Overseas money drives activity in the UK shopping centre investment market as institutional demand weakens.

1 Oct, 2007, London

Cushman & Wakefield reports on Q3 - 2007 UK shopping centre investment transcation volumes

Despite the current difficulties in the investment market, the level of turnover in the UK shopping centre investment market in Q3 and for the year to date, are still up on last year according to a new report released today by Cushman & Wakefield. During the last quarter there were a total of 12 shopping centre transactions totalling approximately £1.55 billion compared to £1.436 billion transacted in Q3 2006. Since the beginning of 2007 a total of £4.35 billion deals have been transacted compared to £3.30 billion for the same period last year.

However, the report highlights the fact that institutional demand for shopping centre assets has weakened significantly and secondary centres are struggling to attract interest as the credit crunch has adjusted many banks’ attitude to lending. The key highly geared buyers are not so active and the vast majority of turnover within this sector over the past quarter has been driven by overseas money. In constrast to last year, 2007 has been notable for a smaller number of high value transactions – the average lot size is £95 million, up 32% on 2006’s average lot size.

The last quarter has been dominated by three notable transactions: the forward funding of Chester, Northgate Centre, the sale of Whitefriars, Canterbury and the sale of a 50% share in West Quay, Southampton. These schemes have been acquired by ING Real Estate/CPP/Warren Capital, GIC and Henderson / CPP respectively. In addition, we have evidenced Westfield’s sale of a 25% stake in their UK Shopping Centre Fund, including Tunbridge Wells, Belfast and Merry Hill as well as a 25% share in Westfield Derby, to ABP Investments and CPP.

Transactions in lawyer’s hands or under offer currently total approximately £850 million including Glagow, Princes Square and Edinburgh, Cameron Toll. In addition, there are currently three forward funding transactions agreed, namely Carmarthen, Lichfield and Wolverhampton.

David Erwin, partner and head of UK shopping centre investment said; ”Looking towards the end of the calendar year we predict a significant number of schemes will be available for purchase – some will be openly marketed and some will be quietly available. The big issue is whether buyer’s and seller’s expectations on pricing will find common ground. ”

He continued: ”Going forward vendors are likely to be from a range of sectors with institutions leading the way in the wake of increased redemptions and portfolio rebalancing. It should prove to be an interesting quarter and at this stage, even in a difficult market, it looks as though last year’s turnover figure of £5.7 billion could be exceeded.”

Q3 - 2007 Shopping Centre Investment Market

Completed Transactions in Quarter 3 2007 (£)

£1.55 billion

[Q3 2006 - £1.436 billion]

Number of Transactions in Quarter

Number of Centres

Comparison with Previous Quarter

£1.54 billion, 11 transactions

Deals Currently in Pipeline

Circa £850million

Buyers

RREEF, ABP Investments & CPP, Alanis Capital & AIB Private Banking, CBRE Investors and ING.