L&G acquires Mitchells and Butlers’ Birmingham HQ and hotel for GBP69.5m

Legal & General Property (LGP) announces, on behalf of its LPI (Limited Price Inflation) Income Property Fund, has purchased the freehold interest in Mitchells & Butlers HQ offices and associated hotel situated on Fleet Street and Lionel Street in Central Birmingham.  

The properties have been acquired for a total consideration of GBP69.5m from LaSalle Investment Management, reflecting a net initial yield of 3.94 per cent.

The high spec, Grade A office building was purpose built for Mitchells & Butlers in 2003 and extends to 95,000 sq ft. The property also benefits from three levels of basement car parking, comprising 278 spaces, together with a 120 bedroom Ibis Styles Hotel which was rebranded and refurbished in 2014. 
The building is prominently located within the Birmingham CBD, positioned opposite the new Paradise Circus, one of the UK’s most significant mixed used development schemes, which is destined to significantly enhance the City’s commercial offering and extend its core. It is let in its entirety to Mitchells & Butlers for 35 years from January 2009 with RPI-linked rental increases. 

Derek Gilby (pictured), Senior Fund Manager at Legal & General Property, says: “The first major regional city centre office asset for the Fund, we believe that Birmingham is set to benefit from a number of significant infrastructure projects already underway and the asset is well positioned to gain from the regeneration of the adjacent Paradise area which is undergoing a rapid transformation.  Mitchells & Butlers offers the fund a strong tenant covenant, providing secure, inflation-proofed income over a long lease term, yet with the benefit of market rental upside.”

Launched in 2010, the LPI Fund offers Defined Benefit pension schemes an innovative way to invest in property with secure, primarily government backed, inflation-linked sources of income. With GBP675 million of assets under management, the portfolio generates income yields well in excess of those from comparable asset classes such as index-linked gilts or social housing.