Friday, April 5, 2013

News: Private property investors in Rotherham Tesco deal

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The £40m forward funding acquisition of the Tesco development in Rotherham town centre is significant given the market conditions.

Private property investor fund Osprey Income and Growth 2 LP completed the deal last month with the backing of £16.9m of equity from private investors and £23.75m of debt from HSBC Bank.

TCN Renaissance, a UK-based commercial property specialist, will be developing the property on the former civic site after the land was acquired from Rotherham Metropolitan Borough Council.

Planning permission for a new 110,000 sq ft Tesco Extra superstore was granted last year which also include 540 parking spaces and a petrol filling station. Tesco has signed a pre-let agreement on a 30 year unbroken lease.

Work is set to get underway this month with required paperwork already submitted relating to the significant changes to the road network.

John White, director of Osprey Equity Partners, who arranged the funding, said: "We are delighted to be working with TCN, HSBC and Tesco on this project, which reflects our current focus on the forward funding of UK food superstores. This sector offers our investors unusually long, inflation-linked income from outstanding covenants and the forward funding entry point provides a discount to standing investment values, unused capital allowances and a state of the art building. As a result of the low cost of debt secured from HSBC, we are able to pay investors a coupon of 6% pa.

"This purchase coincides with the practical completion of a large Sainsbury's foodstore in Sunderland acquired last year from Terrace Hill by another of our high net worth investor funds, Osprey Supermarket Income and Growth 1 LP."

Nick Short, partner of Prime Retail, a retail property consultancy that advised on the deal, added: "This is a significant deal in the current market given the continuing mismatch between high demand from investors and occupiers for food stores and limited development finance.

"Our ability to support Osprey in this key transaction is important to us given our long-standing relationship with the team. Osprey is well placed to take advantage of future opportunities and we look forward to advising them further."

TCN website
Osprey website

Images: Tesco

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