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Birmingham council sells Grand Central shopping centre for £335m

Birmingham council sells Grand Central shopping centre for £335m

🕔22.Jan 2016

Four months after it opened in a blaze of glory, the Grand Central shopping centre above Birmingham’s New Street Station has been sold by the city council for £335 million.

Property investment firm Hammerson, already co-owners of the Bullring, sealed the deal this week in a move that will provide a welcome boost to the cash-strapped local authority.

The sale brings to an end a complex series of property deals undertaken by the council five years ago in order to ease a planning log-jam and push forward with the £750 million redevelopment of New Street Station.

The council bought the former Pallasades shopping centre to see off the threat of time-consuming compulsory purchase objections and speed up the approval process, with the intention of selling on its replacement Grand Central as soon as possible.

Grand Central opened in September to general public acclaim. It provides 435,000 sq ft of retail space, anchored by a 250,000 sq ft John Lewis department store and was developed by Network Rail and the city council.

Stores include Monsoon, Fat Face, Hobbs, The White Company, Cath Kidston, Joules, Kiehls, Jo Malone, L’Occitane and MAC.

A significant share of space is dedicated to restaurants and cafés including Carluccio’s, Yo Sushi, Pho, Ed’s Easy Diner, Caffe Concerto, Giraffe, Handmade Burger Co and Tapas Revolution.

The retail is close to fully let with topped-up annual net rental income of £13.9m. The current weighted average unexpired lease term to break is 10.4 years. Based on the price paid for the retail space the acquisition represents a net initial yield of 4.0%.

Average footfall since opening is 62,000 per day, with a spike of 105,000 per day over Christmas.

As part of the transaction, Hammerson has also acquired Ladywood House, a 95,000 sq ft vacant office building adjoining Grand Central with a value of £10 million.

The sale will be very good news for the city council, which has to cut £250 million from its budget over the next four years and also has to pay down at least £500 million of an equal pay compensation bill.

Councillor John Clancy, leader of Birmingham city council, said:

Hammerson has been a long-standing partner in Birmingham and we are delighted they share our vision for the city. With the addition of John Lewis anchored Grand Central, Birmingham has become the only UK city outside of London boasting the ‘big six’ leading department stores, reinforcing our position as one of the leading national retail destinations.

David Atkins, CEO of Hammerson, said:

The acquisition of Grand Central, a highly-prized trophy asset in the UK’s second city, is fully aligned with Hammerson’s strategy of owning top-performing retail destinations in prime locations, as demonstrated by our recent transactions in Ireland and growing exposure to European premium outlets.

By deploying our expertise from Bullring, as well as other shopping centres around the UK, Hammerson is well placed to further enhance the consumer offer in Birmingham and achieve high returns through skilful management of Grand Central.

We are strong supporters of the future of Birmingham and this acquisition provides us with additional exposure to the city’s fast growing economy.

Andy Street, managing director, John Lewis Partnership, said:

The development of Grand Central is great news for Birmingham and it cements Birmingham’s position as a retail destination of choice. Our new shop has enjoyed a wonderful reception in the city, and given Hammerson’s proven expertise in managing shopping centres it can only go from strength to strength. I am delighted to see them take on the ownership of Grand Central.

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