LONDON (Reuters) - British developer Hammerson (HMSO.L) strengthened its hand in the long-running battle with Australia’s Westfield WDC.AX by buying a 25 percent stake in a shopping center that Westfield wants to develop into its third major London mall.
Hammerson said on Monday it would pay Royal London Asset Management (RLAM) 65 million pounds ($106 million) for the fund manager’s stake in the leasehold of the 42-year-old Whitgift Centre in Croydon, south London.
Westfield said its plans to develop Whitgift remain on track.
“This announcement is not unexpected and does not change Westfield’s commitment to regenerate Croydon,” Westfield’s Director of Development, John Burton, said.
Westfield, whose Stratford City mall near the Olympic Park was one of the biggest retail winners during the Games, said in November the 1.2 million square foot site in Croydon would become its third large London center after an exclusive deal with the Whitgift Foundation, the freeholder and 25 percent leaseholder.
But RLAM and Irish Bank Resolution Corp (IBRC) ANGIB.UL, who had together owned 75 percent of the mall’s lease, said in April they had signed an exclusive agreement with Hammerson.
Neither developer had held a stake in the center until Hammerson’s purchase.
“Hammerson is trying to get additional leverage in terms of a bargaining position in the redevelopment of the center of Croydon and to break the deadlock, but it seems to be a very low yield deal,” Jefferies analyst Mike Prew told Reuters.
The company, which intends to join Whitgift Centre with the Centrale mall in Croydon that it already owns, has been snapping up retail assets since it sold its London office portfolio to Brookfield Office Properties BPO.N earlier this year.
“It’s a disappointment in terms of recycling the proceeds from the sale of its City offices, but it’s a sensible attempt to break the deadlock,” Jefferies’ Prew said.
The redevelopment of the shopping center is, however, likely to be stalled as all three stakeholders have to agree on a single developer.
Westfield, which submitted a planning application to redevelop the Whitgift Centre last week, told Reuters that it intends to spend 1 billion pounds to redevelop the site.
Large British shopping centers that dominate surrounding areas are highly prized by property investors as they have so far weathered a tough retailing climate better than others. Westfield said in November that a major retail scheme in Croydon could serve over three million customers.
Reporting by Brenda Goh; Editing by Mark Potter and Louise Heavens