Landsec Buys Majority Stake in Liverpool ONE Shopping Centre

Land Securities Group (Landsec), the UK’s largest commercial property development and investment company, has acquired a 92% stake in Liverpool ONE, one of the premier shopping centres in the UK, from a wholly owned subsidiary of the Abu Dhabi Investment Authority (69%) and Grosvenor (23%) for an overall consideration of $622.15 million.

Of this total consideration, a payment of $44.44 million to ADIA is deferred for two years and the income returns on Landsec’s initial $565.02 million outlay is expected to be 7.5%.

Liverpool ONE’s current rental income is 4% below ERV, so combined with the benefits of Landsec’s leading operating platform, strong brand relationships and further ERV growth, rental income is expected to grow meaningfully in the coming years.

The acquisition is in line with Landsec’s objective to grow its investment in major retail destinations, recycling the proceeds from its $589.10 million of non-core sales earlier in the year. Landsec will now own and manage seven of the top-30 shopping centres in the UK, providing brands and visitors with a unique portfolio of regionally dominant, urban retail and leisure destinations.

Opened in 2008, Liverpool ONE is one of the most modern major retail destinations in the UK, offering a strong mix of retail, food and beverage, and leisure brands that attract footfall of 22 million people per year.

Retail sales have grown by 5% over the past twelve months, with new leases signed 10% above ERV, re-lettings and renewals 5% above previous passing rent, and overall occupancy of 96%.

This highlights that Liverpool ONE is well-placed to benefit from the continued focus on fewer, bigger and better stores from key brands, further exemplified by recent upsizes and new lettings with e.g. M&S, Sephora, Uniqlo and Zara.

The transaction includes certain performance-related overage provisions with ADIA. Including this, Landsec expects its investment to deliver an unlevered IRR in line with the guidance it provided at its recent half-year results.

It also initially adds 2.7ppt to the company’s LTV and, upon refinancing the existing secured debt on the asset, is expected to add 1.3 pence to Earnings Per Share (EPS) on an annualised basis.

Adding Another Top Centre

Landsec CEO Mark Allan said that the top 1% of the UK’s shopping destinations provide brands with access to 30% of all in-store retail spend, which is why Landsec continues to see brands focus on fewer, but bigger and better stores in the best locations.

He said that Landsec has added another top-ten centre with a highly attractive return profile, which means their unique portfolio now includes seven of the top 30 centres in the UK.

“Liverpool ONE already has a great line-up of brands in a thriving location and we look forward to building on this with our leading operating platform to further add to its exciting growth story,” Allan added.

Grosvenor Property UK CEO James Raynoir said that Liverpool ONE is a phenomenal destination and they were incredibly proud of what they have accomplished with and for the City over the last 25 years.

It’s not only one of the most remarkable regeneration stories, re-defining what long-term investment and partnership can achieve, it continues to be one of the UK’s most successful retail and leisure destinations. And, under the unified ownership and management of Landsec, and they knew it will continue to thrive, he said.