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News Release

Good buying opportunities may emerge in the secondary shopping centre investment market in H2 2017, says JLL

LONDON, 3 July 2017 - According to JLL’s Shopping Centre Investment team, the UK shopping centre market witnessed just 15 transactions in H1 2017. Total deal volume was £1.168bn, down 24.2.% on the £1.49bn from the same period in 2016. Of these transactions all of them except two were 2016 transactions that completed in 2017.

Notable transactions in the first half of this year included the acquisition of Stratford Shopping Centre by Frogmore who were advised by JLL from Blackstone, and Catalyst Capital for £141.5m, a 50% stake in Southside Wandsworth by Invesco from Delancey for £150m, the acquisition of 3 factory outlet centres by Land Securities in Braintree, Castleford and Street for £332.5m and the acquisition of Friars Walk Newport by Talisker for £83.5m.

There are currently 6 shopping centres under offer including assets such as Ocean Terminal and Castle Court Belfast both of which are under offer to a Northern Ireland based vehicle funded with Asian capital. 19 shopping centres are currently in the market.

JLL believes that the macro economic and political uncertainty that currently persists is impacting on investment decisions in the sector. Bidding on assets at all levels is thin, ranging from stakes in prime shopping centres to some of the more secondary assets as investors choose to adopt a wait and see approach believing that tomorrow may be cheaper. Initial forecasts were that 2017 was going to be the year for many secondary assets to come to the market but so far this has failed to materialise.

There are numerous secondary centres that could be bought but JLL reports that there remains a divide between vendor and investor pricing, with vendors reluctant to openly market assets in the knowledge that these may be blighted if they fail to sell.

The current market dynamics are very different to the last cycle as currently a benign debt market is giving prospective vendors the option of refinancing assets. Debt terms of 55-60% Loan To Value are achievable with c.250-300 bps margin on secondary assets and 200-250 bps on prime assets pushing any investment decisions further out. If vendors do choose to endeavour to exit assets, a highly targeted approach is often the best way to achieve a positive outcome.

James Waldock, Director in JLL’s Shopping Centre Investment team, commented: “There will be some interesting secondary buying opportunities in the second half of the year where good convenience assets have been labelled under the secondary banner. We believe that selectively there is value in this market where rents have been re-based, there are strong tenant renewal patterns and footfall has been maintained. These attributes, combined with the continued availability of debt on attractive terms creates an opportunity to achieve healthy geared returns.”