In this case 6% per annum paid out quarterly.
During purchase due diligence, we identified that one of the tenants was looking to offload its lease liability. Quick to action, we were able to secure a new tenant for the unit at an improved headline rent; the deal ended up completing within two weeks of the acquisition which gave us a strong start, growing the rent from £4.40 per sq. ft. to over £5.00 per sq. ft.
The pandemic was an unexpected occurrence which we had to sensitively manage the tenants through. Fortunately, most of them are large well-established companies in the trade industry which were able to continue to operate, so we managed to get through that period with no casualties and only having to concede monthly payment plans. Thankfully, all tenants have come out the other side.
Since acquisition in 2018, we navigated the pandemic and various lease events across the estate, successfully implementing our light asset management approach and capturing increased rents. In 2023, the decision was made to explore an exit on a phased basis. Two units, let to Eurocell and Howdens, were sold via the auction route given their smaller lot size. This ultimately ensured that not only was the right ‘private investor’ buyer pool was targeted but also gave certainty of sale to the syndicate. A strong result was achieved, with the Howdens unit a standout, achieving a 5.8% NIY.
Following on from this, Units 13 – 14 was sold to a private investor for just over £1m and a Local Prop-Co acquired Units 19-20, let to SIG for just shy of £2m. The latter also purchased our long leasehold interest in the entire estate affording us a clean exit.
In the end, exceptional returns were realised, outperforming our forecasts at acquisition.