Investment firm completes £11.5m deal in Bath city centre

An investment firm has completed an £11.5m deal for a property in the centre of Bath.

AEW UK REIT has announced it has completed the purchase of a freehold, mixed-use asset in Bath city centre.

The deal represents a net initial yield of eight per cent and a capital value of £223 per sq ft.

Following the acquisition the company is close to full deployment, with remaining cash available to invest of £3m.

The property includes a rare freehold island site totalling around 0.4 acres and is located next to the Southgate shopping centre.

Bath Spa Train Station is less than a five minute walk from the property, with other key tourist attractions such as Bath Cathedral, the Roman Baths and Pulteney Bridge are all within a short distance.

The 51,632 sq ft asset is multi-let to five tenants across office and retail accommodation.

The majority of the building is let to four office tenants at a low average passing rent of circa £22 per sq ft.

Income levels are expected to improve via rent reviews in the short-term and through lease renewals and re-lettings over the medium-term.

Light refurbishment may also be considered in order to fully capitalise on the building’s prime location and prominence.

A vacant retail unit, fronting Philip Street and Ham Gardens, is currently under offer to an established local retailer.

AEW expect market conditions to remain favourable given the low level of available and consented supply, coupled with strong demand for well-specified and well-located accommodation.

Laura Elkin, portfolio manager at AEW said: “We are pleased to have purchased this very well-located, mixed-use asset at a day one yield that will be accretive to the Company’s earnings and brings the REIT one step closer to full deployment, with just £3m left to invest.

“Completion of the acquisition continues the strategic reinvestment of capital generated from recent sales into higher yielding assets in core urban locations.”

AEW aims to deliver an attractive total return to shareholders by investing predominantly in smaller commercial properties (typically less than £15 million), on shorter occupational leases in strong commercial locations across the UK.

The company is currently investing in office, retail, industrial and leisure assets, with a focus on active asset management, repositioning the properties and improving the quality of income streams.