Land Securities has sold its one-third share in Birmingham's Bullring shopping centre to an Australian sovereign wealth fund for £210m.
Yesterday's deal with the Future Fund is one of the biggest in the real estate market this year, but took 12 months to complete owing to fragile commercial property values.
Francis Salway, the chief executive of Land Securities, explained the reasons for the sale. "The Bullring has been a passive investment for us, given that our joint venture partners had control over the site," he said.
"That gave us no ability to drive its performance or use the property to help build relationships with retailers. There is also no debt secured on the asset, and that is inefficient from a balance sheet point of view."
The group, along with Hammerson and Henderson Global Investors, formed the Birmingham Alliance in 2003 to run the new Bullring centre, and the £210m price reflects a yield of 6.85 per cent. Mr Salway said this was better than Land Securities expected to make on the 11-hectare mall. He also confirmed that the company would be looking to buy other sites and take advantage of low property prices.
Last week, the group's rival British Land said it also wanted to buy more property after selling its 50 per cent stake in the Broadgate complex in the City of London. However, analysts at JPMorgan said both Land Securities and British Land could have secured higher prices for their stakes.
"Although there are valid reasons for the Bullring and Broadgate disposals, the prices were a bit below our estimates because we forecast UK commercial property values to rise by 10 per cent from June this year to June 2010. Moreover, the realised yields are substantially higher than those implied by the equity market," the analyst said in a note to clients.
Future Fund, which is backed by Australian taxpayers, had for some time been reported as a suitor of the Bullring. The fund was established by the Canberra government in 2006 to buy up assets to plug the gap in the country's unfunded superannuation liabilities. It has up to A$61bn (£32.5bn) under management.
Land Securities is expected to use the proceeds of the sale to acquire new office and retail space. Harry Stokes, of Evolution Securities, said: "While the price seems reasonable and the sale was well-flagged, it is time for Land Securities to stop selling at the bottom of the market and start acquiring."
Mr Salway said the £210m would be reinvested and Land Securities was committed to investing next year in two London projects, in Oxford Street and Victoria.