Friday, August 9, 2013

News: Next investment deal completed in Rotherham

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Legal & General Property has bought the massive Next distribution centre in Manvers, Rotherham in a deal worth £86.68m.

Investment fund managers, Tritax sold the two units at Brookfield's Park, which total 1.1m sq ft, and secured a yield of 5.5%.


SG Commercial acted for Legal & General Property, CBRE advised Next and Tritax.

Developed by St Paul's Developments and opened in 2008, the Rotherham operation is home to around 450 employees. The two buildings can handle 110,000 pallets and includes the largest warehouse in Next's 13-site distribution network that handles a total 315 million units each year. The network makes 88,000 deliveries every year to 500 Next stores across the UK and 2.6 million active internet and Next Directory catalogue customers.

In 2006 Tritax established an off-shore Unit Trust, based in the Isle of Man, to fund development of the units that were already pre-let to Next for 25 years (at an initial rent of £4.4m pa) with no breaks and fixed rental uplifts of 2.5% p.a. compounded every five years.

The £115.8m trust enabled investors to shelter tax at 100% under the Enterprise Zone allowances regime and the sale after seven years means that there will be no clawback of the investor's initial tax relief.


Legal & General Property is the third largest institutional real estate manager in the UK with £9.2bn assets under management. The deal follows from the recent deal which saw an unnamed UK investor purchase Maplin's head office and distribution warehouse, also at Brookfields Park, for £11.5m.

A number of major property agents have seen a recent increase in the number of investment deals. Investment volumes across Yorkshire soared during Q2 2013, reaching approximately £334m and representing an increase of 267% on Q1 2013, at £91m according to latest research by Lambert Smith Hampton (LSH). 

Abid Jaffry, Northern Head of Capital Markets at LSH, said: "The regional investment market is currently dominated by UK investors who have been priced out of the Central London market and are seeking to take advantage of the greater value that can be achieved within the regions.

"There continues to be a large amount of competition for prime assets due to the lack of stock being brought to the market.  A significant proportion of the transactions were of considerable size which is indicative investor conditions across the North and highlights the groundswell of cash in the market at present."

Nationally, over £1.03 billion of capital was invested in UK industrial and logistics property in the first half of this year, more than the total volume transacted in 2012, according to new research from global property advisor CBRE.

Richard Moffitt, Head of UK Industrial and Logistics at CBRE, said: "We have witnessed a resurgence in buyers eyeing quality UK industrial and logistics property this year, driven by compelling evidence of the sector's performance relative to other asset classes.

"Occupier markets continue to thrive, and the resulting lack of prime stock has led to a surge in design and build activity in the best markets. The high levels of investment have led to an inward movement in prime yields, now at 5.5% for the best stock, and we expect this trend to continue as competition for prime assets grows."

Experts at Jones Lang LaSalle believe that UK institutions and overseas buyers are attracted by the so-called "Big Box" market’s security, relatively high yields and potential for rental growth due to diminishing supply and improving occupier demand. The latter is being partly driven by the growth of multi-channel retailing, which is driving demand for both mega fulfilment centres and smaller parcel hubs.

Images: LSH

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