Redefine International has provided an update on the progress it is making on asset management initiatives on its recently acquired Aegon UK (AUK) portfolio. The company says that it is making good progress that is ahead of initial expectations. In summary, since the EU referendum result, the company has completed two leases totalling £0.6m, which it says represents a 10% increase on ERV. Furthermore it says that, since exchanging contracts on the AUK portfolio in September 2015, it has increased the AUK portfolio’s WAULT from 7.5 years to 8.0 years, saved £0.3m in vacancy costs and achieved an additional uplift of £0.6m to annualised rental income, representing a 5% increase on ERV.
For the AUK London offices portfolio, the company has comp0leted two rent reviews for 127-133 Charing Cross Road (adjacent to the new Crossrail development and Tottenham Court Road Elizabeth Line Station). These are to Three Monkeys and Superdrug on 12,524 square feet totalling £0.8m representing a 29% increase on passing rent. The Company says that it sees significant reversionary potential for 127-133 Charing Cross Road based on recent letting activity in the immediate area. In the longer term the property presents a development opportunity with nearby properties securing planning permission for schemes totalling as much as 12 floors.
For the AUK Regional offices portfolio, the managers say that at Lochside, Edinburgh, Origa has taken 11,202 square feet of vacant space on a 15 year lease, with a 10 year break, for £0.2m, which is 2.1% ahead of ERV and means the property is now fully let saving an additional £0.1m in void costs. At the Omnibus building in Reigate, Deutsche Leasing has signed a 15 year lease, with a 7.5 year break, on 11,015 square feet of vacant space at an annualised rent of £0.3m the company says that this 10.1% ahead of ERV and that 40% of the vacant space, on acquisition, has now been filled, saving £0.1m in void costs. The managers say that the portfolio presents an immediate income opportunity through removing the residual vacancies in the Manchester, Leeds and Reigate offices totalling 47,614 sqft. Across the remainder of the portfolio the Company has identified a number of opportunities to regear leases increasing both the lease term and rental income.
For the AUK Retail Parks portfolio, the managers say that At Banbury Cross Retail Park the property is now 98% let following a successful reconfiguration of the Harveys unit to free up available space. Specifically, Tapi has agreed a 10 year lease on a vacant 4,998 square foot unit for £0.1m, which the company says is 2.3% above ERV; Poundstretcher has agreed a 10 year lease on 10,056 square feet for £0.2m, which the company says is 2.2% ahead of ERV; and, since the EU referendum result, DFS has signed a 10 year renewal on 20,056 square feet of space at £0.3m, which the company says is 4.9% above ERV. The company says that the Poundstretcher and DFS leasing transactions, despite agreed at rents below passing, are both above ERV and ahead of business plans made on acquisition which the managers believe will support valuations. At Queens Drive, Kilmarnock, the Company says it has achieved full occupation following a 10 year £0.2m lease agreement with Smyths Toys in line with ERV on a vacant 15,000 square foot unit. The Company says it is assessing a number of opportunities across the portfolio’s retail assets to add additional space and enhance the tenant mix to drive footfall, including the creation of food and beverage pods together with a range of commercialisation initiatives, which have not previously been applied to the parks, to generate additional income.
For the AUK Logistics portfolio, the company says that it has agreed four lettings which have increased the logistics portfolio WAULT by 36% to 7.0 years. Specifically, at Camino Park, Crawley, Royal Mail has agreed a 10 year reversionary lease on 221,037 square feet with a break option in five years and, after the EU referendum result, DFS has signed a 10 year lease on 27,306 square feet at £10.25 per square feet, which is a 15.5% uplift to passing rent and 14.6% above ERV. At Express Park, Bridgwater, the company says that Exel has agreed a lease extension until 2019 on 133,550 square feet at £5.7 per square foot, which is 8.6% higher than ERV. At Kingsthorne Industrial Park, Kettering, the company says that Rexson Systems has agreed a new 10 year lease at renewal on 12,737 square feet at £0.1m, which is 17.9% ahead of passing rent and in line with ERV. The managers say that this is a reversionary portfolio that is continuing to benefit from strong tenant enquiries and they expect these to drive future rental growth in the short to medium term.
Redefine International updates on progress with the Aegon UK portfolio : RDI