Schroder Real Estate Investment Trust (REIT) has this week announced the acquisition of a top Bedford retail park.
The REIT snapped up the freehold interest for St John’s Retail Park 1.5 miles south of Bedford town centre in a deal worth £31.8 million, reflecting an impressively above average initial yield of around 6.5 per cent.
Furthermore, the park at present gains around £2 million in rent from existing tenants, although should the trust choose to examine expansion or refurbishment options this has the potential to climb significantly in the coming years.
In total, St John’s Retail Park boasts a 130,000 sq ft retail complex consisting of several warehouse units, which at present are let to 12 retail tenants. An adjoining 11,600 sq ft office building provides plenty of scope for capitalising upon the rising demand for high quality space in prime areas of the UK, along with being an ideal logistics base for on-site retailers should this be required.
Global head of real estate at the trust, Duncan Owen, believes that the acquisition of the retail park ties in well with the long term goals at Schroders.
He says; “The acquisition follows the disposal of low or non-income producing property and results in SREIT being substantially invested with a fully covered dividend.
“Converting to UK-REIT status has enabled SREIT to be more agile and competitive by extinguishing the capital gains in the vendor special purpose vehicle and therefore enhancing SREIT’s initial income return.”
Schroder converted to REIT status on the 1st of May this year – a decision which proved invaluable during this deal as the retail park was purchased through the acquisition of shares from a UK firm which had developed the site. This meant that the deal had latent capital gains tax liabilities, but thanks to Schroder’s REIT status these were effectively extinguished, resulting in a gross purchase price of £32.2 million.
