Schroder Real Estate Investment Trust (SREI) has announced that it has completed the acquisition of Stanley Green Trading Estate together with an adjoining development site in Cheadle, South Manchester, for a total consideration of £17.25 million, reflecting a blended net initial yield of 5.2%. This is in line with the strategy to selectively deploy available capital into income producing assets alongside planned asset management initiatives and the ongoing share buyback programme.
About the Stanley Green Trading Estate and co-located development site
SREI says that the freehold industrial estate and development site are located in a prime South Manchester location at the junction of the A34 and the A555, which is the recently completed upgrade Manchester Airport Eastern Link Road (Ringway Road). This provides a direct link to Manchester city centre, Manchester Airport and the M60 orbital motorway. The local road network also connects to affluent suburbs such as Cheadle, Bramhall, Wilmslow and Alderley Edge. The Estate is located close to established major grocery stores and retail parks.
The Estate comprises approximately 150,000 sq ft of warehouse accommodation across 14 units on a nine acre site and is fully let to thirteen tenants generating a total contracted rent of £960,000 per annum or an average rent of £6.55 per sq ft. The estimated market rental value (‘ERV’) is approximately £1.25 million per annum. The average unexpired lease term, assuming all tenant breaks are exercised, is three years. 97% of the rent due during the Covid-19 pandemic has been collected. The apportioned price for the Estate of £14.4 million reflects a net initial yield of 6.3% and a reversionary yield, based on the ERV, of 7.1%.
The Estate has a strong tenant line up of local, regional and national trade occupiers including Apex Self Storage Limited (19% of rental income), Howden Joinery Properties Limited (9.4% of rental income), Screwfix Direct Limited (7.3% of rental income) and Toolstation Limited (7.1% of rental income). The strategy is to work closely with the occupiers to align their occupation with various estate management improvements.
The Site comprises a 3.4 acre, regular shaped and serviced plot which is currently non-income producing. The apportioned site price is £2.85 million. The Site has a historic planning consent for 48,000 sq ft of trade counter and warehouse space and is allocated for industrial development in the local development plan. As with other industrial assets owned by the Company such as Stacey Bushes Industrial Estate in Milton Keynes, the strategy is to obtain an improved planning consent and develop a high quality trade centre and warehouse units during 2021.
Langley park Chippenham – another SREI Industrial asset
SREI says that its Cheadle acquisition, when combined with its previously announced acquisition of Langley Park in Chippenham, deliver income of £2.7 million per annum, equating to an average net initial yield of 6.8%. The acquisitions increase SREI’s industrial weighting from 30% to 36%, with the majority of this by value in high quality, multi-let estates. On completion of both acquisitions SREIT’s net loan to value, adopting the independent valuation as at 30 September 2020, will be 32%, with cash and undrawn loan facilities totalling approximately £40 million. SREI says that this provides capacity to deliver further net income growth through new acquisitions and investing in the current portfolio.