Deals



Schroder Real Estate Investment Trust Limited Acquires Arndale Centre


Posted: 10th January 2014 08:45

On 9 January 2014 Schroder Real Estate Investment Trust Limited (the 'Company') issued 35,592,128 new ordinary shares by way of a placing (the 'Placing') representing 10% of the Company's existing issued share capital.  The Placing was completed at 48.25 pence per share ('pps'), raising gross proceeds of approximately £17.2 million and reflecting a premium to the last reported Net Asset Value as at 30 September 2013 of 6.3%.
 
Following completion of the Placing the Company announces that it has exchanged unconditional contracts to acquire the Arndale Centre in Headingley for £16.23 million 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 proposed acquisition satisfies the Company's investment criteria by offering:
 
  • Annual rent of £1.57 million per annum, increasing to £1.69 million on expiry of rent free periods, which results in a net initial yield of 9.14% per annum, reducing to 8.73% after non-recoverable expenses;
  • A weighted average unexpired lease term of over five years, with exposure to 23 tenants occupying the retail, office and leisure units.
  • A strong tenant base with approximately 75% of the income generated by 20 retail and leisure tenants, which include Sainsbury's, Morrisons, Wilkinsons and Pizza Express; 
  • Scope to add value through asset management;
  • Income from offices where there is longer term potential for change of use; and
  • The potential to benefit from local transport and infrastructure improvements, with the subject property adjacent to the proposed Leeds Trolley Bus station, a proposed rapid transport system linking Leeds city centre with the suburban areas to the north and south
Following completion of the acquisition, scheduled for 15 January 2014, the Company will have cash of approximately £15 million and a net loan to value, based on the independent valuation as at 30 September 2013, of 40%.  The Company 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.
 
Commenting on the acquisition, Duncan Owen, Head of Property at Schroder Property Investment Management said:
 
"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."

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