A fund advised by pan-European real estate investment manager Tristan Capital Partners has agreed to become the main investor in a £56 million Grade A office and car park development in the Manchester Regional Centre, England, featuring an innovative lease arrangement from Salford City Council that has kick-started this key project for the regeneration of the Greengate Embankment district.
The European Property Investors Special Opportunities 3 (EPISO3) fund is taking a majority stake in a joint venture that is acquiring and redeveloping the site that was part of the former Manchester Exchange railway station. The joint venture is formed with Ask Real Estate and Carillion Plc, who will act as development manager and main contractor respectively, as well as investing equity into the development. Salford City Council has signed an eight-year pre-lease on the whole of the first office building and Q-Park has also agreed to a 35-year indexed pre-lease for a 442 vehicle under-croft carpark, which spans the whole of the podium.
Peter Mather of Tristan Capital Partners, said: “Salford City Council’s vision in providing an innovative ‘wrapper lease’ has been instrumental in unlocking the potential for this part of Greengate, given its ideal location within walking distance of the heart of Manchester. The lease from Salford along with that from Q-Park has enabled the joint venture to secure construction finance to kick-start this exciting development opportunity. The Embankment development will deliver Grade A space to the Manchester office market and create a corporate centre in Salford at a time when there is little new supply coming on-stream and the momentum of economic recovery in the U.K. is lifting tenant demand.”
John Hughes, Managing Director of Ask Real Estate, said; “We have been working closely with our joint venture partners to deliver the shared ambitions for this landmark site and with this extremely positive news that the scheme is now fully funded, we can state with confidence that we will be on site in June 2014. This puts us in a very strong position to take advantage of the continuing urbanisation of the occupier market into the city centre by providing new Grade A office space designed to meet the occupational needs of modern businesses.”
Terms have been agreed with German bank Helaba which secures financing for the 172,640 sq ft first phase office and car park development. Construction work will start in June, with delivery of the completed first phase office programmed for spring 2016. The three joint venture partners are acquiring the site from Network Rail. The site also has planning permission for a second phase, which comprises another Grade A office building of 150,000 sq ft.
Richard Bentley, Head of Real Estate Finance for the UK at Helaba, said: “We look forward to working with Tristan Capital Partners, Ask Real Estate and Carillion Plc to develop this exciting pre-let scheme. This transaction underlines our continuing commitment to the UK commercial property market as well as our strong, relationship-driven business model.”
Greengate takes its name from the main street that ran through the historic core of Salford to the river, where in Medieval times it acted as the main crossing point of the River Irwell to central Manchester. Salford City Council is driving the regeneration of Greengate Embankment as a residential, retail and business destination. Delivery of Building 101 will complement the City Council’s £13.3M investment in the Greengate public realm, using funding from the Homes and Communities Agency, European Regional Development Fund and the City Council. The site is located in a prominent location opposite Manchester Cathedral and across the bridge lies Manchester’s main leisure and retail hub, featuring the stores of Apple, Harvey Nichols and Selfridges, as well as Europe’s second-largest indoor arena and the Printworks complex. The site provides exemplary connectivity with a wide range of public transport options, including being adjacent to Manchester Victoria Station.
Stuart Kirkwood, Director of Development at Network Rail, said; “The redevelopment of the former Exchange station site is an important catalyst for the continued regeneration of the wider Greengate area. The sale of the site will generate valuable income that will be invested to improve the railway and is set to bring lasting benefits to the local community. We are therefore delighted that Ask has secured the financial resources required to get on site with this first phase of development activity.”
Salford City Mayor Ian Stewart said: “Salford City Council has played a crucial role in bringing this major investment to the city. The development is further evidence that Salford is becoming an extremely attractive city for investors from around the world.”
Tristan Capital capped the final equity raise for EPISO 3 at €950 million in January after surpassing its original fundraising target by 25%. Some 22 new investors, notably from the U.S., joined 14 existing clients in participating in the fund, which seeks value-added investments and distress opportunities arising from the shortage of debt and equity capital in the European real estate investment market.