IO, the specialist manager of multi-let industrial estates, has concluded the investment programme of its latest £120m UK industrial property joint venture by acquiring a £76m portfolio of assets from MStar, a joint venture between a controlled affiliate of Starwood Capital Group and M7 Real Estate.
The portfolio comprises 24 freehold and long leasehold, multi-let industrial estates, predominantly located in established industrial locations across England and Scotland. It totals 139,354m2 (1.5million ft2) in 238 units, with a combined vacancy rate of 11.3%, and produces an annual rental income of €7.77m (£5.84m). The purchase price reflects a net initial yield of just less than 7% and a gross reversionary yield of more than 8.5%.
The acquisition means the vehicle, IO Investment 2 LLP (IO2), is 100% invested within three months of closing. In October, IO announced the acquisition, in separate transactions, of 10 investments totalling 60,916m2 (655,700ft2), for €46.5m (£34.9m), reflecting a gross reversionary yield of more than 9%.
Angus Scott-Brown, managing director of IO, said: “This acquisition proves our continuing ability to source the right type of multi-let industrial stock for our investment partners. This portfolio provides us with geographic diversity across core markets where there are strong rental growth prospects, given the improving economic climate, growing tenant demand and an increasingly acute shortage of stock.
“Having completed the investment programme for IO2, we will be looking to establish IO3, which will be open to existing and new investment partners. The opportunity remains to achieve above-average returns from carefully-selected and managed investment in multi-let industrial property.”
IO Investment 2 LLP is a joint venture between IO, Grosvenor Group, the privately-owned international property group, and Quilvest Real Estate, the real estate investment arm of Quilvest, a leading global independent family office. Activity kicked off in October 2015 just two months after the fund closed with the acquisition of €47 mln (£34.9 mln) of multi-let industrial estates, all of which offered the opportunity for significant value enhancement through asset management initiatives. The initial investments channelled through 10 seperate transactions totalled 60,916 m² (655,700 ft²) with a combined vacancy rate of 16%. The blended net initial yield was 7.25% and the blended gross reversionary yield was more than 9%.
