AEW UK REIT has acquired two properties for a combined £18.3m. It has unconditionally exchanged on the purchase of a 67,020 sq ft mixed-use block located in Bath city centre at a price of £13m, reflecting a net initial yield of 8.5%. It expects to complete the deal next week.
In a separate transaction, the company has also completed the purchase of a freehold retail asset in the London Borough of Bromley for a price of £5.3m, reflecting a net initial yield of 8.7%. Following these two acquisitions, the company will have around £7m to deploy on other new purchases.
The asset in Bath, known as Northgate House, provides 48,805 sq ft of retail accommodation fronting on to Bath’s High Street, Upper Borough Walls and Union Passage. The retail accommodation is let to 11 tenants anchored by TK Maxx, which recently removed a tenant break option in its lease. Retail lettings provide a weighted unexpired lease term in excess of 5 years. The remaining 18,215 sq ft of accommodation comprises grade A offices recently refurbished by the vendor. The office accommodation is fully let to a wholly owned subsidiary of Regus Group until 2032, trading as co-working brand, Spaces. The office passing rent of £22 per sq ft provides a low base, and the manager says that it hopes to grow income through a recent outstanding rent review.
The Bromley asset is located on Bromley High Street and provides 54,215 sq ft of accommodation, let in its entirety to Next Holdings Limited. The accommodation comprises a four-storey retail unit with the ground, basement and first floor providing sales accommodation with ancillary accommodation on the second floor. Next has occupied the property since 2000 and, in September 2021, renewed on a four-year lease at a rebased level of rent. A comprehensive store re-fit was undertaken by the tenant at this time.
Commenting on the purchases, Laura Elkin, portfolio manager of AEW UK REIT, said: “Over recent weeks, we have taken time to carefully consider where best value can be found and we are delighted to have acquired these high yielding retail assets both located in strong locations. The purchase prices of both assets reflect low capital values which we believe will provide excellent value to our shareholders over the long term. We continue to analyse a very interesting pipeline of potential acquisitions for AEWU’s strategy and, following full investment of the remaining capital available for deployment, the company’s earnings are expected to return to full cover of its dividend.“
AEWU : AEW UK REIT acquires two retail assets for £18.3m