Lloyds Banking Group has sold a prime shopping centre in Scotland to UK property company Hammerson and the Canada Pension Plan Investment Board (CPPIB) for £297 million (€333 million; $478 million).
The centre attracted interest from several private equity real estate firms partly because of the potential to add value to the prime Silverburn shopping centre, near Glasgow.
However, a 50-50 joint venture between Hammerson and the Canada pension plan secured the asset.
Though there is no suggestion that Lloyds’ decision to sell the centre to Hammerson and CPPIB was based on the type of buyers they are, private equity real estate firms have expressed concerns privately that newly-nationalised Lloyds is reluctant to sell assets to private equity firms for fear of a public backlash if perceived to have “given value” away to such a purchaser.
Graeme Eadie, CPPIB senior vice president of real estate investments, said in a statement that Silverburn deal represented a “unique opportunity” to acquire a high quality asset with one of the largest developers and operators in the UK.
Silverburn is one of the largest malls in Scotland, measuring 93,000-square-metres. It was acquired from Lloyds after developers Retail Property Holdings went into administration owing to its debt load. The centre was bought for £50 million less than its original development cost.
Silverburn opened in October 2007 reportedly more than 80 percent leased. It is now 97 percent leased, with an average unexpired lease term of more than 12 years, CPPIB said in the statement.
The C$123.8 billion (€81.5; $116.5 million) CPPIB pension fund added the net income from the centre would be approximately £17 million in 2010, equivalent to an initial yield of around 6 percent. Hammerson will be managing the property.
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