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AUGUST 2008
Henderson to acquire three UK Outlet Malls for £365 million - Raises £181 million and launches UK Outlet Mall Fund - One of the largest UK Commercial Property deals for 2008 -
Henderson Global Investors’ property business has this week exchanged on the Cheshire Oaks, Swindon and Bridgend designer outlet malls for £364.5 million, with a net initial yield of just over 7.0%, making it one of the largest UK commercial property deals in 2008.
Henderson’s Andrew Rich will manage the fund. McArthurGlen, Europe’s leading manager of designer outlets and the original developers of the properties, will continue to provide specialist property management services.
The portfolio, which includes the UK’s largest outlet mall, Cheshire Oaks, has been purchased following a £181 million equity raise in under three months to launch the UK Outlet Mall Fund (“UKOMF”). Henderson and McArthurGlen have each co-invested in the venture.
Debt for the acquisition was provided by Bayerische Landesbank in an unsyndicated loan.
UKOMF, a Scottish Limited Partnership, is a 10 year closed-ended fund and aims to deliver an IRR of 10.0% per annum over its life, and a target distribution yield of approximately 6.0% per annum. UKOMF also aims to deliver an IRR of 13.0% per annum over the first five years.
Commenting on the acquisition James Darkins, managing director of Henderson Property, says, “Henderson has been a long term investor in UK and European retail assets. We are a firm believer that attractive long term returns are available from prime retail assets.
Our experience with our European Outlet Mall Fund together with our research of historical performance in the US and Europe, clearly demonstrate that outlet malls are consistent performers, and importantly still able to provide growth in turnover during times of economic slowdown.
“The fact that we have been able to raise both equity in under three months and debt for the acquisition of this portfolio is testament to the quality of the assets and Henderson’s and McArthurGlen’s ability and track record of creating value from outlet malls.
It also demonstrates that there is liquidity in the market, providing both buyers and sellers are prepared to take a realistic approach to pricing.”
The portfolio has a total of 785,000 sq ft of retail space across 341 units. Henderson has also identified a further 50,000 sq ft of retail space which can be made available through asset management and development. In 2007 over 14 million people visited the malls.
On plans for the assets Neil Varnham, director of retail property at Henderson, says, “We will immediately begin an active management programme to extract performance, by introducing new retailers, increasing marketing activity, commencing capital projects to enhance the desirability of the assets to both the consumer and retailer community. I remain convinced that these designer outlet malls will meet the key ingredients for success and will provide excellent returns to our investors.”
Commenting on the opportunity Bas van den Ijssel, senior fund manager at MN Services, the Dutch asset manager and one of the UKOMF equity investors, says, “”We were waiting for a good moment and opportunity to take advantage of the correction in pricing in the UK market.
With this opportunity we can step in at a good price and work together with the outlet mall specialists McArthurGlen and Henderson, with both we have very good experience in the Henderson European Outlet Mall Fund. We firmly believe that with these assets at this acquisition price and with this management team it will hit the target IRR’s and above that with sound upward potential.”
Julia Calabrese, CEO at McArthurGlen UK Ltd comments, "Henderson’s acquisition of the Cheshire Oaks, Bridgend and Swindon Designer Outlets further strengthens our successful partnership with them. I am delighted that Henderson have retained McArthurGlen as the management company, re-enforcing our position as Europe's leading manager of designer outlets."