Hines has placed Manchester’s iconic Royal Exchange under offer for around £85m as part of its drive to buy €1.3bn (£1.1bn) of European high street property.
The 280,000 sq ft Royal Exchange, which once saw 80% of the world’s finished cotton traded under its roof, was formally opened in its current form in 1921 by King George V and Queen Mary.
It is being sold by Starwood Capital Group and Trinity Investment Management, which acquired the building from M&G Real Estate for £45m in 2014. The duo have since carried out a comprehensive refurbishment of the building but the sale is still expected to deliver a major profit for the sellers.
The off-market acquisition by Hines is being made on behalf of German pension group Bayerische Versorgungskammer, which has given Hines a €1.3bn investment mandate for retail assets.
Due to vacant space and rental guarantees put in place by the sellers, the yield reflected by the acquisition price for the Royal Exchange is complex but it is understood to be close to 5%.
The building comprises 120,000 sq ft of offices, of which 70,000 sq ft are available to lease. Existing tenants include law firm Clyde & Co.
It also comprises 100,000 sq ft of retail accommodation, which is close to fully let and includes an upgraded retail arcade. Tenants include Molton Brown, Moss Bros, Starbucks, Accessorize, Whittard of Chelsea and Swarovski. Designed by Levitt Bernstein, the it also includes the new Royal Exchange Theatre, which was completed in 1976 and can seat up to 700 people.
The deal marks Hines’ return to the Manchester market after it sold its debut development site at the former Odeon cinema in St Peter’s Square to Castlebrooke in March. Hines and Manchester & Metropolitan Properties had been planning a 178,000 sq ft office building on the site, known as Landmark, but ultimately decided against building such a large office scheme at this point in the cycle.
Bilfinger GVA is representing Hines; MMX and Commercial Properties acted for Starwood and Trinity IM.
All parties declined to comment.
Hines zones in on retail opportunities
Hines was awarded a mandate from BVK in January to spend €1.3bn targeting high street retail assets across Europe. Its first UK acquisition was 229-249 Buchanan Street, Glasgow, a 35% vacant retail block which it bought from Hermes Investment Management in May.
The mandate is to focus on identifying, acquiring and managing value-add and redevelopment assets in prime locations on high streets across 20 countries in Europe. Hines is pursuing a range of measures to add value including rental reviews, repositioning and re-leasing of units, store reconfiguration and light refurbishments.
In addition, major redevelopments, including conversions and ground up developments, will be part of the investment strategy.
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