Norway fund pays £348m for stake in centre

The £390bn Norwegian Government Pension Fund Global, which manages Norway’s oil revenues, bought out a joint venture between London & Stamford Property and a Middle Eastern partner.

It paid £348m for the stake in a deal which, including debt, values Meadowhall at £1.525bn. The centre was valued at £1.497bn in March.

The long-awaited deal will see British Land retain its 50 per cent share in Meadowhall, despite speculation it planned to shrink its exposure to the centre.

British Land and Norges Bank Investment Management (NBIM) formed a new joint venture and the UK property giant will continue to run the centre.

“Meadowhall is one of the largest, most dominant centres in the UK,” said Karsten Kallevig, chief investment officer for real estate at NBIM. “It seems like a very interesting long-term investment.

“I hope we’re going to hold it for a long time. Part of (NBIM’s) retail strategy is these large, dominant shopping centres that are as much an entertainment venue as they are a shopping outlet.

“They’re big enough that they can offer entertainment, (such as) movie theatres and restaurants.

“It’s really more than just going in to buy what you have on your shopping list.”

NBIM manages Norway’s oil fund and last year bought 25 per cent of Regent Street in London from the Crown Estate for £452m.

Chris Grigg, CEO of British Land, said: “Norges’ investment is a measure of the outstanding quality of Meadowhall and we look forward to working with them to continue to develop its potential in the years to come.”

The joint venture covers 74 acres of development land neighbouring the 1.5m sq ft centre.

Mr Kallevig declined to comment on specific investment plans, but said: “These centres are to a certain extent living, breathing entities. I don’t think you can just sit back and let the centre work itself.

“It’s important that the asset has the ability to grow into the future and continue to offer what we think is a great shopping experience.”

Meadowhall, built in 1990 on the site of a former steelworks by Yorkshire entrepreneurs Eddie Healey and Paul Sykes, attracts about 24m shoppers annually.

British Land said the centre has “consistently high” occupancy levels at 97 per cent, and an average lease length of 9.3 years to first break. Last year it completed a £7m overhaul of Meadowhall’s food court, attracting chains including Wagamama, Carluccio’s and Giraffe.

The property giant said this has helped spend per head increase by 17 per cent on a year earlier and average catering spend per shopper surge by 30 per cent.

Footfall at the centre in the quarter to June was up more than four per cent, versus a 2.4 per cent fall nationally.

Raymond Mould, chairman of L&S, said: “The performance of the centre has been outstanding since our acquisition in February 2009. Despite difficult trading conditions, tenant performance has been generally good and in some cases exceptional.

“There is no doubt that there is strong demand globally for prime UK property and therefore we believe that this sale is timely.”

Meadowhall is one of only a handful of super-regional shopping centres in the UK.

“Most of what we’re going to be doing is investing in office and retail, because that’s where things are for sale,” said Mr Kallevig. “We’ve set out a strategy that included prime high street – the Oxford Streets and Regent Streets of the world.”

British Land bought Meadowhall in 1999 for £1.17bn.

A wealth of assets

Norway’s sovereign wealth fund, one of the largest in the world, was set up to manage the country’s oil revenues on behalf of the Norwegian people.

Called the Norwegian Government Pension Fund Global, it was founded in 1990 and now has assets of around 3,561bn kroner (£389bn).

The fund is managed by Norges Bank Investment Management (NBIM), which also manages most of Norges Bank’s foreign exchange reserves.

NBIM was set up by the Norwegian central bank in January 1998 and has offices in Oslo, London, New York, Shanghai and Singapore.