LondonMetric Property Plc has exchanged contracts to acquire a portfolio of 27 DFS assets from the administrators to Delphi Properties Limited for a purchase price of £175 million (approx. €209.6 million), reflecting a net initial yield of 9.3%. The acquisition is expected to complete on 25 March 2014.
The portfolio is to be acquired by a new joint venture which LondonMetric is forming with LVS II Lux X S.a.r.l, called LMP Retail Warehouse JV Property Unit Trust. LondonMetric will own 30.5% of the joint venture.
The portfolio comprises 22 retail warehouses, four industrial units and DFS’ headquarters and distribution centre, covering a total area of 903,700 ft². The rent roll is £17.3 million per annum and all the leases expire in March 2030, providing a WAULT of 16.3 years.
LondonMetric will be responsible for the management of the portfolio and will receive a fee equivalent to 4.0% of rents received.
The acquisition will be financed with a new debt facility which has been put in place for completion, with an LTV of 56%.
Andrew Jones, Chief Executive of LondonMetric, commented: “Our new joint venture with LVS allows us to access both new equity and debt funding whilst leveraging our asset management platform and strong occupier relationships. We aim to grow the attractive day one cash on cash returns as we execute asset management initiatives.
“DFS is the leading UK furniture retailer and one of our strongest retail partners. The portfolio represents high-quality trading assets, with 46% of the rental income derived from Open A1 consents. The portfolio is fully rented but contains significant value accretive opportunities. We look forward to working with DFS across the operational portfolio to strengthen and lengthen the sustainable income profile for our mutual benefit.”
Cairn Capital and Savills advised the joint venture on the acquisition; Cairn Capital also advised the joint venture on the debt.
Source: FTI Consulting