With Tesco’s financial issues growing more prominent by each passing quarter, executives have made the decision to cut back on non-essential spending as a means of patching the large black hole discovered in the group’s finances last month. However, it has remained committed to investing in new assets at the same time, leading to the acquisition of the Waterside Shopping Centre in Lincoln.
Waterside is the supermarket group’s first foray into the shopping centre market, and something of a rarity in the grocery retailing world as a whole. The deal was struck between former owner Capital & Regional and the Tesco Pension Fund, with the sale total eventually agreed at £46 million.
A spokesman for Capital & Regional said; “Since purchasing Waterside in 2011, we have sought to enhance the retail offer with targeted lettings and significant investment in modernising the centre.
“We developed strong relationships with the local authority, listened to the needs of local shoppers and worked hard to provide suitable space for modern retailers.
“We are extremely pleased with what we have achieved with the centre and are confident that its new owners will continue to build on its reputation as Lincoln’s leading fashion and lifestyle centre.”
Capital & Regional purchased the Waterside centre for £24.8 million in February 2011, and has recently completed a £9 million redevelopment of the centre in partnership with Karoo Investment Fund. The redevelopment saw existing units reconfigured to fit with the preferences of modern retailers, while the centre’s escalators were repositioned in order to create two double height, large scale anchor units which now house Next and budget fashion retailer H&M.
In addition, the food court was relocated from the upper level to the waterside level, creating additional retail units. This paved the way for new tenants including The Body Shop to take up space.
Capital & Regional chief executive Hugh Scott-Barrett revealed that the sale represented a net initial yield of 5.88 per cent, tying in well with the firm’s ongoing strategy.
He said; “The success we have achieved with Lincoln Waterside since its acquisition in 2011 not only demonstrates our ability to add value to our assets, but also our ability crystallise that value through a timely and profitable sale.
“The sales price achieved in Lincoln confirms our positive outlook for further increases in property values during the fourth quarter – the disposal of this non-core asset is also in line with our strategy and objective to meet our medium term LTV target of 40 to 50 per cent.
“This is a truly transformational time for Capital & Regional and our immediate focus now is on achieving conversion to REIT status next month, while continuing to enhance our portfolio by progressing the asset management initiatives that we have identified.”
With Capital & Regional having achieved much during its ownership of Waterside, it is hoped that new owner Tesco will enjoy a similar level of performance in the coming years.
Do you think Tesco has taken something of a risk in investing in a shopping centre when the group’s food business is in such turmoil?
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