Schroder Real Estate Investment Trust, the UK-focused REIT, has acquired St Ann’s House in Manchester for £14.7 mln (€17 mln).
The deal reflects a net initial yield of 7.8%, a reversionary yield of 9.1% and an average capital value of £283 per ft2.
The mixed-use office and retail asset generates £1.22 mln per annum of headline rent compared with an estimated rental value (ERV) assessed by the independent valuer of £1.33 mln.
Nick Montgomery, fund manager of SREIT, said: 'This acquisition is line with the strategy to selectively acquire income producing assets with good fundamentals and the potential to add value through active asset management initiatives, with a focus on improving sustainability credentials.
'Compared to other major cities, Manchester, which is one of the Company’s high conviction locations, currently has the lowest office vacancy rate, and we expect relatively higher growth in office rents over the next five years.'
The freehold, 51,885 ft2 (4,820 m2) building, is 96% occupied and comprises 40,277 ft2 of office space over five upper floors with five retail units at the ground floor level and ancillary basement space.
It is located on St Ann’s Square, which features a listed church, the Royal Exchange theatre, a mix of office occupiers and high-quality luxury retail as well as leisure operators.
The office space is fully let to four office tenants at an average rent of £18.65 per ft2, with the potential to increase rental levels through refurbishment and improving sustainability performance. Some 58% of the property by floor area currently has an EPC rating of ‘B’ with the remainder rated ‘C’.
In the wake of this deal, SREIT said that its loan to value ratio, net of cash, is now 32.2%, with cash and undrawn loan facilities totalling approximately £16.5 mln.
