11 November 2014

In what is otherwise considered a quiet time of the year within the property industry, Osborne King has recently completed three significant transactions: the sale of a Tesco store and a Premier Inn hotel in Belfast and a forward sale in Aberystwyth that will be let to M&S upon completion. These deals show that the investment market has strength but perhaps lacks a little depth in the investor demand profile.

The Tesco store on Belfast’s Castlereagh Road was sold by Tesco Stores Ltd to CBRE Global Investors for £24.74 million representing a net initial yield of 4.55%. Commenting on the deal, Gavin Clarke, Investment Director, Osborne King, who acted on behalf of the purchaser said, “We continue to see institutional investors bidding strongly, reflecting the quality of the product on offer and this sale is further evidence of the confidence that these investors have in Northern Ireland. The sale and leaseback nature of this transaction demonstrates that the level of demand for such prime investment assets is reflected in the yield achieved. Corporate sale and leasebacks present the tenant with a credible alternative for raising capital in an age wherecashflow is all-important.”

Meanwhile, the Premier Inn at Titanic Quarter, Belfast was sold to a private Northern Irish investor for £6 million reflecting a net initial yield of 6.20%. The location of this property, positioned between The Odyssey Arena and Citi Group’s offices - a prominent gateway location into Titanic Quarter- bodes well for its continued success as the area continues to act as a significant leisure draw and a strategic location for large office occupiers.

The company has also acted on behalf of a private client to provide advice regarding a forward commitment to purchase a 54,000 sq. ft. retail store in Aberystwyth, Wales, which upon completion will be let to Marks & Spencer on a 25-year lease. The effective sale price of the asset equates to £10.10 million reflecting a net initial yield of c. 5.25%.

Commenting on the latter transaction, Gavin Clarke added, “Austerity measures during the recession virtually put paid to traditional development finance and within this vacuum a number of schemes, throughout the UK and Ireland, quickly stalled. This gap in the market, whether real or perceived; or just based on significantly more stringent terms has driven some more innovative solutions to financing; chiefly equity participation. The greater use of joint venture arrangements, forward-funding and forward sales could help overcome the financing hurdles of new developments, at least until such time as the risk profile becomes more palatable for traditional debt funders.”

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