Brixton has moved another step towards selling out of offices in order to concentrate on industrial property with disposals to Delancey and Teesland.
The company, now the largest industrial landlord in the UK, has sold three of its four remaining office holdings to Delancey, a private company run by Jamie Ritblat, for £148.5m. It will sell its remaining office holding in the new year.
At the same time, Brixton has sold 50 industrial properties from its Industrious portfolio to Teesland’s European fund manager, Teesland iOG, for £249.4m.
Teesland intends to use them as the basis for a new UK multi-let industrial fund.
Tim Wheeler, Brixton’s Chief Executive, said: “Our focus will be entirely industrial and we are comfortable selling out of our offices at this point in the cycle as the pricing reflects only a 30 month period to get the new office developments income producing which even in an improving market is not unrealistic.”
As a result of the sales, the company will own or manage 25m sq ft of industrial space worth around £2bn, of which 85% is in the South East.
The company’s debt/equity gearing will reduce to a 85-90% range.
Brixton’s office sales comprise Aviator Park, Addlestone; Intec Business Park, Basingstoke,l and the Causeway Corporate Centre, Staines.
The purchase price includes a further £1.5m to be paid conditional upon the grant of a lease on the 45,108 sq ft recently refurbished Lovett House in Staines.
The lease will run for 15 years at a rental of just over £1.0m pa, which equates to £22.34 per sq ft overall together with a 27 month rent free period.
The interests in Addlestone and Staines are freehold. At Basingstoke the property is held on a 228 year lease from the Local Authority at a rental of 15% of rents received.
The sale leaves Brixton with only one remaining office holding, the 135,000 sq ft Dorking Business Park.
The current passing income from the properties being sold totals £7.5m a year, giving a net initial yield of 5%.
The two vacant buildings at Aviator Park will produce a further increase in rent of circa £2.6m pa when let, and this, together with the letting of vacant accommodation at Basingstoke and the receipt of rentals from Lovett House would give an overall reversionary yield of 7.8%.
At the same time, Brixton’s £249.4m industrial portfolio sale to Teesland, part funded by the Royal Bank of Scotland will effectively halve Brixton’s Industrious portfolio.
The portfolio comprises 50 properties totalling 4.6m sq ft together with 45 acres of development land with a current rent roll of approximately £17.5m pa, showing a net initial yield of 6.9%.
The sale will leave Brixton with a net portfolio from the Industrious acquisition of 7m sq ft comprising 113 estates.
The disposals comprise many of the smaller peripheral properties, for example, in the North and East of England, South Wales and the West Country but also includes three of Industrious’ five largest holdings at Fradley Distribution Park, Lichfield, Fareham Reach, Gosport and the 1.65m sq ft Hartlebury Trading Estate at Kidderminster.
Brixton will retain properties including £230m worth of properties in the South East with larger properties in Greater London at Dagenham, Deptford, Haringey, Rainham and Romford together with other significant assets in Bedford, Ipswich and Paddock Wood, Kent.
The remaining assets held include around £110m clustered around Birmingham together with circa £90m predominantly around the Manchester and Sheffield conurbations.
The price agreed shows Brixton a 2.4% enhancement over the apportionment on the price agreed for the whole portfolio.
It reflects a net initial yield of 6.9%, an equivalent yield of 7.4% and a reversionary yield of 7.5%.
In a statement Teesland said: “The portfolio is ideally suited to Teesland iOG’s style of active management, capitalising on its extensive industrial property expertise throughout the UK. The intent would be to use the industrial estates as the core of a new UK multi-let industrial fund to be launched in late 2005.”
The subsidiary said it will be looking to buy other similar properties to add to the portfolio.
CB Richard Ellis acted for Brixton in both transactions, with King Sturge also advising on the Industrious deal and Holley Blake also acting on the office sale.
References: EGi News 20/12/04
