In a move which has stunned the market, Marks & Spencer has matched Universities Superannuation Scheme’s bid of £122m to buy Edinburgh’s Gyle shopping centre from the city council.
The deal is M&S’s biggest property purchase and one of the largest ever completed by a UK retailer. However, the company stressed today that the purchase was a “one off” and did not signal any change to its investment policy.
A rental income of £5.2m pa implies a keen initial yield of 4.25%. Market sources said the figure was likely to rise to 6.5% when rents were reviewed in 1998.
“The sale of the Gyle will be remembered as a landmark transaction marking the stage when the investment market finally shrugged off the recession of 1991,” said Jamie Forsyth of Montagu Evans, joint selling agent with Hillier Parker. He added that the yield was “truly exceptional” in a lot size of £122m.
The 27,870 sq m (300,000 sqft) centre is anchored by M&S and Safeway on long leases. Both firms had the right to match a bid in the event of the centre being sold. Their joint bid comprised 99% M&S cash and 1% from Safeway, a council spokeswoman said.
Robert Walden of USS said he was very disappointed. “But this risk was something which has always been understood,” he added. The council will pay USS’s legal costs to a maximum of £150,000.
Under a deal agreed with the Scottish Office, the council will keep £75m of the sale price. It intends to invest the proceeds in educational and transport projects, and possibly further retail schemes.
Lunson Mitchenall advised M&S while Jones Lang Wootton represented USS.
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