THE offer for sale of the Friars Walk shopping centre by Queensberry Real Estate for a quoted £120m could spark major player interest in Newport, leading South Wales property professional Justin Kingdon claims.

Justin Kingdon, partner, CNC Property Fund Management, Newport, said news of the possible sale of the shopping centre did come as a bit of a surprise.

“However, I would say, that most modern developed shopping centres of this type and size are sold after being developed as the developer seeks to release his investment.

“Friars Walk developers Queensberry are not unique in this respect as many developers are not long term investors, this is a rule of thumb and is not always the case as developers often develop with the long term investor alongside, so end up in the scheme for longer.

“Without knowing the exact details of the tenancy line up I am unable to comment on how good the reported sale price of £120m is, although if this is at the rumoured six per cent that would equate to a rent in excess of £7m.

“We find the trend in shopping centre investment is currently more focused on rental growth than capital yield, so selling this early gives an indication that the developer may feel the rent has been reached at its maximum level, therefore the time being right to realise the capital yield.

“That said, with Queensberry staying on as asset managers for the next five years, there may be an opportunity to share in further income growth through the value of good centre management, which is certainly what Queensberry excel at. Selling prior to opening does feel unusual, but with very few vacant units left and such a massive spotlight on Newport at the moment, why not capitalise on the hype.

“In respect of the tenant’s already signed up, most of the national chains will be used to occupying centres which see a sometimes frequent change of ownership. Yes, normally these are already trading and each new owner brings their own management style and ideas to maintain interest in the centre.

"On this occasion the occupiers will see no change of focus with Queensberry reportedly staying on as managers for the next five years, which is really good for continuity of the initial opening period.

“I cannot see the sale of the shopping centre causing any issues for the tenant line up who should take confidence from the scheme attracting so much interest. Let's hope the people of Newport and surrounding areas show such as much interest as potential investors will.

“Deals of this size and complexity can take many months to complete so we could be well into 2016 before any news of a sale is announced, although we suspect there will be many potential suitors for the scheme.

"This opportunity will certainly attract some of the largest investors and pension funds from across the UK, such as Capital & Regional and Legal & General, among other investment management funds.

“The level of the sale and reported yield will be more reflective of the investment profile in terms of rent, lease lengths and covenant strength of the tenancy line up, rather than how investors view Newport specifically, although this will form part of the investment decision certainly. What will be interesting is how many investors express an interest in the scheme and the size and stature of the final bidder. Who knows, maybe we can attract some of the foreign investors who seem to be favouring only London.

“I assume a sale at the reported £120m will return a very healthy level of profit if the developer feels the time is right to sell and this can only be good news for Newport City Council, which should receive a healthy return on their investment and commitment to the scheme. It wouldn’t surprise me if Newport retains an element of ownership, if only a token share for the long term capital gain.

“To get any of the major UK and international shopping cCentre investors looking at Newport can only be good news.

"I just hope selling early is not seen as a sign of the developer's lack of faith, as I believe the scheme will go from strength to strength for many years and should prove a very solid investment, further enhanced by the overall strengthening position in Newport as a whole that should have a positive knock-on effect on rents for many years to come.

“I hope the interest in Newport is sustained and enhanced and encourages other investors in to other parts of the city."