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APG, TH Real Estate in £1bn Edinburgh JV

Dutch pension fund manager APG has acquired a 75 percent stake in the Edinburgh St James redevelopment in the Scottish capital, a move which has kick-started the construction process of one of the UK’s largest private regeneration projects. 

APG, the Dutch pension fund, has acquired a 75 percent stake in the Edinburgh St James redevelopment from TH Real Estate, the management firm owned by TIAA, which will retain the remaining 25 percent stake in the project on behalf of its UK Shopping Centre Fund.

The £1 billion ($1.2 billion; €1.1 billion) redevelopment of one of the city’s largest shopping complexes will see the creation of 1.7 million square feet of retail and leisure space, in one of the UK’s largest private sector regeneration projects.

A spokesman for both APG and TH Real Estate said that confirmation of the joint investment partnership paved the way for the immediate commencement of the construction phase. Neither firm, however, disclosed the price paid by APG.

The mall, which was constructed in the 1960s, has now closed its doors for the final time after over 40 years of trading as the St James Centre. Its new name will be Edinburgh St James.

Construction work began yesterday (Monday, October 17) with the start of the demolition process, expected to take 18 months to complete.

Once compete, the new shopping center, which will be anchored by John Lewis, will also include 85 shops, 20 restaurants, three new public squares, a multi-screen cinema, a 214-room, five-star W Hotel, which represents the firm’s debut in Scotland, as well as 150 private apartments.

Aside from breathing new life into an under-developed part of Edinburgh’s Princes Street shopping district, the project will also create 3,000 new jobs.

Laing O’Rourke, the UK’s largest privately-owned construction company, has been appointed as the main contractor for the redevelopment, which is expected to be fully completed by 2021.

“The Edinburgh St James project is one the UK’s largest and most significant regeneration projects. As such, the project fits very well in our portfolio with stakes in shopping centers like Westfield Stratford City in London and CAP3000 in Nice,” said Robert-Jan Foortse, head of European property investments at APG.

“Edinburgh St James also fits in seamlessly with our strategy to increase our focus on ‘develop to core’ projects,” Foortse added.

“We believe (this investment) will set a new benchmark for the future of retail and leisure schemes, both in the UK, and beyond,” said Myles White, director of retail, TH Real Estate.

APG formed another significant joint venture earlier in the year when it merged two prominent sites within London’s private rented sector. In April, the pension fund joined forces with Qatari Diar Real Estate Investment, the subsidiary of the Qatar Investment Authority (QIA), and London-based developer Delancey to create a £1.4 billion residential estate in the UK capital by merging the East Village project in the 2012 Olympic site and the redevelopment of Elephant and Castle town center.

The deal, which is an equal partnership between the three parties, includes a portfolio of 4,000 rented homes. Of these, 1,500 have already been built, a further 1,000 are under construction and the remaining 1,500 homes have planning consent with construction work due to begin shortly.

For the Edinburgh St James transaction, Savills acted on behalf of APG, while Cushman & Wakefield acted on behalf of TH Real Estate.