UK-listed property investor NewRiver REIT has teamed up with a fund run by American asset management group Pacific Investment Management Company (Pimco) to create a portfolio of UK retail assets up to a volume of around £500 mln (€570 mln).
The joint venture with the Pimco fund, Bravo Strategies III, said it had kicked off with the purchase of a portfolio of four UK retail parks for £60.5 mln (€69 mln).
The vendor is the property arm of Swiss insurer Zurich Assurance. The deal price reflects a net initial yield of 9.8%.
The partnership plans to subsequently pursue other opportunities in the UK retail sector, NewRiver said, to a total asset volume of around half a million pounds.
'We are delighted to be forming this joint venture with Bravo, re-establishing a successful partnership that dates back to 2012, and has a track record of delivering growing returns to our shareholders,' said Allan Lockhart, NewRiver's chief executive.
'Recycling our capital from disposals into joint ventures enables us to secure a superior return on our capital and provides us with significant additional firepower to take advantage of the current dislocation in the retail real estate market.
'The portfolio of retail parks we have contracted to acquire is highly complementary to our existing portfolio, providing a low entry price, robust cashflows and opportunities to extract further income through active asset management and risk-controlled development opportunities.'
Initially, NewRiver will hold a 50% interest in the gross assets of the JV and benefit from 50% of the net rental income, currently£6.2 mln per year. The UK REIT said it would be appointed as asset manager to the portfolio, in return for a rent-indexed management fee.
The portfolio comprises four retail park parks: Kittybrewster Retail Park, Aberdeen (pictured); Telford Retail Park, Inverness; units in Kingsway East Retail Park, Dundee and Wakes Retail Park on the Isle of Wight.
The retail parks have an average rent of £14.77 per ft2, which NewRiver described as 'affordable', as well as an average unexpired lease term of 6.3 years. The firm said that the assets are let to 'a high quality and well-diversified line-up of occupiers that complements NewRiver’s existing portfolio'.
NewRiver's share of the transaction will be executed using existing resources and available credit facilities, according to the REIT.
