Cordea Savills’ UK Income & Growth fund has completed the purchase of Integra II, Maidstone for £5.2m (€7.3m). This recently constructed industrial unit is predominantly let to Grafton Merchanting for a term of 10 years and generates an initial yield of 6.7%.
In 2014, the fund took advantage of the prevailing strong market conditions to sell J9 Gallagher Retail Park, Wednesbury, a prime retail warehouse, for £23m (€32.2m) reflecting a yield of 5.4% to the purchasers.
The unit was bought by US private equity firm Kohlberg Kravis Roberts, advised by Quadrant Estates, and is let to PC World for another 21 years at a rent of £1.3m (€1.8m) p.a. The sale was structured with a delayed completion date, giving time for Cordea Savills to reinvest the proceeds of the disposal and thereby limiting any cash drag for existing investors.
The proceeds have been reinvested in four assets situated in Oxford, Greenwich, Leeds and Maidstone, within the industrial and leisure sectors, at a combined yield of 6.3% thereby improving the net distribution yield of the Fund as a whole.
UK Income & Growth’s fund manager, Jamie Pearson, commented:“ UK property as an asset class, particularly in a fund such as this with a high distribution yield, minimal gearing and strong underlying assets, looks very attractive in today’s economic climate. The prospects for rental growth on prime assets combined with a relatively high income yield make a compelling case for investment over the next few years.”
During 2014 the Fund raised £15.6m (€21.8m) of new equity and broke through the £100m (€140m) mark. Investors in the fund are a mixture of UK pension funds, charities and high net worth investors who have been attracted by the very low risk profile, high distribution and minimal gearing.