Doubt has been cast over a potential deal between Network Rail and Birmingham city council for NR’s potential £200m acquisition of the Grand Central shopping centre.
Network Rail and the local authority have been in talks regarding a sale by the council. The rail network was hoping to acquire the shopping mall which sits above the redeveloped New Street station and forms a key part of the £650m overhaul of the station. Both are due to complete next year.
Network Rail has carried out due diligence for the potential purchase, however any deal would have to be backed by the Office of Rail Regulation.
In a letter published by the Birmingham Post from Daniel Brown, strategy and policy director at the ORR, Brown states: “On the basis of the data and models we have seen, the acquisition of the Grand Central shopping centre does not appear to provide sufficient value for money.”
He adds: “Nor are we satisfied that Network Rail’s own due diligence process has included robust stress testing of the internal valuation and a comprehensive risk assessment.”
Government-backed Network Rail operates over 500,000 sq ft of retail space at its stations across the UK. The acquisition would be part of a five-year capital spending programme.
Network Rail confirmed talks are ongoing and a decision on an acquisition is “many weeks away”.
Grand Central is anchored by a 250,000 sq ft new John Lewis store, the first in Birmingham’s core. It is a redevelopment of the outdated 1960s’ built Pallasades shopping centre. The new scheme will see 60 new stores, restaurants and bars. Retail prelets have been signed with a string of new tenants including The White Company, Cath Kidston, and Fat Face.
