Hercules Mergers Create $2-Bil Retail Parks Giant

LONDON-Pillar Property and Equitable Life have restructured and extended their Hercules Unit Trust venture, which specialises in retail park investments. Three simultaneous transactions have almost doubled the size of the fund and it now owns 28 parks across the UK worth £1.5 billion ($2.1 billion).

Pillar has sold three more retail parks–the 575,000-sf Fort Kinnaird in Edinburgh; the 313,000-sf Deepdale park in Preston and the 297,00-sf Broughton park at Chester–into Hercules for £444.1 million ($630 million). The deal raises Pillar £87.6 million ($124 million) in cash.

At the same time the Retail Park Unit Trust, a similar venture in which Pillar had a one-third stake whose sole asset was the 416,000-sf Fosse park at Leicester, has merged with Hercules. Pillar has raised a further £93.9 million ($133 million) from the sale of its stake. Fosse park is the highest-rented retail park in the UK, with prime space fetching £70 ($100) per sf.

And in the third transaction Hercules has also bought a retail park in Hamilton, Lanarkshire, from Equitable Life and Merrill Lynch Property Fund. The two investors are also paying £27 million ($38 million) for more new Hercules units. Hercules has also secured an option to acquire two more parks in Croydon and in Bletchley from Merrill Lynch.

Pillar Chief Executive Patrick Vaughan said: ‘Our prime objective this financial year is to secure the major expansion of Hercules. Through these transactions Pillar will become property adviser to the largest specialist unit trust investing in retail parks in the United Kingdom and will substantially increase the earnings that it derives from basic and performance related advisory fees.’And William Hill, director of the Hercules fund manager Schroders added: ‘This transaction is defining the boundaries of the 21st century real estate market:- property companies utilising capital more efficiently and selling their skills to third parties, and investors accessing top grade property in a potentially tradeable paper format’.