BlackRock Real Estate buys garden centre portfolio from LaSalle for GBP112.5 million

BlackRock Real Estate has purchased a portfolio of eight garden centres within The BlackRock UK Long Lease Property Fund for GBP112.5 million from LaSalle Investment Management, reflecting a net initial yield of 5.25 per cent.

The purchase takes the Fund’s total capital deployed to more than GBP420 million since inception two years ago.
 
The ‘Ferndown Portfolio’ spans 91.33 acres including some of the UK’s best trading garden centres, with locations in Bicester, Cadbury, Endsleigh, Cardiff and Woodford. Comprised of six sites let to Wyevale Garden Centres, the largest garden centre operator in the UK, and two additional sites occupied by Notcutts and Squires Garden Centres, the portfolio enjoys a weighted average unexpired lease term of nearly 30 years.
 
The UK garden centre market is set to grow with Mintel forecasting a 23.6 per cent increase in consumer spending on garden products from 2014 to 2016. The core customer base for garden centres is 55 – 74 year olds, a demographic that is also set to grow by 24 per cent in the next 20 years, according to the market researcher.
 
The capital to purchase the portfolio of sites was secured and deployed within a week and came from existing pension scheme investors in the Fund, seeking long term inflation-linked secure income to meet their liabilities. The portfolio provides an average unexpired lease term of 29 years, in excess of the Fund target of 20 years. The net initial yield of the Ferndown portfolio is 5.25 per cent, with income subject to either RPI-linked reviews or fixed uplifts.
 
Geoffrey Shaw (pictured), portfolio manager of the BlackRock UK Long Lease Fund, says: “The garden centre market is unique and purchase opportunities come around very rarely. The Portfolio is well-placed to take advantage of future demographic shifts and this high quality set of assets will deliver strong index-linked income streams for the Fund’s investors. This, combined with promising sales growth and investment in development of the centres continuing, makes it an exciting investment opportunity.”
 
Paul Jaffe, National Director, LaSalle Investment Management, says: “Garden centres are attractive to investors because they offer long index-linked leases, good quality operators and good underlying fundamentals. We acquired the portfolio in 2006 for a closed ended vehicle at a time when investors were looking for stable, income producing asset in an increasingly hot market. The portfolio has outperformed for investors and its sale comes during year of high demand for UK commercial property.”
 
BlackRock was advised by Gilbert Evans and LaSalle was advised by JLL.