Landsec to buy Metrocentre in Gateshead for over 500 million pounds

Property company Landsec has agreed to buy Metrocentre in Gateshead, near Newcastle, for a net cash consideration of 516 million pounds, adding one of the UK's largest shopping centres to its retail portfolio.

Landsec said on Thursday that it had exchanged contracts to acquire a 100 percent stake in the centre from Tynehawk Holdings (Jersey) Limited. The deal will be funded through an equity issue and existing debt facilities.

Based on in-place net rental income of 41 million pounds, the price implies a net rental income yield of 7.9 percent, according to the company.

Retail and leisure destination

Landsec describes Metrocentre as a top-10 UK shopping centre by sales. The centre attracts more than 16 million visitors a year and generates retail sales of around 650 million pounds.

It has 282 stores across 1.86 million square feet of lettable floorspace, while the deal also includes an adjacent retail park of 15 units covering 0.2 million square feet. Occupancy stands at 95 percent, with an average lease term of 4.5 years.

Tenants include Apple, Sephora, Zara, M&S, Bershka, Stradivarius, Next, Lego, Primark, JD Sports and Lefties.

Expanding the retail platform

The acquisition forms part of Landsec's strategy to invest a further one billion pounds in major retail assets. Once completed, the company will own three of the UK's top 10 and eight of its top 30 shopping centres, with major retail destinations accounting for around 46 percent of its annualised rental income.

"Our acquisition of Metrocentre represents a rare opportunity to obtain 100% control of a top-10 UK shopping centre," said Mark Allan, chief executive officer of Landsec. "Metrocentre offers the scale, relevance and quality of catchment where demand from brands is highest, as they focus on fewer, bigger, better stores in the strongest locations."

Allan added that retail sales across Landsec's existing major retail platform are up 26% since March 2022, compared with 1% for the average UK market.

Completion depends on the dissolution of a legacy entity from the former Intu Properties group, expected on October 9, 2026, and on consent from 75% of the bondholders of Metrocentre Finance PLC. Tynehawk has received confirmations of support from holders of more than 80% of the bonds, and completion is expected by the end of October.

Trading update

Alongside the deal, Landsec said lettings in the five months to August 31 were comfortably ahead of estimated rental value. The company continues to expect like-for-like net rental income growth of around 3 percent to 5 percent for the year ending March 31, 2027.

Year to date, Landsec has sold or exchanged contracts to sell 290 million pounds of assets, mainly a London office development site and an older London office block.

This article was written with the assistance of AI.