Schroder Real Estate Investment Trust Limited has acquired Morgan Sindall House in Rugby for £3.95 million, reflecting a net initial yield of 8%.
The property comprises a 36,016 ft² office building together with 95 car parking spaces and is let to Morgan Sindall Plc as their regional headquarters for 15 years without tenant breaks at £335,000 per annum or an overall rate of £9.30 per ft², with a guarantee from Morgan Sindall Group Plc. The lease benefits from five yearly upwards only rent reviews linked to the Retail Price Index, subject to a minimum uplift of 2% per annum compound and a maximum uplift of 4% per annum compound.
In addition, the Company has also completed the disposal of its 19.5% interest in Merchant Property Unit Trust (‘MPUT’), generating net proceeds of approximately £3.25 million, in line with the Net Asset Value as at 31 December 2013. MPUT owns a portfolio of 35 builders merchant units located throughout the UK let to Travis Perkins.
Following completion of these two transactions the Company has cash of £14.2 million.
Commenting on the transactions, Nick Montgomery, Head of UK Investment at Schroder Property Investment Management said: “These two transactions provide a good example of our ability to realize value and reinvest the proceeds into higher yielding assets to support our strategy of growing net income and dividend cover. The property in Rugby complements the Company’s current portfolio by offering a long lease to an established tenant at an above average initial yield with inflation-linked rental uplifts.
“We are continuing to focus on unlocking value in our portfolio and enhancing income by disposing of low or non-income producing properties and redeploying capital into higher income producing investments. As such, we have identified further transactions that are aligned with our strategic objectives and hope to make further announcements in this regard in due course.”
Source: FTI Consulting