Schroder Real Estate Investment Trust has issued 35,592,128 new ordinary shares by way of a placing representing 10 per cent of the company’s existing issued share capital.
The placing was completed at 48.25 pence per share, raising gross proceeds of approximately GBP17.2m and reflecting a premium to the last reported net asset value as at 30 September 2013 of 6.3 per cent.
Following completion of the placing the company has exchanged unconditional contracts to acquire the Arndale Centre in Headingley for GBP16.23m from joint fixed charge receivers. The property comprises a 125,834 sq ft multi-let retail, leisure and office property located in a densely populated suburb of Leeds.
The property provides annual rent of GBP1.57m per annum, increasing to GBP1.69m on expiry of rent free periods, which results in a net initial yield of 9.14 per cent per annum, reducing to 8.73 per cent after non-recoverable expenses. It has a weighted average unexpired lease term of over five years, with exposure to 23 tenants occupying the retail, office and leisure units.
Approximately 75 per cent of the income is generated by 20 retail and leisure tenants, which include Sainsbury’s, Morrisons, Wilkinsons and Pizza Express.
Following completion of the acquisition, scheduled for 15 January 2014, Schroder REIT will have cash of approximately GBP15m and a net loan to value, based on the independent valuation as at 30 September 2013, of 40 per cent.
Schroder REIT is progressing further acquisition opportunities and continues to believe that there is potential to enhance future returns to shareholders through a gradual increase in the size of the company.
Duncan Owen, head of property at Schroder Property Investment Management, says: “This acquisition is consistent with our strategy of focussing on assets offering good underlying fundamentals which are capable of adding value through a variety of alternatives uses because of a strong and convenient location. This property already offers high quality retail units which are delivering an attractive initial income yield which is immediately accretive to dividend cover. There is also the potential to generate further income and capital growth from asset management of the upper parts of the property.”