Capital & Regional has confirmed it is to buy the Pallasades shopping centre in Birmingham from Fordgate for £93.8m, as tipped in Estates Gazette on 14 February. The deal reflects an initial yield of 7.6%
The 24,131 sq m (259,750 sq ft) shopping centre and adjoining 8,872 sq m (95,500 sq ft) office building is situated above New Street station and is linked to the Bull Ring shopping centre via pedestrian walkways. It generates a total rental income of £7.1m. Tenants at the centre include Argos, Boots, Austin Reed and Woolworths. The office accommodation is let to the Secretary of State for the Environment.
Capital & Regional is financing the acquisition through a two for seven rights issue at 280p per share which will raise around £59m. Credit Suisse First Boston and SBC Warburg Dillon Read are underwriting the issue. The balance will be met through the extension of a credit facility with Hypo Bank, which has been increased from £88.7m to £160.2m.
Commenting on the deal, Capital & Regional chairman Martin Barber said: “This acquisition strengthens our portfolio and continues the strategy of investing in retail properties where we can add value.”
Capital & Regional says it expects the centre to benefit from Hammerson’s proposed redevelopment of the Bull Ring and Land Securities’ planned Martineau Galleries scheme, which will improve Birmingham’s retail offer. It plans to increase the amount of retail space at the scheme and has not ruled out expanding the centre at some time in the future.
Fordgate bought the centre from Norwich Union for £34m in 1993 and has seen its value rocket since the purchase.
EGi News 30/03/98
