Valad Europe has bought the Royals Shopping Centre in Southend from Orchard Street Investment Management for around £33.4m.
The price for the 285,000 sq ft centre reflects a net initial yield of 8.45%. It has four anchor stores, 23 shops and a 450-space car park. It has a gross annual rental income of £3m and is anchored by Debenhams for a further 72 years and also includes tenants such as Boots, Primark and TK Maxx. There is an average unexpired lease term to break of around 26 years.
The purchase is being made by Valad’s new £375m European Diversified Fund which launched in October with £150m of equity and is targeting core plus and value add assets across the office, retail and industrial sectors of between £5m and £20m in the UK and Germany.
The Royals was originally put up for sale as part of a £120m portfolio in May last year through Morgan Williams and Griffiths Eccles, which also included Market Walk Shopping Centre in Chorley, St David’s Retail Park in Bangor, Mallard Road Retail Park in Bournemouth and The Meadows Retail Park in Chelmsford.
However, the portfolio – which is held in the Orchard Street UK Special Situations Fund I - did not sell in its entirety and the Royals was put up for sale in October through Knight Frank. The five centres were then refinanced with a £69m loan from Royal Bank of Scotland in November, with an existing facility with the bank due to have expired at the end of the year.
David Kirkby, Valad Europe’s chief investment officer, said:
“We launched VEDF to take advantage of an anticipated narrowing of prime-secondary spreads both in the UK and Germany over the course of the Fund’s life. This acquisition follows the recent purchases in the UK of three office assets at Wexham Springs and a Wickes retail warehouse in Aintree.
“In addition, we have a strong pipeline of deals with over £50m in solicitors’ hands in the UK and Germany and we are actively seeking additional suitable acquisitions in these markets. The fund’s initial acquisitions in the UK are typical of the type of office and retail assets we are targeting, while in Germany we are looking for offices in the top and second tier cities, selected retail assets and nationwide distribution warehouses.”