Brixton plc announces that it has exchanged contracts to sell a portfolio of property for €718 million (£460 million) to Dunedin Property Limited, with completion due on 31 May.
This comprises 84 different holdings and is made up of the majority of the Industrious North and Midlands portfolios, a significant element of the Industrious South portfolio together with Castle Estate, High Wycombe, Southwood Business Park, Farnborough and Tower Bridge Business Park (including The Willows property), London from Brixtons main portfolio.
The total portfolio comprises approximately 5.7 million ft² in 1,100 units with a current rent of just over £27 million pa. Part of the income is made up of rental guarantees worth £0.63 million pa which run until January 2008, the benefit of which Brixton took when it bought the Industrious properties. The Company is also providing €0.87 million pa worth of rent guarantees for 12 months on the Farnborough and Ipswich holdings.
Overall, the net initial yield equates to 5.6%, allowing for normal costs, and compares with the net initial yield of 6.9% that Brixton paid for the whole Industrious portfolio, which completed on 31 January 2005. From acquisition to the 2005 year end Brixton completed 123 leasing transactions in the retained Industrious portfolio at an overall rental enhancement over the valuers ERVs of 19.4%. Allowing for the price paid for the Industrious assets in this sale and the previous two portfolio disposals made during 2005 by Brixton, the total property return has been 33% in 15 months from this corporate acquisition.
Included in the sale is Martlesham Heath Business Park, Ipswich, which is worth close to £50 million and was the largest industrial property retained by Brixton from the original purchase. Excluding this, the average lot size of the other 79 properties in the Industrious portfolio averages less than £4 million.
In addition to the consideration, Brixton will benefit from a net 50% overage on any property sold by Dunedin within 12 months of completion with the exception of a group of properties totalling £40 million from a defined pool of £60 million which are excluded from this provision.
Brixton announced in February that it was looking to dispose of a substantial element of property and potentially set up a fund with circa £300 million worth of smaller properties from Industrious but in the course of discussions decided to sell the portfolio in its entirety.
Brixtons rationale for the sale is to enable the Company to focus on its core portfolio, particularly in West London, together with its two South East joint venture partnerships Heathrow Big Box and Equiton as well as Trafford Park which will remain the key holding outside this area.
The Company plans to dispose of a final element of approximately 60m of Industrious property over the next few months, including the Vaughan Trading Estate in Tipton, Birmingham, which is worth in excess of £40 million. Brixton has seen an acceleration of rental growth in its core West London portfolio from the mid point of 2005, this location now comprising approximately 65% of the total value of the portfolio, and where the Company has been particularly active with 8 developments totalling over 1.2 million ft² in Heathrow, Park Royal and Greenford which are either completed, started or planned to commence this year.
Brixton will retain 8 ex-Industrious estates comprising 540,000 ft², 7 of which are located in London and primarily on the eastern side of the Capital taking the total proportion of value from Brixtons whole portfolio in Greater London to more than 70%. The remaining estate is in Bishops Stortford and comprises 74,000 ft².
Overall, the Company has created £70 million worth of surplus value from Industrious, allowing for the corporate expenses of purchase and reorganisation, and the value of the Industrious properties still retained. The price paid for the overall portfolio is 3.2% above the D