Land Securities has agreed to buy the Metrocentre near Newcastle, one of the UK’s largest shopping centres, for £516m, funding the deal with a £500m share issue as it doubles down on prime retail property.
The FTSE 100 landlord said it would acquire 100% of the Gateshead centre, a top-10 UK shopping destination with more than 16 million annual visitors and tenants including Apple, Zara and Primark, from Tynehawk Holdings.
The price represents a net initial yield of 7.9% and, Landsec said, around half the cost of building such a centre today. It is also spending a further £100m to consolidate stakes in its existing retail portfolio.
To help fund the deals, Landsec launched an equity raise of about £500m, through a placing and a retail offer, with the balance coming from existing debt. The company said the acquisitions would add to earnings from its 2028 financial year and would leave its balance sheet slightly stronger, with loan-to-value edging down to 37.7%.
The move deepens Landsec’s bet on major retail destinations, which its chief executive, Mark Allan, called the company’s “highest conviction” investment.
Mark Allan, Chief Executive Officer of Landsec, 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 vs 1% for the average UK market, and footfall continuing to gain market share.”
After years in which shopping centres fell out of favour, Landsec said demand from big brands for space in the strongest centres was robust, with sales across its major retail assets up 26% since 2022, far ahead of the wider market. This contrasts with high streets that have seen years of decline and are now dominated by barbers and coffee shops.
Once complete, it will own three of the UK’s top 10 shopping centres. Metrocentre was previously part of Intu, the shopping centre group that collapsed in 2020.