CLS picks up 34-asset portfolio in the UK

London-listed European real estate investor CLS Holdings has confirmed the acquisition of a portfolio of 34 properties out of receivership in the UK.

The investment volume for the mainly UK government-occupied assets bundled together in the Project Neo Portfolio comes to almost £119 mln (€142 mln), excluding costs of £5.3 mln.

The purchase of four long leasehold properties in the portfolio with an aggregate value of £12.7 mln is conditional on gaining the landlord’s consent.

The Neo Portfolio was purchased through FRP Advisory LLP in its capacity as receiver for certain subsidiaries of London-listed property company Wichford. The consideration was paid in cash, following the sale of the majority of the group’s corporate bond portfolio.

Some 78% of the portfolio's rental income comes from UK government bodies, including HM Revenue & Customs, police authorities, courts, the immigration service and the Department for Work and Pensions, and 20% from Trillium (Prime) Property GP, a property outsourcing company providing services to the UK government.

The portfolio generates a rental income of £15.1 mln per annum (net of ground rents), of which 66% is index-linked. The portfolio has a weighted average lease term of 7.2 years, or 4.8 years to the first break, and provides a net initial yield after costs of 12.23%. The portfolio is currently 99% let.

CLS said the acquisition is in line with its strategy of opportunistically purchasing high-yielding, well-let office properties with opportunities to add value through active property management.

Following the acquisition, 49% of the group’s total contracted rent will be receivable from government occupiers, and 32% from major corporations.

The process to provide medium-term financing of the portfolio is under way.

CLS had a market capitalisation of a £425 mln and its property portfolio was valued at just over £1 bn at end-June 2013. The company owns assets in London, France, Germany and Sweden.