GIC Takes 62% Haircut on Sale of Stake in UK Megamall to Landsec for $152M

GIC has sold its 17.5 percent stake in the UK’s fifth largest mall to London-based developer and property investor Land Securities Group (Landsec) for £120 million ($152 million), with the Singaporean sovereign fund taking a 62 percent haircut on its nearly two-decade investment.

Having acquired the stake in the Bluewater shopping centre in 2005 from the property investing unit of British insurer Prudential (now M&G Real Estate) for £318 million in a deal which valued the megamall near London at £1.8 billion, GIC has now divested its interest in the asset at a valuation of £686 million, representing a 62 percent decline on a British pound basis and 74 percent markdown in US dollar terms.

The transaction hands control of the asset to Landsec, with the firm boosting its stake in the asset to 66.25 percent from 48.75 percent prior to the deal.

“This transaction underscores our ability to continue to create value through prime investments in scarce, major retail destinations with attractive return profiles,” Bruce Findlay, managing director of retail at Landsec said in a release on Tuesday. “Bluewater is one of the UK’s top retail destinations and a key part of our strategy to further build our relationships with key brands.”

GIC declined to comment on the transaction.

27 Million Annual Visitors

Situated 21.5 miles (34.6 kilometres) southeast of central London in the county of Kent, Bluewater has a floor area of 1.8 million square feet (167,225 square metres) across three levels, and occupies a site area of 240 acres.

The 1999-vintage mall has over 300 stores, F&B outlets and entertainment venues and attracts over 27 million visitors annually, according to Landsec, which expects the acquisition to increase its net rental income by £10.3 million on an annualised basis based on the performance of its existing investment in the property in the twelve months through March.

GIC had purchased half of Prudential’s 35 percent stake in the mall as part of a UK property acquisition spree in the years preceding the 2008 financial crisis. The sovereign giant in 2005 teamed up with Lehman Brothers Real Estate Partners and Canadian private equity firm Realstar Asset Management to buy a portfolio of 73 UK hotels from InterContinental Hotel Group for £1 billion, and in 2007 bought the Merrill Lynch Financial Centre office campus in London from the US investment bank for £480 million.

In 2014, Landsec acquired its initial 30 percent stake in Bluewater from ASX-listed builder and property investor Lendlease for £656 million in a deal which valued the property at £2.2 billion. As part of that transaction, Landsec also paid £40 million for full asset management rights for the property in addition to 110 acres of surrounding land.

Following that transaction, Lendlease retained a 25 percent share in the asset, while GIC and M&G Real Estate each maintained their 17.5 percent stakes. UK-based investment firms Hermes Investment Management and Aberdeen Asset Management (now Abrdn) respectively held the remaining interests of 7.5 percent and 2.5 percent.

In 2017, Hermes sold its 7.5 percent stake to UK insurer Royal London for a reported £155 million, while Lendlease and GIC began marketing their stakes in the asset, having reportedly sought either £870 million for their combined 42.5 percent stake, or £510 million for Lendlease’s share and £360 million for GIC’s interest on an individual basis, with those exercises having valued the property at just over £2 billion.

By 2021, when Landsec acquired Lendlease’s remaining 25 percent stake for £172 million, valuations of UK retail properties had plummeted amid the pandemic, with that deal having taken place at a valuation of £688 million, roughly equivalent to the £686 million valuation at which GIC sold its stake.

As part of that 2021 transaction, Landsec sold a 6.25 percent stake from Lendlease’s shareholding to M&G Real Estate, bringing M&G’s interest in the property to 23.75 percent.

Retail Green Shoots

GIC is exiting its investment in Bluewater after capital values of UK retail properties fell roughly 30 percent from the end of 2018 through late 2023, according to CBRE.

With Britain’s economy having emerged from recession in the first quarter of this year, investment in retail properties nearly doubled to £2 billion in the first quarter from £1.1 billion in the fourth quarter, which is slightly above the five-year quarterly average and the strongest quarterly figure in a year, according to a Colliers report this month.

Retail sales rose by 1.8 percent in the first quarter following a 0.9 percent drop in the fourth quarter amid slowing inflation, rising real wages, and improving consumer confidence.

Nationwide retail rents rose for the fifth consecutive quarter in the first quarter, with the consultancy forecasting 3.1 percent retail capital value growth in the five years through 2028 amid the improving economic backdrop.