LondonMetric acquires UK warehouse portfolio at 9.3% yield

LondonMetric Property is acquiring a retail warehouse-dominated portfolio out of administration in the UK at a yield of 9.3%.

The UK REIT has exchanged contracts with the administrator of Delphi Properties Limited to acquire the portfolio of 27 assets for £175 mln (€209 mln).

The portfolio is to be acquired by a new joint venture which LondonMetric is forming with LVS II Lux X, called LMP Retail Warehouse JV Property Unit Trust. LondonMetric will own 30.5% of the joint venture. The acquisition is expected to complete on 25 March 2014.

Delphi Properties had acquired the portfolio from UK furniture retailer DFS for £150 mln in a sale-and-leaseback transaction in 2005. The portfolio comprises 22 retail warehouses, four industrial units and DFS' headquarters and distribution centre, covering a total area of 84,000 m2. The rent roll is £17.3 mln per annum and all the leases expire in March 2030, providing a weighted average unexpired lease term of 16.3 years.

LondonMetric will be responsible for managing the portfolio and receive a fee equivalent to 4% of rents received. The acquisition will be financed with a new debt facility which has been put in place for completion, with a loan-to-value ratio of 56%.

Cairn Capital and Savills advised the joint venture on the acquisition, and Cairn also advised the JV on the debt.