Tuesday, June 3, 2014

News: LondonMetric wrap up deal for Rotherham Parcelforce depot

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Property investors, LondonMetric Property Plc, has snapped up the massive new Parcelforce distribution centre in Rotherham in a £10.3m deal.

The UK real estate investment trust (REIT) is listed on the London Stock Exchange and invests across the UK in retail and distribution properties as well as Greater London real estate opportunities.

Royal Mail Group's express parcels business, Parcelforce Worldwide, opened its new depot in Rotherham at the end of 2013. The UK and International parcel delivery service took over the 152,421 sq ft distribution unit at the Magna 34 development at Templeborough that had been empty since it was completed by JF Finnegan in 2008.

The new depot is part of a UK-wide £75m expansion programme which is expected to create up to around 115 jobs in Rotherham over the next three years. The Rotherham operation currently employs around 110 people but this is expected to increase to up to around 225 people over the next three years as the number of parcels the company handles increases.

The massive unit now includes a jet wash facility, new ramps and fencing and new access doors and has the capacity to hold up to 141 vehicles and handle up to thirty thousand parcels a day. It is about seven times the floor space of the previous site on Parkgate Business Park.

The property is the largest parcel distribution centre in the country outside of Parcelforce's main Coventry hub. Around 12,000 parcel movements are made per day on average, peaking at 25,000 per day in busy periods. Currently, Parcelforce only utilise 80% of the warehouse which will be fully occupied within two to three years to keep pace with the rapidly expanding home delivery market.

Parcelforce has taken a 15-year lease and paying around £650,000 per annum with fixed rental uplifts of 1.75% per annum compound in 2018 and 2023.

Sheffield agents, Commercial Property Partners (CPP), had been advertising the investment opportunity with a guide price of in excess of £9.8m and LondonMetic said that the £10.3m deal represents a net initial yield of 6.0%.

JF Finnegan was represented by Commercial Property Partners as agent and DLA Piper as lawyer, with CBRE acting as agent for LondonMetric.

Andrew Jones, chief executive of LondonMetric, said: "[We are] extremely pleased to have secured our second Royal Mail distribution centre. This will further strengthen our relationship with them as well as delivering a long, strong and growing income."

Roger Haworth, partner at Commercial Property Partners, added: "This deal is a great result in the current market where there is strong demand for prime, long-let distribution assets with fixed uplifts, let to good covenants. The high profile nature of Royal Mail, which was listed on the London Stock Exchange in October 2013, coupled with the quality of build, proved key in attracting investor interest."

The Templeborough property fits into the portfolio of the trust in that they operate an occupier-led approach with an asset focus on properties with enduring occupier appeal providing opportunities to improve both rental values and the security and longevity of income; and limited risk redevelopments with the aim of enhancing shareholder returns.

Created in a merger between London & Stamford Property plc and Metric Property Investments plc, the trust reported a profit of £125.3m for the year ending March 31 2014.

Andrew Jones, added: "The last six months has seen a dramatic change in the UK property market particularly for assets outside the south-east. We have seen liquidity return to the vast majority of the UK market for the first time since 2007 and strong secondary assets outperforming prime real estate, a trend we expect to continue.

"As yields on prime real estate head towards record lows there is an increasing acceptance that yield compression is a button that can't be pushed forever. Conversely strong secondary assets continue to offer higher sustainable income returns and with an improving economic outlook and little new development, will also begin to deliver real income growth.

"Our focus on out-of-town retail and distribution has not only simplified the business but created a portfolio of good quality real estate with strong occupier appeal and desirable income characteristics, as well as laying the foundations for income growth."

LondonMetric website

Images: CPP

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