Landsec swoops in £490m deal for 92% stake in thriving Liverpool One retail centre

Landsec – the property giant that took control of Salford’s MediaCity from Manchester-based Peel Group in an £83m deal last month – has now swooped for the Liverpool One retail centre in a £490m acquisition.

The group, which previously owned the St Johns Shopping Centre in Liverpool city centre, now controls a 92% stake in Liverpool One, which opened in 2008, coinciding with Liverpool’s year as European Capital of Culture.

Both events have played an integral part in the city’s regeneration.

Landsec has acquired a 69% stake in Liverpool One from a wholly-owned subsidiary of the Abu Dhabi Investment Authority (ADIA) and a 23% stake from the original developer, Grosvenor.

Of this total consideration, a payment of £35m to ADIA is deferred for two years.

The income return on Landsec’s initial £455m outlay is expected to be around 7.5%.

The centre’s current rental income is four per cent below ERV, so combined with the benefits of Landsec’s operating platform, strong brand relationships and further ERV growth, rental income is expected to grow meaningfully in the coming years.

Landsec said the acquisition is in line with its objective to grow its investment in major retail destinations, recycling the proceeds from its £464m of non-core sales earlier in the year.

The group will now own and manage seven of the top 30 shopping centres in the UK.

Opened in 2008, boasting flagship tenants in John Lewis and Debenhams, Liverpool One is one of the most modern major retail destinations in the UK, offering a strong mix of retail, food and beverage, and leisure brands that attract footfall of 22 million people per year.

Retail sales have grown by five per cent over the past 12 months, with new leases signed 10% above ERV, relettings and renewals five per cent above previous passing rent, and overall occupancy of 96%.

This highlights that Liverpool One is well placed to benefit from the continued focus on fewer, bigger and better stores from key brands, further exemplified by recent upsizes and new lettings with, for example, M and S, Sephora, Uniqlo and Zara.

The transaction includes certain performance-related overage provisions with ADIA. Including this, Landsec expects its investment to deliver an unlevered IRR in line with the guidance it provided at its recent half-year results.

The transaction initially adds approximately 2.7ppt to the company’s LTV and, on refinancing the existing secured debt on the asset, is expected to add around 1.3p to EPS on an annualised basis.

At the end of the third quarter of 2024, occupancy at Liverpool One stood at 96.5% versus a UK shopping centre average of 86% and footfall was up 3.2% year on year (UK benchmark: 0.9%).

Total sales for the year to the end of October were also up 15% (UK benchmark: minus two per cent).

As part of the transaction, Landsec will assume the management of the retail and leisure destination from Grosvenor in February 2025.

Mark Allan, Landsec Chief Executive, said: “The top one per cent of the UK’s shopping destinations provide brands with access to 30% of all in-store retail spend, which is why we continue to see brands focus on fewer, but bigger and better stores in the best locations.

“As such, I am delighted that we have added another top ten centre with a highly attractive return profile – meaning our unique portfolio now includes seven of the top 30 centres in the UK.”

He added: “Liverpool One already has a great line up of brands in a thriving location and we look forward to building on this with our leading operating platform to further add to its exciting growth story.”

James Raynor, Grosvenor Property UK CEO, said: “Liverpool One is a phenomenal destination and we’re incredibly proud of what we’ve accomplished with, and for the city, over the last 25 years.

“It’s not only one of the most remarkable regeneration stories, re-defining what long term investment and partnership can achieve, it continues to be one of the UK’s most successful retail and leisure destinations. And, under the unified ownership and management of Landsec, we know it will continue to thrive.”

He added: “Looking ahead, we have ambitious plans to grow and diversify the business and we will reinvest the proceeds from the sale in our core portfolio including our 10-year programme of investment in London and residential debt business, which has supported the delivery of 3,370 homes in just two years.”

Liverpool City Council leader, Cllr Liam Robinson, said: “Liverpool One has been one of the UK’s great retail success stories of the 21st century, and its arrival and growth has been transformational for Liverpool’s visitor economy and appeal – the vision of Grosvenor working with the council since 1996 has truly been delivered.

“I’d like to thank Grosvenor for their stewardship and partnership over the past few decades, their legacy to Liverpool is unquestionable. I welcome Landsec’s acquisition of the Liverpool One estate, it represents a great opportunity for a new chapter and new investment for our city centre – I look forward to meeting the owners to discuss their plans.”