Church to sell £500m Metro Centre

The Church Commissioners, who pay the pensions and subsidise the salaries of the Church of England's clergy, are to sell their most famous asset, a shopping centre outside Newcastle.

The sale of 90 per cent of the Metro Centre, Europe's largest covered shopping centre, is likely to raise more than £500m for the Church Commissioners, and recoup more than half the losses incurred in a series of disastrous property speculations in the 1980s.

The sale is one of the first large decisions taken by the new management team which was appointed in 1992 after the scale of the catastrophe in the property market became apparent. Covering 135 acres, the centre has 2.2 million square feet of shops and attracted 26.8m visitors in 1994. Built by John Hall, owner of Newcastle United football club, it has 1.5m people within a 30 minute drive and was voted Britain's most profitable site by retailers.

With a rent roll of £20m, rising to an estimated £27m after forthcoming rent reviews, surveyors think the centre could be worth up to £675m. The Church claims that it is selling the Metro Centre in order to rebalance its £2.5bn investment portfolio, fromwhich it pays the salaries and pensions of the clergy. The timing of the deal as the property market begins to recover from recession is surprising, although the income the Church could achieve by re-investing the proceeds in higher yielding investmentssuch as government bonds could be considerably higher than it currently receives. Retail property, and especially out-of-town shopping centres, are expected to rise in value in coming years even faster than other types of property such as offices and industrial buildings because of the government's recent clamp down on developments which encourage car use.

Two planning guidance notes issued in 1993 by the Department of the Environment make it very unlikely that any more large scale shopping centres such as Metro, Lakeside at Thurrock and Merry Hill in Dudley will be built,.

At the heart of the Church's need to raise cash quickly is the drop in its assets from £3 billion to £2.2 billion, largely due to unsuccessful property deals.