Sovereign wealth fund bets big on UK shopping centre recovery

Posted by author April 22, 2024 Shopping

The centre boasts a prestigious tenant list that includes retail giants like Marks & Spencer, Zara, and Primark. Credit: Angelina Dimitrova via Shutterstock.

In a move signalling confidence in the future of prime UK retail locations, Norway’s sovereign wealth fund, Norges, is on the verge of acquiring full ownership of Meadowhall, a prominent shopping centre in Sheffield, UK, the Sunday Times reported.

Norges, managing an impressive £1.3trn ($1.6trn), is reportedly in advanced talks to purchase British Land’s 50% stake in Meadowhall for an estimated £363m ($447.47m), taking control of the entire centre.

This deal would value the shopping centre at roughly £725m ($893.71m), generating a yield of 7-8%.

The discussions mark the potential conclusion of a sales process initiated by British Land last September.

The Sunday Times noted, while an agreement between the two existing partners appears most likely, sources suggest Norges is exploring options with other potential buyers as well.

Interestingly, under the current terms, British Land, led by CEO Simon Carter, would retain its management role for Meadowhall, overseeing day-to-day operations for the new owner.

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The centre boasts a prestigious tenant list that includes retail giants like Marks & Spencer, Zara, and Primark.

According to the Sunday Times, this acquisition aligns with Norges’ existing UK property portfolio, which includes significant investments in London’s West End.

The fund possesses a 25% stake in Regent Street, a vast portfolio managed by The Crown Estate, and holds a 23.5% share in Shaftesbury Capital, the owner of Covent Garden.

Additionally, Norges co-owns the West One shopping centre with British Land, strategically located near Bond Street Station.

Meadowhall itself boasts a rich history, rising from the ashes of a former steelworks on Sheffield’s outskirts. Developed by Yorkshire entrepreneurs Eddie Healey and Paul Sykes, the centre was sold to British Land in 1999 for £1.2bn ($1.48bn), marking a significant profit for the original developers.

However, the past decade has seen a decline in the value of UK shopping centres. The surge of e-commerce and persistent high business rates have triggered a wave of retail closures, impacting the sector significantly.

Norges’ decision to potentially acquire full ownership of Meadowhall indicates a belief that prime retail locations like this one can weather the storm and rebound.