Property group disposes of industrial assets in £45m deal to bolster office portfolio

Stephen Inglis

Regional REIT has exchanged contracts with ARA Dunedin for the disposal of a significant industrial property portfolio for £45m.

The property firm, which has offices in Manchester overseeing properties throughout the North West, said the completion is conditional on Dunedin having in place the required financing.

This reflects a net initial yield of 6.75% to the purchaser and is 7.5% above the valuation as at December 31, 2020. After capital expenditure, the sale represents an uplift of 18% from the acquisition price.

In line with Regional REIT’s stated strategy to exit the industrial sector in preference for higher yielding regional office investments, this disposal marks the sale of 62%, by value, of the company’s industrial holdings held as at December 31, 2020.

During the company’s ownership of the seven industrial properties (801,787 sq ft) located in Bromborough, Erith, Nottingham, Scunthorpe, Telford, Winsford and Wisbech, several asset management initiatives have been actioned to increase value.

These initiatives included a series of renovations and the subdivision of some of the larger units, which assisted in improving occupancy rates, rental income and in turn, capital values.

It is anticipated that the proceeds from the disposal will be promptly recycled into the group’s strong pipeline of higher yielding office investments to further diversify the portfolio by geography and income stream.

Completion is expected to take place in August 2021.

The North West site, in Bromborough, Wirral, is located on Commercial Road, and comprises 126,689 sq ft of space.

Regional REIT announced in May this year that it was shifting focus from industrial assets to offices.

Stephen Inglis, chief executive of London & Scottish Property Investment Management, the asset manager of Regional REIT, said: “The disposal of this industrial portfolio at 18% above the acquisition price enables the recycling of capital into higher yielding assets, where our bespoke asset management platform can best add shareholder value.

“This will also allow the company to continue to focus on its clear strategy of offering investors exposure to a geographically diversified portfolio of regional office assets.”

He added: “We look forward to providing a further update regarding the reinvestment of the proceeds from the sale in due course.”