Legal & General Property (LGP) today announces that it has acquired The Meadows Shopping Centre, Chelmsford, Essex, (CM2 6FD) from Lend Lease for £56.1 million, reflecting a net initial yield of 7.75%. The in-town shopping centre asset has been acquired on behalf of LGP’s UK Property Income Fund (the Fund/UK PIF), which reached its final close last month with a total geared investment capacity of circa £475 million. The asset represents the UK PIF’s fourth acquisition, having invested a total of circa £260 million to date.
Situated in the centre of Chelmsford, fronting the High Street, the covered shopping centre provides circa 150,000 sq ft of prime retail space, arranged over a single trading level, and 730 car parking spaces, within two car parks. Anchored by BHS and Wilkinson, as well as an eight-screen Odeon Cinema to the rear, the scheme contains 39 retail units in total, fully let to a range of multiples, including Warehouse, Boots, Fat Face and Sportsworld, as well as a restaurant quarter. With an average unexpired lease term of over six years and 80% of the income secured against established retailers, the centre provides a defensive income profile over the short term. To complement this, LGP has already identified a number of significant asset management opportunities to provide income growth over the medium term.
As a major retail centre in the South East, and supporting a high number of businesses employing circa 80,000 people, Chelmsford benefits from an affluent catchment area, as well as excellent transport links with trains providing direct access to London Liverpool Street in just 28 minutes. Healthy footfall figures for the centre have been recorded in recent years, with in excess of seven million people visiting the site per year.
Charlie Walker, Fund Manager of the UK Property Income Fund, comments: “Against a background of increasingly limited debt available and further challenges facing retailers, there continues to be a growing polarisation in the UK shopping centre market. I fully expect that there will continue to be a number of less attractive secondary shopping centre assets flooding the market, however, The Meadows, Chelmsford, represents one of only a very small handful of opportunities that provide the right combination of quality, size and location.
“Following the purchase of Fremlin Walk shopping centre in Maidstone earlier this year, and further to a successful final close of the Fund in October, this purchase is in line with the Fund’s strategy of acquiring well-located assets with a strong tenant line-up, but still offering the potential for active asset management.”
Dan Labbad, Chief Executive Officer – EMEA, Lend Lease, said: “Now is the right time for Lend Lease to secure a sale as The Meadows is trading well and continuing to attract new retailers.”
The UK PIF reached its final close in October 2010, having secured commitments totalling £300 million from 14 major international institutional investors based in the Middle East, Denmark, UK, France, Finland, Switzerland and Japan. The closed ended fund has an innovative structure which allows investors to choose their preferred level of gearing of between 0% and 50% Loan to Value (LTV), thereby offering a unique solution to accommodate a range of risk appetites.
The Fund aims to provide investors with returns of 15% (geared) and 10% (ungeared) through careful stock selection of large lot size assets which will be positioned to capitalise on the economic recovery in the UK based on a core/core-plus risk strategy. The internationally dominated investor base clearly signifies the global appeal of UK commercial property.
To date, the Fund has acquired assets totalling circa £260 million, including:
– Fremlin Walk Shopping Centre in Maidstone
– Guildford Business Park , Guildford
– Co-op distribution centre, Andover.
This was a press release from Legal and General Property.