Property investor expands Midlands portfolio with £80m acquisition
Commercial property investor Tritax Big Box has invested almost £80m in a deal which strengthens its Midlands distribution portfolio.
The real estate investment trust has exchanged contracts with ProLogis European Finance XI Sarl to acquire two large logistics facilities at Prologis Park, Stoke-on-Trent.
The two units are let to fashion, food and soft furnishings retailers Marks and Spencer and Dunelm.
The combined net purchase price is £78.5m, which will be funded from equity.
The company has been especially active in the Staffordshire market, owing to the county’s strategic location at the heart of the UK’s transport network.
In the past year it has built a 543,692 sq ft factory in South Staffordshire for automototive component manufacturer Gestamp and a 561,767 sq ft warehouse in Fradley, which is let to Screwfix.
The M&S unit is one of the retailer’s five National Distribution Centres. Tritax said the net purchase price reflected a net initial yield of 5.43% on the corporate acquisition.
The property, which has a gross internal floor area of 382,594 sq ft with a site cover of approximately 57%, has been acquired with an unexpired lease term of approximately 8.5 years and has a lease break or rent review in c.3.5 years. The lease is subject to five yearly upward only open market rent reviews. The passing rent reflects £5.24 per sq ft.
Likewise, the Dunelm unit acts as a national distribution facility. The unit comprises two interconnected buildings with a gross internal floor area totalling approximately 503,389 sq ft. The net purchase price reflected a net initial yield of 5.38%.
The facilities, built in 2004 and 2010 respectively, work in conjunction with the company’s new Dunelm National Distribution Centre, located in nearby Sideway, Stoke-on-Trent, which was forward funded by Dunelm in June 2015, and together form Dunelm’s dedicated national distribution hub.
The properties are being acquired with two coterminous leases, each with an unexpired lease term of approximately three years. There are no further rent reviews. The passing rent reflects c. £4.56 per sq ft which Tritax said was highly reversionary against current market rents in this location.
Colin Godfrey, partner of Tritax, said: “We are very pleased to have acquired these modern and adjacent Big Box distribution facilities, situated in an established core logistics location with two high quality tenant covenants in M&S and Dunelm. They build on our strong working relationship with both retailers.
“These value add investments provide opportunity for rental growth and the short unexpired lease terms offer potential for capital value enhancement from either lease renewal or reletting. Value add assets now constitute 17% of our portfolio by value.”
