UK-based Standard Life Investments Property Income Trust (SLIPIT) announced this week that it had completed the purchase of a B&Q Retail Warehouse in Halesowen for £19.5 million.
The purchase reflects an initial yield of 7.5% and the facility is currently let to B&Q with a further 11 years still to go on the lease.
The acquisition is in-line with the market trends identified in SLIPIT’s annual report. The report highlighted the fact that, “the structural shift to online shopping remains supportive of logistics”. The commentary continued that the disruption caused to supply chains by the pandemic and de-globalisation means that, “Larger inventories to create a greater buffer within existing supply chains are the simplest near-term solution – and will require more warehousing for storage.”
The fund has been understandably firmly risk-off during the first half of 2020, however Jason Baggaley, commenting on the deal, said, “At a time of great turmoil it is sometimes tempting not to do anything, however this asset fits our strategy exceptionally well, providing secure long income on an asset that not only works for the existing tenant, but also has future potential for urban logistics. We believe the asset is a great addition to the portfolio.”
Oli Lord, Deputy Fund Manager of SLIPIT commented, “We are pleased to have completed the purchase of this retail warehouse unit which will provide secure income given the strong tenant covenant and good unexpired lease term. In addition, the property’s configuration and attractive location in the West Midlands also provides flexibility of use in the longer term.”
Prior to the purchase retail warehousing made up just 6% of SLIPIT’s £447.3 million portfolio, with industrial being the largest sub-sector taking a 53% share of the asset mix.