Schroder Real Estate Investment Trust has exchanged conditional contracts to sell Reynards Trading Estate in Brentford to Notting Hill Home Ownership for a base price of GBP20m, with completion subject to securing a residential planning permission.
Reynards Trading Estate comprises a six acre, 170,000 sq ft, substantially vacant industrial estate located in a mixed-use area.
As at 30 June 2013 Reynards Trading Estate was valued at GBP16m and produced short term income of GBP200,000 per annum.
Schroder Real Estate Investment Trust's strategy has been to secure residential planning permission and sell. In March 2013 a residential planning application with a net sales area of 220,000 sq ft was refused by the Secretary of State following a planning appeal.
The contract obliges Notting Hill to use all reasonable endeavours to pursue a residential planning permission at its own cost. The base price of GBP20m (which could be lower if section 106 and other planning agreement costs exceed the expected level) increases by GBP116.70 for each additional square foot of net sales area secured by a planning permission above 176,000 sq ft.
The contract obliges Notting Hill to make a pre-planning application and carry out local community consultation during 2013 and early 2014, with the planning application submitted shortly thereafter. During this period Schroder Real Estate Investment Trust will continue to be responsible for managing Reynards Trading Estate and will receive the rental income. The contract has a long stop date of 31 December 2014 which is capable of extension if a planning decision is awaited.
Whilst exchanging conditional contracts with Notting Hill is an important step to potentially realising value from Reynards Trading Estate, there continues to be uncertainty regarding the timing and prospects for achieving a residential planning permission.