The pressure is on for Ballymore to find a funder for Two Snowhill after it emerged Wragge & Co is free to walk away from its lettings deal if its new home is not built by the end of 2013.
The Birmingham-based law firm agreed to take up 60 per cent of the office building in 2008 – but the scheme was plunged into crisis half-way through construction when backer Anglo Irish pulled its funding amid a retreat from commercial property.
The first building in the Snowhill development is already occupied by KPMG and Barclays, but Anglo Irish’s withdrawal has left the remainder of the scheme half-built, with two unsightly concrete cores left at the heart of Birmingham’s city centre skyline.
The second office building at Two Snowhill – Wragge’s future accommodation – and the third phase, which has planning permission for residential apartments and a luxury hotel, have been on hold for the last two years.
Ballymore confirmed it was still seeking another source of finance to get the offices built at Two Snowhill.
The remaining construction costs for phase two are estimated at around £110 million.
In a bid to secure the cash needed to get the scheme under way again, Ballymore’s agent Savills has released a funding proposal which sets out the terms of Wragge & Co’s agreement with the developer.
Wragge & Co has a 20-year prelet on 183,599 sq ft at Two Snowhill, but the law firm can get out of the agreement if practical completion is not achieved by December 2013, according to the proposal.
But Wragge said it was still fully on board with its move to Snowhill. The law firm’s managing partner Ian Metcalfe said: “We remain committed to Two Snowhill, which promises to be a superb, state-of-the-art space for Wragge & Co’s global headquarters.
“We are looking forward to moving into the new building.”
One Snowhill was sold earlier this year to Commerz for £126 million.
A third planned phase, with the Westin Hotel and Spa, Birmingham’s first five-star hotel, and a 44-storey residential tower, looks set to remain on hold for the foreseeable future.
The scheme first hit difficulties after Anglo Irish was nationalised by the Irish government in January last year and became one of six Irish banks set to be bailed out by the National Asset Management Agency. It has committed to reducing its exposure to commercial property.
A similar fate befell another city development – Connaught Square in Digbeth – whose Irish backers pulled funding, although in its case construction had not yet started.
Naus Group, another Irish developer, had planned to build a £150 million mixed use scheme opposite Digbeth coach station, but was forced to call in the administrators as a result of a funding decision by Allied Irish Bank.