Royal London Asset Management Property has bought a 50% stake in centre:mk, Milton Keynes’ primary shopping centre, from AustralianSuper, in a major transaction first tipped by CoStar News in March.
The price paid has not been disclosed but the mall was valued at £300 million in March. Market sources suggested the price paid was £140 million, representing a yield of 9%.
Royal London Asset Management Property said the acquisition formed part of a strategy to invest in "well-let and re-priced shopping centres with a strategic Net Zero Carbon pathway, delivering core income returns from rebased rents with capital growth potential". The remaining 50% share of the shopping centre is owned by Federated Hermes on behalf of BT Pension Scheme.
The mall has an annual footfall of over 21 million, according to centre:mk. It is a Grade II listed, purpose-built shopping centre constructed in 1979, and comprises 1.3 million square feet in the centre of Milton Keynes, approximately 50 miles northwest of London. Representing 80% of the city centre’s total retail space, it is the dominant shopping destination in the region.
Anchored by national retailers including M&S, John Lewis, Harrods H Beauty, TK Maxx, Boots, and Next, centre:mk has a 4.4% vacancy rate compared with the UK average of 10%. RLAM said "healthy supply-demand tension, supported by robust tenant interest and rebased rents, offers potential for sustained income growth".
The shopping centre also has a multistorey 1,400 space car park built in 2018.
Retail forms an important component of Royal London Asset Management Property’s strategy, it said, pointing to the recently announced plan to undertake a revitalisation of the two-acre Mayfair Quarter in Central London. The purchase of centre:mk follows Royal London Asset Management Property’s sale of Quedgeley Retail Park in Gloucester to Frasers in September, and the Homebase in Winchester in October.
AustralianSuper bought its 50% interest in the 1.3 million-square-foot shopping centre from Hermes Real Estate Investment Management, on behalf of BT Pension Scheme Trustees for £269.66 million, reflecting a net initial yield of 5.34% in 2013.
Previously the majority owner, now Federated Hermes, had acquired the remaining 36% in the Centre:mk in June 2013 through a property swap with M&G, bringing the asset fully under its control.
Australian Super, which is a profit-for-member scheme somewhat like a pension fund, appointed JLL in October last year to advise on a potential sale as part of a review of its global property portfolio.
Over the past nine years, AustralianSuper has nearly tripled in size, growing from £40 billion to more than £155 billion in assets under management. It had conducted a review of its global property portfolio and identified several assets that no longer fit its strategy of investing in large-scale property opportunities globally.
Paul Nicholson, senior asset manager at Royal London Asset Management Property, said in a statement: “This acquisition marks a significant move for Royal London Asset Management Property, demonstrating our confidence in the retail market's recovery and the future success of well located, best-in-class shopping centres such as centre:mk. As consumer confidence improves, low inflation and high earnings growth are expected to enhance spending power, subsequently boosting retailers' sales. centre:mk, as a catchment-dominant shopping centre, is poised to benefit from this recovery.
"Underpinned by high footfall and sales, centre:mk offers a strong, stable income stream coupled with a low vacancy rate, significantly below the UK shopping centre average, highlighting its resilience and appeal. This acquisition enhances our balanced portfolio by increasing our retail sector exposure. We anticipate strong returns and excellent rental growth, and look forward to working with Federated Hermes to further centre:mk’s success.”
Royal London Asset Management Property was represented by Knight Frank and DAC Beachcroft, with AustralianSuper advised by JLL, Griffiths Eccles and Linklaters.
(Updated on 18 November to add price in second paragraph).