Rob Tincknell’s next move has been eagerly anticipated since he unexpectedly stepped down as chief executive of Battersea Power Station Development Company last spring after a decade in the job.
He has co-founded Areli Real Estate, which is buying the Nicholsons shopping centre in Maidenhead out of receivership. As a forced sale, it was a closely watched process in an otherwise quiet retail investment market. The price of around £25m is better than some may have expected and appears to be just enough for the senior lender, Hermes Investment Management, to escape relatively unscathed.
However, a look at the history of the property still tells a grim story. It last changed hands for £37m little more than three years ago and back in 2007, it was sold for £85m – more than three times its current value.
Nicholsons’ days as a shopping centre now look to be numbered. Most of the interest in the centre was from developers rather than retail property investors and Tincknell’s Areli is no exception. It aims to build a portfolio of urban regeneration projects across the UK and it is easy to see why it was attracted to Nicholsons shopping centre. The property is bang in the centre of Maidenhead, which will soon benefit from the arrival of Crossrail, so it looks like an ideal location for residential development.
Could this be a model for other struggling UK shopping centres?
On the back of Rob Tincknell's "surprise" move this week to acquire @NicholsonsSC (as revealed by @RichWilliamsPW here: https://t.co/p9UEW3qHGe) we want YOUR VIEWS:— PropertyWeek (@PropertyWeek) January 24, 2019
Will we now see a run of investors buying struggling malls for regeneration projects and alternative uses?
Retail landlords have certainly been talking up the residential development possibilities of their portfolios in recent months. For example, intu said in October that it had identified potential for 5,000 homes around six of its centres. Many shopping centres may well benefit from residential development and some could even be knocked down and replaced with housing. Shopping centres tend to be well located and there’s plenty of untapped demand for housing in the UK.
However, the potential for residential conversions may be exaggerated in some quarters; retail landlords, in particular, sometimes seem to be motivated by the need to assuage investor fears over the outlook for retail, rather than a genuine desire to become residential developers.
Maidenhead is a great location for residential development and yet Nicholsons was still sold for a fraction of its former value as a retail centre. So what hope is there for struggling centres in less desirable locations? Redevelopment in many places – particularly outside London, the South East and major regional cities – will simply be unviable.
Many shopping centre landlords may have no choice but to stick to their knitting and try to attract the best possible mix of tenants. It is tough going out there, as our story about Smiggle seeking rent reductions shows, but retail is not all doom and gloom. This week, Hotel Chocolat, WHSmith and Joules all reported strong growth in sales.
For landlords that play their cards right, 2019 may not be as bleak a year as is commonly feared. Savills named retail property as one of its two top 2019 UK commercial property investment picks – it’s a brave call, but may well turn out to be a good one. Canny investors with steady nerves and a willingness to see through the prevailing pessimism should be able to pick up some retail bargains.
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