UK focused REIT Capital & Regional has agreed to acquire The Gyle Shopping Centre in Edinburgh for £40 million, excluding acquisition costs.
The acquisition will be funded by existing funds held by the company, a £16 million debt facility, an Open Offer proposing to raise proceeds of approximately £23.4 million (net of fees, costs and expenses), and the group’s existing cash resources.
The asset is being acquired at a net initial yield of 13.51% that is expected to rebase to around 12%.
The Gyle, a 415,000 square feet well-established and designed community shopping centre on a 50-acre site in Edinburgh, comprises 88 retail units and is anchored by a Marks & Spencer store and Morrisons supermarket as well.
The property’s retail space is let at approximately £6.8 million and approximately £5.77 million of annual gross rent and net rental income, respectively, with strong rent collection and headline occupancy of 94 per cent. as well as a weighted average unexpired lease term of 2.1 years.
The centre is located six miles west of Edinburgh city centre in a mixed-use area. The centre directly serves two large affluent residential areas which lie to the north and east of the Property as well as the commercial areas of South Gyle and Edinburgh Park which are to the south and west.
Lawrence Hutchings, Chief Executive Officer, comments:
“The strong operational results and continued valuation stabilisation we are reporting today give us considerable confidence in our own portfolio, platform and UK Community centres strategy, as well as the physical retail market where many of the structural changes are maturing.
“This confidence is also reflected in our announcement this morning of the acquisition of The Gyle Shopping Centre in Edinburgh, which marks the first step towards rescaling our business and fully leveraging our proven skills and management expertise. This acquisition allows us to capitalise on an opportunity to add an established dual supermarket anchored community centre in Scotland’s capital city to our portfolio, in a transaction that will be part-funded by a £25 million equity raise available to all existing shareholders and fully underwritten by our majority shareholder, Growthpoint.
“The centre will be accretive to income from day one, with the agreed price representing a significant discount to the replacement cost and providing us with a highly attractive entry point from which we can create value. In addition, we have arranged terms with Morgan Stanley to staple debt to the acquisition at a 40% LTV capped at a cost of 6.5% fixed for 5 years.
“We have also identified a number of asset management opportunities to create value including refining the tenant mix, a renewed focus on leasing to improve occupancy and income, whilst enhancing the centre’s appeal to the growing and affluent catchment in south western Edinburgh.”
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