UK-focused REIT Capital & Regional has entered into an agreement to acquire The Gyle Shopping Centre in Edinburgh for a total acquisition consideration of £40 mln (€46 mln), excluding acquisition costs.
The deal is to be financed through existing funds held by the company, a new debt facility of £16 mln and some £25 mln set to be secured through a planned capital raising.
The asset is being acquired at a net initial yield of 13.51% that is expected to rebase to around 12%.
Said CEO Lawrence Hutchings: '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 mln equity raise available to all existing shareholders and fully underwritten by our majority shareholder, Growthpoint.'
He added: '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.'
According to the firm, the centre will be accretive to income from day one, with the agreed price representing a significant discount to the replacement cost and representing an entry point to creating further value.
In addition, the firm has arranged terms with Morgan Stanley to staple debt to the acquisition at a 40% LTV capped at a cost of 6.5% fixed for five years.
Said Hutchings: '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.'
The 415,000 ft2 (38,500 m2) centre stands on a 50-acre site in Edinburgh and comprises 88 retail units. It is anchored by a Marks & Spencer store and Morrisons supermarket as well.
The property’s retail space is let at approximately £6.8 mln and approximately £5.77 mln of annual gross rent and net rental income, respectively, with strong rent collection and headline occupancy of 94%, as well as a weighted average unexpired lease term of 2.1 years.
With a 2022 footfall of 8.6 million, the Property has 2,800 free car parking spaces and directly serves two large affluent residential areas, as well as the commercial areas of South Gyle and Edinburgh Park.
The company is proposing to raise proceeds of approximately £23.4 mln by way of an open offer of 46,278,681 open offer shares, with the issue price representing a 5.43% discount to the closing price of 57.1 pence per ordinary share as at the latest practicable date.
