LondonMetric Property Plc ("LondonMetric"), the UK REIT recently created through the merger of London & Stamford Property Plc and Metric Property Investments plc, has announced the acquisition of the Primark Distribution Unit, Thrapston from Moorfield Real Estate Fund II for £60.5 million. The acquisition will be funded from existing resources.
The scheme is Primark's central distribution centre for the UK and comprises 785,000 sq ft of space, strategically located for national distribution close to major road networks, including the M1. The unit is fully let to Primark Stores Limited until October 2032 at a rental of £3.9 million per annum. The lease benefits from annual fixed uplifts of 1.5% and upward only open market rent reviews every five years. Adjoining occupiers include Paperchase, Morrisons and DSV Logistics.
The purchase price reflects a net initial yield after purchasers' costs of 6.4% and will show an initial cash return of 11.5% per annum and a geared total return of over 15% per annum. These returns will grow annually as the built-in uplifts are triggered.
Following this acquisition, the LondonMetric distribution portfolio comprises 13 assets with a combined value of circa £245 million and a weighted average unexpired lease term of 13.0 years (12.8 years to first break). This represents 22% of the enlarged LondonMetric portfolio.
Andrew Jones, Chief Executive of LondonMetric, commented: "The retail distribution sector is continuing to benefit from strong occupier interest as retailers' multichannel strategies continue to evolve. We regard this as a key area for growth within our core portfolio and aim to capitalise on this dynamic further by leveraging our deep occupier relationships to secure more opportunities.
"Primark is one of the UK's most successful retailers and the attractive lease terms reflect the demand/supply tensions within this sector. The investment offers excellent cash returns and exposure to prime real estate, let for nearly 20 years to a fantastic covenant, with guaranteed annual rental increases."
Cushman & Wakefield advised LondonMetric. Doherty Baines advised Moorfield Real Estate Fund II.