British Land plots buy-back on Slough shopping centres

British Land is negotiating to buy back a share in two shopping centres in Slough it sold more than a decade ago. The REIT is in discussions with the Abu Dhabi Investment Authority, the owner of the Queensmere and Observatory centres in Slough, Berkshire, to buy a circa 20% stake. British Land had sold the two centres to clients of Criterion Capital for £200m in 2006. It is also considering an option to boost this to a 50/50 joint venture. The deal would not depend on it but it is thought the likelihood of this would increase if the current owners can gain planning consent to rebuild the scheme as a development incorporating flats operated by Fizzy Living. British Land is currently in discussions to buy 16% of Fizzy Living’s underlying portfolio from Thames Valley Housing on top of its management company, also revealed by EG. ADIA is also a shareholder of Fizzy. Proposals are still being drawn up for the two adjacent Slough malls but are expected to comprise a mixed-use development with circa 1,500 build-to-rent flats. Councillors last year said plans to demolish the Queensmere Observatory shopping centre were under way, with plans being drawn up for a mix of retail and at least 900 homes on the floors above. The malls bought by ADIA for £130m in 2016 included Wellington House, a 57,400 sq ft office building next door and a 1,300-space car park. At the time, Queensmere had consent for a 130,000 sq ft extension and 675 homes. In its full-year results in May, British Land said that build-to-rent would “play an increasingly important role in our mixed-use business”, as a “structural growth market which is complementary to our core model”. The REIT is taking locations with strong links to the upcoming Elizabeth line, having acquired assets in locations including Woolwich and Ealing during the year to 31 March. The Slough deal would form part of this strategy. The malls are currently managed by Catalyst Capital. British Land is expected to take over the asset management as part of the deal. The buyback indicates how more investors are spotting opportunities in the relatively low-yielding private rented sector, while returns in other sectors decline. At the same time, investors are increasingly looking at converting retail assets into residential uses to create more value and diversify their revenue streams. NewRiver REIT has identified the potential to deliver up to 1,300 homes adjacent to or above its retail assets over the next five to 10 years, while Crosstree Real Estate Partners is close to buying St Modwen Properties’ Edmonton Green, having spotted a major opportunity to enhance value through the development of around 1,000 flats. And last month, intu highlighted “substantial” mixed-use development opportunities identified within its portfolio, including scope for 5,000 PRS residential units. British Land and Fizzy Living declined to comment. ADIA did not respond to requests for comment at the time of writing. To send feedback, e-mail pui-guan.man@egi.co.uk or tweet @PuiGuanM or @estatesgazette