UK Reit LondonMetric Property – recently created through the merger of London & Stamford Property and Metric Property Investments – has made its first acquisition with the purchase of a portfolio of six retail warehouse assets.
The total consideration is GBP92.4m (net of acquisition costs) reflecting an average net initial yield after purchasers’ costs of 7.8 per cent.
The acquisition will be funded from existing resources including the revolving credit facility with Lloyds Banking Group.
The portfolio is being acquired from clients of Aviva Investors and comprises six out-of-town retail parks all located within approximately 100 miles of London. The six assets provide a total area of nearly 400,000 sq ft; 70 per cent of which has a “bulky” consent and 30 per cent with Open A1 (non food) consent.
The schemes are Christchurch Retail Park (Christchurch), B&Q (Leicester), Dunstable Retail Park (Luton), Cairngorm Retail Park (Milton Keynes), Mountbatten Retail Park (Southampton) and the B&Q/Halfords units (Tonbridge).
The portfolio will deliver a day one income of circa GBP7.5m per annum with approximately 50 per cent of the income subject to fixed uplifts or RPI linked increases over the next five years. The parks are well let with 98 per cent occupancy and a weighted average unexpired lease term of over nine years. Circa 60 per cent of the income is secured from B&Q, Dixons, Next, DFS, Halfords, Wickes and Pets at Home.
Following completion of the acquisition, anticipated by mid-February, the LondonMetric retail investment portfolio will comprise 31 assets with a combined value of circa GBP335m representing 33 per cent of the enlarged LondonMetric portfolio. The retail portfolio’s occupancy is 99 per cent, with a low average passing rent of GBP16.15 psf and a long weighted average unexpired lease term of 10.3 years (9.8 years to first break).
Andrew Jones (pictured), chief executive of LondonMetric, says: “This acquisition typifies the opportunities that we are seeking to acquire; as it offers secure, well let income with additional asset management opportunities and the ability to add value all in an area of the market where we have particular expertise. The attractive income yield, combined with our existing debt facilities, will deliver initial cash-on-cash returns of over 12 per cent and will continue to grow as the fixed rental uplifts fall due.”
Cushman & Wakefield advised LondonMetric. Wilkinson Williams advised the clients of Aviva Investors.