Land Secs' Bluewater deal to lift shopping centre valuations, says Deutsche Bank

26th Jun 2014 12:01

Deutsche Bank said that Land Securities' £656m purchase of a 30% stake in shopping centre Bluewater will likely lift valuations of shopping centres across the UK.Land Securities said that overall net initial yield after the expiry of rent-free periods is 4.1%. However, Deutsche Bank estimated that before allowing for the expiry of rent-free period, the initial yield was "a very low 3.75%, compared to the equivalent figure of 4.2% for Intu's Trafford Centre, Manchester, at the end of 2013, a centre of comparable size and quality".The bank roughly estimated that the price the group paid implies a capital value appreciation - for equivalent assets of other shopping centres - of about 11%. "Sceptics will argue that the valuation evidence created by this transaction can only be applied to the very best shopping centres in the UK, including Intu's Trafford Centre, Manchester and Westfield's two London shopping centres (held in their balance sheet at 5.5% yields at end-2013). "However, we expect this evidence to encourage valuers to tighten yields at least to some extent on most good quality UK shopping centres and hence benefit net asset value growth for Intu Properties (UK shopping centres: 98%), Hammerson (37%), Land Securities (26% existing exposure) and British Land (16%)."BC