AEW UK REIT has sold part of the Central Six Retail Park, in Coventry, for £26.25m, reflecting a net initial yield of 7.49%
The sale price for units 1-11 of the park represents a 60% premium to the purchase price of the entire property, which was acquired in November 2021 for £16.411m and a 6.7% premium to the 30 June 2024 valuation. It is expected to deliver an IRR in excess of 16%.
The proceeds of the sale will be used to buy higher yielding property, with the company already placing new acquisitions under offer with a “significant part” of the proceeds.
The company will retain units 12, A(1), A(2) and (B), known as the ‘triangle site’.
The sale price will be paid in two tranches; the first instalment of £25.9m was paid on sale completion on 13 December 2024. The second instalment, amounting to £350,000 and currently held in escrow, will be paid on the completion of a new lease of Unit 10 to Superdrug Stores Plc, where an agreement for lease has already exchanged.
The purchaser is also contracted to pay a third instalment of £500,000 to the company should it complete a letting to an electric vehicle charging operator within the first 18 months of ownership.
Since its ownership of the retail park, the company has brought the park to fully let, from a vacancy of 24%. This included three new lettings to Aldi Stores Limited, Iceland Foods Limited and Whitecross Dental Care Limited, which added £668,000 of annual rental income. These lettings, coupled with lease renewals and regears to Next Group plc, Boots UK Ltd and TJX UK (TK Maxx), maximised both income and the value of the asset, the company said.
Having increased the net operating income by around 54% since acquisition, the company said that the property was no longer considered reversionary, with two of the ten units where lease renewals are anticipated in 2025 being considered ‘over-rented’ with a forecast reversionary yield of 6.88%.
Commenting on the sale, Henry Butt of AEW UK REIT, said: “As a result of our active asset management strategy, we have sold part of this asset at a very healthy premium to the purchase price of the whole, thereby delivering excellent returns to the company’s shareholders. The value created by our successful asset management presents an opportunity to crystallise capital growth and reinvest the sale proceeds into higher yielding opportunities in the market. A significant part of the proceeds from the sale are already under offer and, as such, we expect to make purchase announcements in the coming months.”
