The Company has completed contracts to acquire the BT building in West Bromwich for £14.86 million (approx. 17.1 mln.), reflecting a net initial yield of 7.63%. The Company had previously paid a deposit of £0.75 million and at completion made a balancing payment of £14.11 million.
The property comprises a 75,000 ft² (7,000 m²) new office development constructed to a high specification capable of flexible future occupation. It is let for fifteen years without break options to British Telecommunications plc, who will become the Company's largest tenant paying a rent of £1.2 million per annum, or 4.72% of the total portfolio rental income. Rent is payable immediately as there is no rent free period. The lease benefits from annual compounded fixed rental uplifts of 3% per annum, thereby increasing the rent every year of the lease term.
Knight Frank has valued the property upon completion at £18.9 million which reflects a net initial yield of 6% and represents a 27% increase relative to the purchase price. It is anticipated that this valuation uplift will increase the Company's NAV, after all acquisition costs, by approximately £3.1 million. In addition, the Company has received rental payments in advance for the period from 25 October to 24 December 2011 of £204,000.
The acquisition enhances the defensive characteristics of the Company's portfolio, increasing the average unexpired lease term to 8.1 years, assuming all tenants exercise break options at the earliest opportunity.
Source: FTI
