Schroder trust buys Leeds industrial asset at 7.25% yield

Schroder Real Estate Investment Trust has exchanged contracts to acquire Millshaw Industrial Estate in Leeds for £22.7 mln (€33 mln), reflecting a net initial yield of 7.25%.

The acquisition has been funded using existing cash and a revolving credit facility from Royal Bank of Scotland. The £20.5 mln loan has a four-year term and a margin of 1.6% per annum above three-month Libor.

Millshaw Industrial Estate comprises a freehold, 463,400 sq ft (43,000 m2) multi-let industrial estate constructed in the 1990's on a 28.3 acre site with 27 units ranging.

The property is let to 20 tenants and produces a rent of £1.73 mln per annum or £3.77 per sq ft, with four vacant units representing 4% as a percentage of rental value. The average unexpired lease term is 5.5 years assuming the earlier of lease expiry or tenant break option.

Schroders said that 'restricted supply of new industrial and warehouse development in Leeds creates an opportunity to reposition the estate by refurbishing units as leases expire in order to achieve higher rents'. The rental value of the estate is estimated to be £2.2 mln per annum or £4.80 per sq ft, resulting in a reversionary yield of 8.4%.

Following completion the company's overall net LTV will be 32%.