Lone Star Funds is in advanced talks to buy the Union Square shopping centre in Aberdeen from Hammerson, said two market sources.
The US private equity firm is offering around £110 million, a 12% yield, and has received financial backing from Natwest, the sources said, speaking on the condition of anonymity. If the deal goes through, it will mark a return to the retail sector for Lone Star. Five years ago, it handed back the keys on a portfolio of shopping centres, called Project Tiger, it had acquired from Rockspring in 2014 for £260 million using a £200 million Citi loan, as first reported by Debtwire at the time.
Attracted by relatively high yields, many private equity firms had bought shopping centres around 2014. However, malls were hit by rising vacancy rates as retailers struggled with the rise of e-commerce. Following the pandemic, opportunistic investors have started to feel more comfortable with retail again, reasoning that the sector has stabilised having weathered the online attack and survived the pandemic.
Last October, Northdale Investments, acting for US real estate investor Magnetar Capital, and Sovereign Centros, were in early stage talks to buy the property for more than £115 million, as reported. Earlier, Hammerson had been in talks to sell the mall to Canadian investment giant Brookfield but that deal fell through.
Union Square in Aberdeen covers 520,000 square feet of retail space, according to Hammerson’s website. In addition to 50 shops, it has 30 restaurants and a 2,400-seat cinema. Tenants include Zara, H&M, The White Company, Mac, Scottish craft beer brewer BrewDog and Indian street food pop-up Riksha.
Hammerson declined to comment while Lone Star and JLL did not respond to a request for comment by the time of publication.