Hercules Unit Trust, the retail park fund managed by Pillar Property, is believed to have agreed an innovative five-property £128m swap deal with HSBC Bank Pension Trust.
The Hercules fund, which is managed by Andrew Jones, is understood to be buying a 50% interest in Banbury Cross retail park from the LaSalle Investment Management-run HSBC trust for £25m, which reflects a yield of 5.75%. At the same time it is selling to HSBC a 50% interest in Springvale Retail Park in Orpington for £28m and 100% interests in three smaller parks in Torquay and Oxford for a combined £72m. Yields range from 5.3% to 5.9%.
The complex deal is the first by Pillar and its Raymond Mould-led management team in its new strategy of targeting institutions with an overweight exposure to retail parks. Buying retail parks on the open market is proving nigh on impossible for Pillar because they are either too expensive or of poor quality.
Banbury Cross is a 168,500 sq ft (15,600 sq m) park with a restricted planning consent. It is next to a Tesco superstore and is occupied by Focus, Allied Carpets, Comet and DFS. The park will be managed by Pillar, giving it the opportunity to benefit from an asset with significant rental growth potential from asset management initiatives.
Oxford Retail Park, sold for £37.3m, and the two Torquay parks, Riviera Way and Wren, sold for £14.1m and £20.6m respectively, are smaller schemes and had been earmarked for disposal during 2004. This is in line with Hercules’ strategy of owning parks of more than 100,000 sq ft (9,300 sq m) with open A1 planning consent.
At Orpington, rental levels from the bulky goods tenants, such as Currys, Furniture Village, Harveys, MFI and PC World, have reached a threshold. However, Pillar has recently gained consent for 120,000 sq ft (11,150 sq m) at the nearby Nugent site, so the retained 50% stake enables it to benefit from any initiatives between the two schemes.
The transaction, which is due to be completed early next month and will coincide with completion of the £194.7m purchase of the Glasgow Fort Shopping Park, will result in total sales proceeds of £100m. The sale price represents an uplift of £24m over the original purchase price of the properties, three of which have been held for less than two years.
Hercules, the UK’s largest owner of retail parks, will own £2.2bn of parks on completion of both deals. It will have an average park size of more than 200,000 sq ft (18,600 sq m) with 88% of the portfolio benefiting from open A1 or open restricted planning consent. Pillar declined to comment.