Hammerson has confirmed the sale of the Union Square shopping mall in Aberdeen, Scotland, to Lone Star for £111 million, a net initial yield of 11%.
CoStar News last week reported that the United States investor was in talks to buy the 52,000-square-metre property for £110 million, a 12% yield, with financial backing from bank Natwest. Lone Star bought the property for its Lone Star Real Estate Fund VI. The sales price is 8% lower than the United Kingdom REIT's book value of £121 million as of year-end 2023.
The purchase marks a return to the United Kingdom retail sector for Lone Star. Five years ago, it handed back the keys on a portfolio of shopping properties, 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.
Hammerson said the sale of Union Square completes its £500 million non-core disposal strategy it had embarked on in 2022. It will use the proceeds from the sale to strengthen its balance sheet and provide capital to reinvest in its core portfolio.
The sale marks the end of a two-year process for Hammerson where deals were close to being completed with Brookfield and then with Northdale and Sovereign Centros.
JLL and Sheridan Keane advised Hammerson on the sale.