Acquisition of Bedford Retail Warehouse Park
For issue 18 May 2015
Schroder Real Estate Investment Trust Limited
(the `Company')
ACQUISITION OF BEDFORD RETAIL WAREHOUSE PARK
The Company announces that it has acquired the freehold interest in St.John's
Retail Park in Bedfordfor £31.8million reflecting a net initial yield of
approximately 6.5%. The property is well located approximately 1.5 milesto the
south of Bedford town centre and comprises a130,000 sq ft retail warehouse park
let to 12 tenants with an adjoining 11,600 sq ft office building.
The retail park produces a rent of £2 million per annum which reflects a
relatively low average rent of £16 per sq ft. The average unexpired lease term,
assuming all tenants break at the earliest opportunity, is 7.9 years with
tenants including DSG Retail Limited (24% of income expiring in September 2020)
andHomebase Limited (17% of income expiring in May 2024). There is a single
vacant unit comprising 5,000 sq ft where terms have been agreed for a new
letting. Approximately half of the office building islet to DHL GBS (UK)
Limited at £61,000 per annum reflecting a low average rent of £9.50 per sq ft,
with approximately half of the remaining vacant space under offer.
The acquisition satisfies the Company's investment criteria by offering:
* An above average initial yield of approximately 6.5% with potential for
immediate growth assuming the completion of lettings under offer to new
tenants;
* Good fundamentals due to tenant demand, affordable rents, low retail
warehouse supply and vacancy in Bedford and above average population growth
for Bedford and the surrounding area; and
* Significant scope for asset management including lease extensions and
widening the planning consent in order to increase the rental tone and
improve the tenant mix.
The property was acquired via the acquisition of shares in a UK company that
had developed the property and therefore had latent capital gains tax
liabilities. Following conversion to Real Estate Investment Trust (`REIT')
status on 1 May, the Company has been able to extinguish these capital gains
tax liabilities. This provided a competitive advantage when bidding for the
property and resulted in the gross purchase price of £32.2 million.
Following the acquisition of St. John's Retail Park the Company expectsits
dividend to be fully covered by recurring earnings with approximately £12
million of cash remaining for on-going committed capital expenditure and
operational flexibility.
Looking forward, there are further potential capital expenditure initiatives
that should be accretive to earnings and net asset value (`NAV'). The Company
intends to fund these initiatives from selling smaller properties or the
issuance of new equity from treasury. The Company is now cautious about pricing
in parts of the market but may consider issuing new equity in a disciplined
mannerto fund specific acquisitionsthat are accretive to earnings.
Commenting, Duncan Owen, Global Head of Real Estate at Schroders said: "The
acquisition follows the disposal of low or non-income producing property and
results in SREIT being substantially invested with a fully covered dividend.
Converting to UK-REIT status has enabled SREIT to be more agile and competitive
by extinguishing the capital gains in the vendor special purpose vehicle and
therefore enhancing SREIT'sinitial income return."
-ENDS-
For further information:
Schroder Real Estate Investment Management 020 7658 6000
Limited:
Duncan Owen / Nick Montgomery
Northern Trust: 01481 745529
David Sauvarin
FTI Consulting: 020 3727 1000
Dido Laurimore / Ellie Sweeney
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