The Board of Directors of Alternative Income REIT PLC (AIRE) has completed the acquisition of the Virgin Active leisure club in an affluent suburban location in Streatham, in South-West London for c. €6m. The price reflects a net initial yield of 9.8% and a discount on replacement costs.
The acquisition of the asset redeploys the majority of the net proceeds from the Group’s disposal of the Mercure Hotel, Glasgow for €8.78m, at a higher initial yield. The Group expects to invest the remainder of the proceeds in Q1 2024.
The asset has been acquired with an unexpired lease term of over 10 years, which is subject to five-yearly upward-only uncapped rent reviews linked to RPI. The Asset has a passing rent topped up by the vendor to €456,441.6 pa (equivalent current ERV pa level) until the next rent review, which is due on 29 September 2024.
The asset is fully let to Virgin Active Health Clubs Limited and is guaranteed by Virgin Active Health Club Holdings Limited, part of the Virgin Active Group. The club is trading well in this location just off Streatham High Road, benefitting from a densely populated residential area and the hybrid work ethos. The area, which is well served by public transport, is vibrant with a strong residential market, a variety of shops and restaurants and areas of public open space.
The asset which occupies a third of an acre site, was originally the Streatham Squash Club and was significantly extended in 1999 and refurbished in 2009 when an additional storey was added. The building comprises a total of 2,284m2 of purpose-built leisure facilities over three floors. The Asset’s third-floor gym enjoys panoramic views over Greater London.
Simon Bennett, Chairman of Alternative income REIT plc, commented: “We are pleased to have acquired for £5.1 million (c. €6m) the Virgin Active in Streatham, South-West London, which is a premier leisure club that is trading well in an excellent location and is let on a long lease with uncapped index-linked rent reviews. The price reflects a net initial yield of 9.8% and a discount to replacement cost. This acquisition redeploys part of the net proceeds from the Group’s disposal of the Mercure Hotel, Glasgow at a higher initial yield, and we expect to invest the remainder of the proceeds in Q1 2024. The Board remains confident that the Group is well positioned, given its diversified and fully let portfolio that delivers secure, long-term and index-linked income flow.”
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