Canada Pension Plan Investment Board is in talks to unlock one of London’s largest regeneration projects by buying a circa 50% stake in Hammerson and Standard Life Investments’ Brent Cross shopping centre, NW4.
CPPIB is in discussions to become a new joint owner in the 900,000 sq ft centre that is set to double in size and have a £1.4bn end value. If a deal goes ahead, CPPIB will provide an initial cash payment of around £500m for the half share.
The three owners are then expected to inject extra capital into the construction of the extension, which will cost between £475m and £550m. Although discussions are at an advanced stage, the deal’s structure is highly complex and CPPIB’s exact contribution is yet to be finalised.
Hammerson, which owns 41% of Brent Cross, and Standard Life, which owns 59%, instructed Morgan Stanley to find a partner last November.
With the proceeds from the sale of the stake, the existing partners will be able to use to fund their share of the extension.
The opportunity is understood to have attracted interest from a selection of sovereign wealth and giant pension funds including Norges, AustralianSuper, Gingko Tree and ADIA.
CPPIB is a logical fit for the opportunity as it has an existing relationship with Hammerson. In February last year they joined forces to jointly buy the £335m Grand Central shopping centre in Birmingham. Both also own shares in the Bullring in Birmingham and they jointly own Silverburn shopping centre in Glasgow.
In an interview with EG last November, Andrea Orlandi, CPPIB’s head of real estate for Europe, said he was looking to invest more in dominant, “fortress” shopping centres.
“When I joined we had interests in more than 20 shopping malls in the UK. Today we have four. We have found that, across the portfolio, regional dominant centres continue to outperform. It doesn’t mean the smaller centres are bad investments but it’s harder to get capital growth.
“If you are looking for an income return and have good management it’s fine, but you are seeing the impact, whether it’s demographics or urbanisation or e-commerce, of buyers gravitating towards those centres.”
Final plans for the Brent Cross project were submitted to Barnet Council in May this year. The full plans will see the 1974-built property refurbished in addition to the extension.
Proposals include more than 200 shops, 40 restaurants, a cinema and a hotel. John Lewis and Fenwick will be retained as anchor tenants and there will be a new facility built for Marks & Spencer. All three were part of the original Brent Cross when it opened in 1976.
Outline planning permission was first granted in 2010. Subject to planning consent and an agreement with CPPIB, preliminary work could start as early as summer 2018 and complete by 2022.
CBRE is advising CPPIB.
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