LONDON—Kennedy Wilson Europe announces that it has closed on a portfolio of 180 mixed use properties located across the UK from multiple receivers on behalf of Aviva Commercial Real Estate Finance for a purchase price of $785 million (£503M), reflecting a net initial yield of 6.9% (gross yield 7.2%).
The acquisition is expected to complete at the end of January and will be funded from the company's cash resources and a new $549 million (£352.3M) secured loan facility with Aviva.
"This significant portfolio acquisition allows us to access a high quality mixed use portfolio with strong tenant covenants generating robust income streams at a material discount to the original loan amounts, said Mary Ricks, president and CEO of Kennedy Wilson Europe. “The portfolio benefits from a number of institutional quality investments with good individual asset liquidity across the remaining portfolio. There are significant asset management angles, including growing income through lease re-gears, renewals, rent reviews and the leasing up of vacant space. We are pleased to have vendor finance provided on such a material transaction and to be adding Aviva to KWE's portfolio of lenders."
The 3.5 million square feet portfolio is 98% occupied with a WAULT of 9.6 years (11.1 years to expiration) and generates total net rental income of $56 million (£36.1M) million. Its geographic concentration is predominately England, 54% weighted towards London and the South East with 5% of value weighted towards Scotland and Wales. The primary sector use is retail, food and convenience, comprising 62% of the value of the portfolio followed by leisure at 14%, industrial at 12%, and office and hotels at 6%, respectively.
Ewan Tocher, managing director, Aviva UK life commercial mortgage restructuring, added:
"The sale of this portfolio was central to concluding our property restructuring strategy for 2014 and we are very pleased that the high quality nature of the assets and income streams were attractive to KWE as an investor. The sale has allowed Barry Fowler's team in Aviva Commercial Finance to establish a new relationship with KWE through the provision of a new long term debt facility. With gilt yields at all time lows, we can offer attractive and competitive all-in financing costs for quality portfolios owned by experienced operators and we are keen to develop this relationship further."
The portfolio includes strong institutional grade properties with the top ten assets representing 31% of the purchase price and a combined value of $240 million (£153.5M). These include the likes of the Travelodge hotel in King's Cross, London, the Waitrose Superstore in Saltash, Cornwall and the Asda Superstore in Hemel Hempstead.
The top ten tenants represent 32% of total net rental income with a WAULT of 12.6 years (14.9 years to expiration). These include robust covenants such as Wincanton, Debenhams, Travelodge, Waitrose and Matalan.
Upon completion of the acquisition, the KWE investment portfolio will have a value of $3,040 (£1,948.5M), with net rental income of $203 (£130.1M), generating a net initial yield of 6.5% (gross yield 6.7%). The portfolio geographic split will be 72% UK and 28% Ireland with an asset mix of 89% direct real estate and 11% loans. The main sector splits will be 40% office, 27% retail and 8% industrial.
CBRE advised Kennedy Wilson, and and Jones Lang LaSalle advised Aviva.
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David Phillips
David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.
