Real estate investment trusts (Reits) have been squeezing in deals in the run-up Christmas, with LondonMetric Property (LMP) snapping up a property fund and UK Commercial Property (UKCM ) helping to fight Covid-19 with its latest purchase.
LondonMetric, the £2.7bn portfolio of specialist logistics and industrial real estate, has used some of the £175m it raised last month to acquire the Savills IM UK Income and Growth fund in a deal worth £122.2m.
The fund is home to 15 assets, of which 75% are in urban logistics and the remainder in long-income assets. Almost three-quarters of the properties are in London and the South East, including Croydon, Greenwich, Maidstone and Guildford, while another 12% is focused on the Midlands. The properties are rented to a host of big names, including Fujitsu, HSBC and Volkswagen. The fund generates combined rents £5.35m a year, with 43% of the rents benefiting from contracted uplifts.
The Jersey-domiciled open-ended fund, which is run by the investment arm of Savills estate agents, has delivered a return of 4.9% over the past three years, beating the 1.1% return from funds in the MSCI/AREF UK Quarterly Property fund index.
Andrew Jones, chief executive of LondonMetric, said following last month’s equity placing that his company is ‘pleased to have quickly invested a substantial proportion of the proceeds into this high-quality portfolio’.
‘Reflecting its London and South East weighting, we expect these assets will continue to perform strongly as high occupier demand and diminishing warehouse supply drive rental growth higher,’ he said.
The purchase of the fund is in keeping with LondonMetric’s strategy to up its exposure to warehouses, a property sector that exploded during the pandemic as demand soared due to increased online shopping necessitating more distribution centres and the onshoring of inventory.
At the launch of the equity raise in November, Jones said the ‘e-commerce backdrop remains compelling, underpinned by insatiable consumer expectations and supply chain challenges that are forcing businesses of all shapes and sizes to improve their infrastructure and become more efficient’.
UKCM was also ticking off its shopping list with the purchase of an industrial and business park for £94m.
The Reit has added Leamington Spa’s Precision Park – with two distribution units, office accommodation and development land – to its £958m portfolio. The distribution units are currently let to IT services management company Iron Mountain and the Secretary of State for the Department of Health and Social Care, with the latter using the property as one of two UK megalabs for Covid-19 testing.
This particular unit, says the trust, will ‘create up to 4,000 jobs and forms a key part of the UK’s national infrastructure response to future epidemics as well as adding diagnostic capacity for other critical illnesses’.
The £958m Reit has spent £233m this year, 80% of which was transacted in the last three months.
Kerri Hunter, interim manager at UKCM, said the property was well located in the so-called Golden Triangle, with the M40 and A452 just minutes away and Birmingham International Airport 20 minutes away. This means 90% of the UK’s population is accessible within a five-hour drive.
Aberdeen Standard Investment’s Hunter, said the asset was also ‘well let to very strong covenants in good quality buildings, with a life sciences/technology angle’.
‘Its purchase is an excellent fit to fund strategy as it is a multi-faceted investment, encompassing all aspects of what we’re trying to achieve. It not only offers solid income streams but also the opportunity to drive superior performance through asset management and development.
‘The low-risk nature of the existing portfolio enables us to take on more development, thereby creating more high-quality assets at a significant discount to purchasing up and let stock.’
The fund has bought three new warehouse units, known as Sussex Junction, which are under construction near Gatwick Airport, providing £25m of forward funding, and has also spent £35m buying West Gate, a medium-term redevelopment site on Hanger Lane in West London.
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