Peel in talks with Capital over £1.6bn Trafford Centre sale
CAPITAL Shopping Centres (CSC) has said it is in advanced talks with property giant Peel Holdings to buy its 1.5m sq ft Trafford Centre shopping complex in Manchester in a deal which values the property at £1.6bn.
The firm, which owns Manchester’s Arndale Centre, said that if the deal were to complete, it would involve an equity payment price of £750m for the landmark shopping and leisure complex.
However, CSC would also assume responsibility for the centre’s net debt of around £800m and other net liabilities equating to around £50m.
“On the basis of CSC’s 30 June 2010 net asset value per share of 368 pence, the acquisition would imply a price for The Trafford Centre of approximately £1.6bn,” the London-based company said in a statement.
Peel would also make a further £75m cash contribution in return for CSC shares. If approved, it would make Peel’s founder John Whittaker the biggest single shareholder in Capital Shopping Centres, with a stake of 19.9%, which could rise to 24.9% if some of CSC’s bonds were converted.
Mr Whittaker would also be invited onto CSC’s board, taking on the non-executive post of deputy chairman.
Capital Shopping Centres is the biggest retail property country, and adding the Trafford Centre to its portfolio would give it four of the six biggest out-of-town shopping centres in the country and 10 of the top 25 centres.
The deal would also involve CSC raising additional cash through a share placing of up to 9.9% of its existing share capital in a bid to raise more funds to reduce its bank debt and bring its loan-to-value ratio down to 50%.
The Trafford Centre has been a huge success since it was opened by Peel in 1998, despite predictions among some in Manchester’s political community that it would flop. It is now the prime shopping destination in the North West.
A report published by Colliers in October stated that the centre was one of only two areas in the region which managed to maintain its Zone A rental levels in the year ending June 2010, alongside Manchester city centre. The centre also commands the highest rental levels in the region, with Zone A rents of £400 per sq ft.
CSC said that the Trafford Centre’s property assets had been externally valued and excluding the Barton Square extension, was found to be worth £1.65bn, representing a net initial yield of 5.01%, which would mean the proposed deal would give CSC a discount of around 3%.
“It is expected that the acquisition and the placing would have a neutral impact on earnings per share in the first full year and on net asset value per share,” CSC said.
“A further announcement will be made in due course.”
The deal will be another key strategic disposal by Peel, which this year sold a majority stake in its airports business to Canada’s Vancouver Airport Services.
