INTERNATIONAL. Abu Dhabi backed property company is reportedly the front-runner to buy a large stake in the Meadowhall shopping centre in Sheffield, England.
Meadowhall's parent company British Land has restarted talks to sell around a half of the US$2.6 billion flagship shopping centre to London & Stamford, a listed property opportunity fund backed by an unnamed Abu Dhabi sovereign wealth fund, according to a report in the Financial Times.
Most of the funds would be sourced from the Middle East if the deal goes ahead, the paper claimed. Other interested buyers are said to include US opportunity fund Carlyle.
The FT said the half stake would be sold for less than the £700 million September valuation following tumbling property prices over the past two months.
British Land looked at selling Meadowhall last summer when it was valued at £1.7 billion, but pulled out of the deal in October last year as the property market nosedived.
A British Land spokesman declined to comment on the report.
Last month, it was revealed that Meadowhall was bucking the retail downturn with a 3% increase in visitor numbers following the revamp of its main food hall. British Land said the new Meadowhall Food Court had seen strong demand from customers.
Recent store openings such as Zizzi and Coal had contributed to a 12% increase in the food court's turnover in the six months to 30 September. Meadowhall's former food hall has been redesigned to create larger and better-shaped units.
While the shopping centre reported good overall retail performance over the six months, it had seen a further £112 million fall in its value, dropping 7.4% to £1,400 million. British Land said the value of its property portfolio, which covers retail, office and business parks, had fallen more than 10% over the period.
The rapid UK property correction has stripped more than a £1 billion off the value of the group's assets.
But the UK's second-largest real estate investor, seen as a bellwether for UK property firms, is still benefiting from retailers taking space in its landmark shopping centres such as Meadowhall and corporate occupiers in its office towers in London. Existing residents are also willing to pay higher rents for their premises.
"We offer resilience in an otherwise uncertain market," Chairman Chris Gibson-Smith said last month. "Over the past few years we have reshaped our portfolio to focus on prime property.
"Our average lease lengths are 13 years with only 4% up for renewal in the next three years."
London & Stamford, which is reportedly interested in buying a stake in Meadowhall, is a London-listed property fund backed by a sovereign wealth fund from Abu Dhabi, possibly Mubadala.
Once seen as a bottomless resource, sovereign wealth funds (SWFs) are now feeling the effects of the credit crunch. Some analysts believe the funds are withdrawing from investments abroad and may divert more funds to prop up local economies.
SWFs have made their mark in the north of England over the years. The Singapore government's SWF is part of a consortium that owns Kelda, the parent company of Yorkshire Water.
A Dubai World company this year bought Gazeley, the property developer subsidiary of Asda (Wal-Mart's UK operation), adding to its world-wide portfolio of companies that includes ferry operator P&O which operates from Hull.
Dubai International Capital owns Travelodge, which has 21 hotels in Yorkshire, and Alliance Medical, which has NHS contracts to provide healthcare across the UK.