LondonMetric Property is buying a pair of Argos and WH Smith warehouses for a combined £61.8m – a 7.2% yield.
In Bedford, LondonMetric has exchanged on the Argos distribution warehouse for £51.7m, reflecting a net initial yield of 7%.
The 657,500 sq ft scheme is Argos’s key distribution centre in the UK, handling its bulky goods home delivery operations.
The unexpired lease term is 9.5 years and an open market rent review is due in December 2017. Nearby occupiers include Asda and Sainsbury’s.
In Birmingham, LondonMetric has exchanged contracts to buy the WH Smith distribution hub for £10.1m, reflecting a net initial yield of 7.9%.
The 211,000 sq ft scheme is let for 11 years to WH Smith. It is one of three WH Smith distribution warehouses across the UK that supplies its UK high Street and Travel Outlet business.
Simultaneously, LondonMetric has entered into agreements to surrender the existing lease and grant a new 21-year lease to WH Smith at £3.75 per sq ft with a fixed uplift in September 2014 to £4.75 per sq ft, producing a yield on cost of 7.5%.
Following these acquisitions, the LondonMetric retail distribution portfolio comprises five distribution centres with a combined portfolio value of £164.8m, representing 14% of the enlarged group portfolio.
The weighted average unexpired lease term is 14.9 years with no tenant break options and the portfolio is 100% occupied.
Fixed rental uplifts across the distribution portfolio represent 40% of total distribution rental income, and 21% of the group contracted rental income.
Chief executive Andrew Jones said: “The Argos and WH Smith distribution units represent the latest in a number of deals that we are working on within the retailer distribution sub-sector.
“We continue to successfully sell down our residential investment holdings and re-invest into retail and retailer distribution sectors where we can deliver more attractive income and capital returns.”
Dowley Turner Real Estate advised LondonMetric on Bedford; Burbage Realty acted for LondonMetric on Birmingham.
nick.whitten@estatesgazette.com
