Alternative Income REIT buys retail park – Alternative Income REIT has exchanged contracts to acquire the Droitwich Spa Retail Park for £4.75m, in an off market transaction. The price represents a discount to replacement cost and reflects a net initial yield of 7.95%. This is the first deal that the trust has done led by its new investment adviser, M7 Real Estate Limited.
This acquisition deploys the disposal proceeds from the Wet ‘n’ Wild Water Park, North Shields and comes at a yield which is materially higher than both the 6.0% exit yield on the water park and the group’s latest portfolio valuation yield of 5.76%.
The retail park offers flexible retail warehouse space with enhanced planning. It is fully let to B&M European Value Retail, the UK’s leading variety goods value retailer and a FTSE 100 constituent (19,744 sqft of the asset, 67% of the total income) and Pets at Home Group, the UK’s leading pet care business and a FTSE 250 constituent (7,410 sqft, 33% of the total income). Both businesses have traded well through the pandemic and 100% of the rent due has been collected this year without interruption. The asset has a weighted average unexpired lease term (“WAULT”) of seven years with a passing rent of £403,654 per annum.
Droitwich Retail Park is situated in the dominant retail warehousing area for Droitwich Spa, which is approximately 22 miles south of Birmingham and 12 miles west of Redditch. Droitwich Spa is a historic market town, which is under provided with retail warehouse space. Located at the junction of Kidderminster Road and George Bayliss Road, benefiting from excellent transport links and close to J5 of the M5 motorway, and in a light industrial cluster (including Aldi, Lidl, The Range, DFS and Homebase), the area attracts high footfall.
The retail park was built in 2007 and consists of a total of 27,154 sqft of retail warehousing space across three units, one of which has a trading mezzanine, and benefits from approximately 100 car park spaces and a service yard.
The lease of the two units let to B&M expires on 31 August 2029 and is subject to five-yearly upward only rent reviews linked to RPI with no collar or cap, with the next due in September 2024. The asset also provides for medium term value creation through a potential lease regear or extension of the lease to Pets at Home, which is due to expire in January 2023.
Completion is expected later this week.
AIRE : Alternative Income REIT buys retail park