Metric Property Investments plc, the UK specialist retail real estate investment trust, announces that it has created a £150-million (approx. 175-million) joint venture with Universities Superannuation Scheme Ltd ('USS') known as the Metric Income Plus Limited Partnership ('MIPP'/ the 'Joint Venture').
The objective of the Joint Venture is to acquire small, higher yielding, income-focused retail parks and solus units ranging in value from £2 million to £20 million. The target portfolio yield on cost, once established, will be in excess of 7%, to deliver attractive post leverage cash on cash returns.
USS has committed an initial £50 million of equity to MIPP, with Metric committing £25 million for a one-third equity stake. The Joint Venture will have a target LTV of 50% across its entire portfolio.
MIPP has already contracted to acquire two properties from Metric at Inverness and Swindon for a combined cost of £19.9 million:
- At Inverness, MIPP will forward purchase Metric's 30,000-ft² retail park development upon completion for £9.7 million, reflecting a net initial yield of 6.4%. The park is already fully pre-let to DFS and Carpetright for an average of 17 years with rents reviewed to RPI. It is due for practical completion in January 2012.
- At Swindon, MIPP has acquired the 57,700-ft² Fleming Way Retail Park for £10.2 million, reflecting a net initial yield of 7.2%. The park is adjacent to the town center and is let to The Range and Halfords for a weighted unexpired lease term of over 20 years off average rents of £13.45 per ft².
MIPP will have an initial life of five years. Metric will be responsible for all acquisitions and asset management initiatives and will receive a management fee of 0.4% per annum of Gross Asset Value of the portfolio.
Andrew Jones, Chief Executive of Metric, commented: "We are continually looking for ways to grow our business and we are therefore very excited to be entering into this new joint venture with USS, one of the UK's leading pension funds. We will look to take advantage of opportunities to acquire operationally strong, well let, long dated income at prices 250 basis points above the current cost of debt.
"Furthermore, this access to institutional and third party equity allows Metric to leverage its strong asset management platform and increase the scale of our business without tying up significant investment capital, as well enhancing our recurring earnings stream."
Graham Burnett, Head of Property at USS, added: "Our fund continues to be an active investor in the UK property market, with acquisitions totaling in excess of £1 billion over the last three years. This joint venture enables us to access Metric's market intelligence and asset management expertise to build a portfolio of smaller retail warehouse parks with an emphasis on higher income return."
Source: FTI Consulting