Leisure developer Citygrove has secured a forward sale of its 100,000 sq ft Southwater Square development in Telford, Shropshire, as institutions make a tentative return to the regional funding market.
PRUPIM is forward funding the scheme, which is 100% prelet to Cineworld, Premier Inn and seven restaurant operators, for £22m – reflecting a 6.5% yield on the cinema and hotel and 7% on the restaurants.
The funding will allow work to start on the development within the next three weeks. Completion is scheduled for Christmas 2013.
Citygrove chairman Toby Baines said the firm initially had significant interest in funding the project but that concerns over the strength of the regional market put off some potential investors. However, three firm offers were made, with PRUPIM being selected last week.
Baines said the fact that Southwater Square was connected to the shopping centre in the town centre, enabling it to pick up trade throughout the day and evening, plus a new-found desire for leisure investment was likely to have attracted PRUPIM.
“Leisure is very much on the radar at the moment,” he said. “The fixed uplifts you get with leisure investment makes it far more attractive than non-food retail. On Southwater Square 70% of the income has fixed uplifts.”
The leisure scheme forms part of Telford council’s larger £250m Southwater regeneration plan for 30 acres in the town centre. Alongside the cinema, hotel and restaurants, there are plans for 300,000 sq ft of offices and more than 300 homes.
Baines said cash raised from the sale would be invested in further development projects.
“There are huge numbers of towns across the country where we can see this vision of bringing leisure back into town centres working,” he said.
PRUPIM declined to comment.
