Landsec Shopping Centre Acquisitions Moving Forward

Research evidence excerpt

Landsec Shopping Centre Acquisitions Moving Forward

bove 40% LTV, even 03/28E 55.71 55.22

on a temporary basis. While office disposals were intended to fund Landsec's planned 03/29E 59.20 57.93

shopping centre acquisitions, the timing of Metrocentre's emergence may force

management to act before large-scale office sales can be completed. In our view, the Zachary Gauge

Analystoffice disposal market is unlikely to move quickly enough to provide funding certainty

zachary.gauge@ubs.com

while keeping leverage within management's stated parameters. On our estimates, +44-20-7901 5534

funding the acquisition entirely through debt would push pro forma LTV above the

company's preferred range. Charles Boissier, CFA

Analyst

charles.boissier@ubs.com

Key variables +44-20-7568 4415

The principal debate is the acquisition yield. We assume a 7.5% net initial yield in our

Nadir Rahman

base case. We base this on several reference points. First, Landsec's acquisition of

Liverpool ONE in late 2024 was effectively completed at a yield of c.7%, including the nadir.rahman@ubs.com

deferred payment. Although we believe prime shopping centre yields have subsequently +44-20-7567 1750

compressed, Metrocentre is a materially older asset, is being sold out of debt ownership

and, in our view, warrants a meaningful quality and capital expenditure premium relative

to Liverpool ONE. Second, a previously reported operating income figure of £38.4m,

inflated by 5% to reflect rental growth since publication, implies income of c.£40m and

a yield of ~7.5% on a £525m purchase price. Finally, the assumption remains

comfortably below broader prime CBRE regional shopping centre yield benchmarks, at

8.25%. With reported acquisition price far exceeding the original guide price, we