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(Sharecast News) - Landsec said on Thursday that it has agreed to buy the Metrocentre shopping centre near Newcastle for £516m.
Based on in-place net rental income of £41m, the cash consideration implies an in-place net rental income yield of 7.9%. At this price, Metrocentre offers "an attractive combination of a high day-one income return, strong future rental growth prospects and an expected low double-digit unlevered IRR," Landsec said.
The acquisition will be funded through an equity issue and existing debt facilities.
Landsec said Metrocentre is a top-10 shopping centre destination in the UK based on sales and attracts more than 16 million visitors per year. It generates retail sales of around £650m, with 282 stores across 1.86 million sq. ft. of lettable floorspace.
The acquisition includes an adjacent retail park, which covers 0.2 million sq. ft. of space across 15 units.
The company also provided an update on recent trading. It said that since the start of this year, it has continued to see strong customer demand for its "best-in-class" assets. As a result, lettings over the five months to the end of August have been comfortably ahead of ERV, with re-lettings and renewals well ahead of previous passing rent.
Based on this "continued positive momentum", Landsec continues to expect to deliver around 3-5% growth in like-for-like net rental income for the year to the end of March 2027.
Landsec said it was well placed to deliver an acceleration in earnings per share growth in both the near and medium term, with the potential to deliver around 5% compound annual growth in EPRA EPS through to FY30, the vast majority of which is derived from its existing portfolio and operating platform.
Chief executive Mark Allan said: "Growing our investment in major retail destinations remains our highest conviction call, given the high income yields and attractive income growth on offer for the right assets.
"Our acquisition of Metrocentre represents a rare opportunity to obtain 100% control of a top-10 UK shopping centre. Metrocentre offers the scale, relevance and quality of catchment where demand from brands is highest, as they focus on fewer, bigger, better stores in the strongest locations. This established trend remains clear, with retail sales across our existing major retail platform up 26% since March 2022 versus 1% for the average UK market, and footfall continuing to gain market share."
At 1358 BST, the shares were up 1% at 630.50p.
Russ Mould, investment director at AJ Bell, said Landsec had made "an important acquisition".
"Ranked as a top 10 shopping centre destination in the UK based on sales, Metrocentre becomes a flagship asset for the property group and accelerates its position as a retail landlord in larger shopping centres," he said. "Tenants include Apple, Zara and Marks & Spencer, the sort of names that won't give Land Securities a sleepless night over whether the rent will be paid.
"Metrocentre looks like an ideal fit for Land Securities' portfolio that includes stakes in retail sites across the UK such as Bluewater in Kent and Liverpool's ONE centre. Land Securities also has a range of office workspaces.
"Mike Ashley won't be pleased as Frasers Group was rumoured to be in the running to buy Metrocentre. Frasers' Sports Direct and Flannels brands are prominently displayed on the front of the shopping centre, and the group is a key tenant.
"Frasers owns several shopping centres and retail parks in the UK and Metrocentre would have been a trophy asset to add to its portfolio, given Ashley's association with Newcastle. As the former owner of Newcastle United Football Club, Ashley has deep ties with the city."
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