburgh

UK and global investors are in the running for a portion of one of the largest retail developments in Europe, the St James shopping centre in the Scottish capital Edinburgh, according to the owner of the project TIAA Henderson Real Estate.

The €1 bn mixed-use project is being developed under the umbrella of TIAA Henderson Real Estate’s UK retail Shopping Centre fund which was recently extended for another 10 years. ‘This is a great opportunity for investment into a top-quality development with much more to offer than retail,’ Martin Perry, director of development, told PropertyEU. ‘The development is in a concentrated space in the middle of a world heritage area. Tourism is growing in Edinburgh and the city has direct flights to over 130 international destinations outside the UK.’

With an estimated value of over £850 mln (€1.07 bn), the St James project will create 1 million sq ft (92,900 m2) of retail space, a luxury hotel and up to 250 new homes. Currently TH Real Estate’s UK retail fund has a 100% stake in the project, but it is seeking partners to share the development costs. Existing investors in the fund have the first right of refusal, but the prospectus will also go out to the market, Perry added.

The chance of an off-market deal is nihil. Perry: ‘The fund manager would need to get the best price in the market to protect investors in the fund. Existing investors in the fund may express an interest to invest in an extra portion outside the fund vehicle, but the fund manager will make the decision at the end of the day based on the principle of best value for the fund.’

The fund manager has already received unsolicited interest in co-investment, he confirmed. ‘The centre is the largest private-sector project outside the centre of London. It’s a unique product because it is a fully integrated development, like Roppongi Hills Tokyo or Midtown Plaza in Tokyo.’

The timing is good, Perry added. ‘This is the only large-scale retail development in the UK market outside of London Croydon (a development by Westfield and Hammerson, ed.) and Brent Cross (an extension by Hammerson, ed.) with both of those developments tied up. The two investors in those projects are going to do the whole thing.’

By contrast, TIAA Henderson Real Estate is now seeking partners to take on one or more portions of the Edinburgh project. In addition to the retail section of the project, the fund manager is looking for investors in the hotel and residential sections, Perry said. ‘There are companies that specialise in these individual sectors and also those that span sectors. We’ve also had approaches from hotel operators who want to own the project and others who are just interested in being the operator. We’re looking at all the possibilities.’

The fund manager will be fluid in terms of the structure of additional investment, he added. ‘It could be with one of our existing investors in the form of a joint venture or a separate fund.’