The Board of Directors of Alternative Income REIT PLC (ticker: AIRE), the owner of a diversified portfolio of UK commercial property assets predominantly let on long leases with inflation-linked rent reviews, is pleased to announce that the Company has completed the acquisition of the Volvo car showroom in a prime location on the A4 Bath Road, Slough (the “Asset”) for £5 million (net of acquisition costs to the Company), in an off-market transaction. The price reflects a net initial yield of 5.00% and a discount to replacement costs. The Asset has been acquired with a weighted unexpired lease term of over 15 years.
The acquisition of the Asset redeploys the net proceeds from the Group’s disposal, announced on 30 November 2021, of its Audi car showroom in Huddersfield for £5.5 million, with a materially longer lease term.
The lease of the Asset, which expires in March 2037, is subject to five-yearly upward only rent reviews linked to RPI. The reviews contain a collar of 1.5% pa and a cap of 3.5% pa. The Asset has a passing rent topped up by the vendor to £270,000 pa (equivalent current ERV pa level) until the next rent review, which is due on 17 March 2022.
The Asset is fully let to Volvo Car UK Limited, which forms part of the Volvo Group, which is ultimately owned by Zhejiang Geely Holdings Group, a Chinese multinational automotive manufacturing company. The property is wholly sub-let and occupied by Endeavour Automotive Limited, which has a strong and established trading track record in a structurally supported sub-sector.
The Asset is in a prime location, a short distance from Slough Trading Estate and just north-west of Slough town centre, and with a prominent frontage onto the Bath Road. Slough is a large London commuter town located approximately 22 miles west of central London with excellent road, rail and airport connectivity, and the town has the UK’s highest concentration of headquarters of global companies outside of London. The town occupies a strategic location with excellent road connections, with the M4 running immediately to the south, M25 to the east and M40 to the north. The Asset is situated in an automotive/light industrial cluster that has attracted a number of major occupiers including Alpha Romeo, Fiat, Mini, Mercedes, SEAT and Jeep.
The Asset, constructed in 2016, comprises a total of 14,955 sq ft of purpose-built state-of-the-art dealership space across ground and first floor on the c.1.03 acre site. The Asset benefits from ample car display spaces to the front and side elevations, fenced off spaces for parking, and incorporates rooftop solar PV.
This transaction is the Company’s second investment introduced by its Investment Adviser M7 Real Estate Limited (“M7”), following the Company’s highly accretive acquisition of Droitwich Spa Retail Park, announced in December 2020.
Alan Sippetts, Chairman of Alternative Income REIT plc, commented:
“We are pleased to redeploy the net proceeds from the disposal of our Audi car showroom asset in Huddersfield that completed on 1 December 2021 for £5.5 million by acquiring this Asset in a prime location, let to a strong tenant covenant on a long lease with index-linked rent reviews. The Asset is expected to further diversify, strengthen and lengthen the profile of the Group’s income and provide a robust, resilient, indexed-linked long term income return, which is also expected to benefit from enhanced income and capital growth.
The Board continues to believe firmly that the Group is well positioned given its diversified and fully let portfolio that delivers secure, long-term and indexed-linked income flow, combined with its continuing very strong rent collection, robust balance sheet and modest, well controlled overhead. The Board remains confident that the Company is on track to deliver on its target annual dividend of 5.5 pence per share with full dividend cover expected, all else being equal, by September 20221.”
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