Oxford Properties Group Inc. is making its first foray into London's retail market, buying a landmark shopping centre across the street from the Bank of England for £86.5 million ($151-million).
The shopping plaza is located in the Royal Exchange, which traces its roots back to 1571 when Queen Elizabeth I opened it as a centre for trade and commerce. Today it is home to high-end retailers including Hermes, Smythson, Watches of Switzerland and Tiffany & Co.
The deal is the ninth in London for Oxford, a division of the Ontario Municipal Employees Retirement System, and comes a few months after the company announced a partnership with the Crown Estates to build a 260,000-sq.-ft. office and retail complex in St. James's Market, near Piccadilly Circus in London's west end.
Oxford's property portfolio in Europe has grown to $3.2-billion in five years and it plans to raise that to $10-billion in the next five years, concentrating mainly on London and Paris. So far Oxford has focused largely on office space in London but managing director Paul Brundage said there are plans to branch out into retail even more, which won't be easy.
"There are very significant barriers to entry in the U.K. and in Europe," said Mr. Brundage, who opened Oxford's London office in 2008. "They are very tightly held by a select number of very well capitalized long standing property companies and institutional investors, just like they are in Canada. The good ones don't trade very often."
The Royal Exchange only came up for sale as a result of the financial troubles at Ireland's former Anglo Irish Bank, which owned the property through a subsidiary and put it up for sale as part of a re-organization. Mr. Brundage said the plaza's collection of luxury brand shops meshes with other high-end malls Oxford owns in New York and elsewhere.
"We think that the combination of our global platform and our global relationship with some of these retailers is a really great fit for our business," he said.
He also remains bullish on the London real estate market even though it is showing signs of overheating. "There's a lot of global capital that's invested in London and there's a lot of global capital that is looking to invest in London," he said. The city "has very strong long term fundamentals."
Many office projects were put on hold during the recession but now that Britain's economy is showing signs of recovery, office space is at a premium. As a result parts of London now have some of the highest office rents in the world.
"Projects that went ahead like [Oxford's] Leadenhall Building and a number of others have really reaped the benefits of the improved economic environment and business confidence that has led tenants into making decision to take space," he said.
Mr. Brundage is convinced that Paris is the next logical target for office and retail opportunities. "It's the obvious next market to look at," he said. "We've spent the last 18 to 24 months trying to build relationships in that market and understand the fundamentals that are there."