Cordea Savills, the international property fund manager, has completed the freehold purchase of an approx. 5,500-m² Virgin Active health and fitness club in Sheffield for £7.36 million (approx. 8.73 million) on behalf of the UK Income & Growth Fund.
The purchase means that the Fund has now invested the £70 million raised in its initial closing in 2010.
The Fund's objective is to deliver distributions in excess of 5% as well as capital growth over the longer term. It has a target size of £500 million and invests in prime assets across all the main commercial sectors. The Fund currently delivers a net distribution yield of 5.65% secured on high income quality and an average unexpired lease length across the portfolio of just under 16 years.
George Tindley, Fund Director, commented: "We are delighted that all of the equity in the Fund has now been invested. The combination of strategy, tactics and strong stock selection ensures that the Fund will outperform its objective. Despite uncertain prospects in the short term, we believe that UK prime commercial property still offers fair value and will see growth again once the occupational markets return to strength."
The latest acquisition offers a net initial yield of 6.5% to a low risk tenant, with an unexpired term of 17.5 years that includes five-yearly fixed increases in rent of 2.5% p.a., guaranteeing income growth. The equivalent yield is just over 7.5%.
Other assets purchased by the Fund include prime retail warehouses in Longwell Green, Bristol, let to B&Q Plc and Comet Group Plc and Wednesbury, Birmingham, let to PC World and an industrial unit in Sheffield, let to Sandvik Holdings.
Source: Citigate Dewe Rogerson