UK property company Landsec has exchanged contracts to acquire a 100% stake in Gateshead's Metrocentre for £516m in net cash consideration.
The deal with Tynehawk Holdings has a headline price of £530m before agreed deductions. Based on £41m of in-place net rental income, Landsec says the £516m net consideration represents an in-place net rental income yield of 7.9 per cent.
The acquisition is expected to be funded through an equity issue and Landsec's existing debt facilities. The company is seeking to raise approximately £500m in new equity, which would also help fund a separate transaction of around £100m involving interests in its existing retail portfolio.
Landsec says Metrocentre is among the UK's top 10 shopping centres by sales, attracting more than 16m visitors a year and generating around £650m in annual retail sales. It has 282 stores across 1.86m square feet of lettable space, while the acquisition also includes an adjacent retail park with 15 units. Occupancy is currently 95 per cent.
The company plans to invest around £30m in Metrocentre over the next few years as it seeks to improve the tenant mix, food and leisure offer, occupancy and rental income.
The acquisition forms part of Landsec's plan to invest a further £1bn in major retail destinations. Its existing retail portfolio includes Bluewater in Kent and Liverpool ONE. If the Metrocentre deal completes, Landsec says it will own three of the UK's top 10 shopping centres and eight of the top 30, with major retail destinations accounting for around 46 per cent of its annualised rental income.
Landsec chief executive Mark Allan said the acquisition represented “a rare opportunity to obtain 100% control of a top-10 UK shopping centre”.
He said retailers were increasingly concentrating on “fewer, bigger, better stores in the strongest locations” and that Metrocentre had the scale and customer base to benefit from that trend.
Tynehawk is the holding company for a group of investors that took control of the Metrocentre business following the collapse of former owner Intu in 2020. The centre was put up for sale earlier this year.
Completion remains conditional on the dissolution of a legacy entity from the Intu Properties group, expected on 9 October, and approval from bondholders for the restructuring of outstanding Metrocentre Finance bonds. Landsec expects the acquisition to complete by the end of October.