Local Shopping REIT’s £90m Project Renouvier comes to market

A portfolio of 387 UK-wide local shopping assets in urban and surburban centres – the final assets owned by the Local Shopping REIT – is coming to market, writes CoStar News Editor Paul Norman.

Project Renouvier comprises the corporate entities that own portfolio of 328 Freeholds/Heritable and 59 Leaseholds.

Allsop has been appointed to sell the portfolio seeking offers in excess of £90m.

The portfolio is spread across the UK but the capital value bias is towards London and the South East.

The total commercial accommodation extends to approximately 727,000 sq ft (67,500 sq m) and it is let to 925 tenants including national covenants such as Tesco, Coral, Thomas Cook, Argos and Clydesdale Bank.

There is a total rental income of £7,990,000 pa and a potential reversion to £8,779,000 pa.

There is an average weighted unexpired term of 3.7 years to break and 4.7 years to expiry for commercial tenancies.

The portfolio also includes 127,200 sq ft (11,800 sq m) of vacant accommodation, 195 Residential Ground Rents and 229 Residential units mostly let on ASTs.

There are also a series of planning consents in place to be implemented and significant development and change of use opportunities.

The Local Shopping REIT sold a first portfolio of 235 UK-wide local shopping assets dubbed Project Minard to Värde Partners in a deal with an implied property sale price of £79.3m in August.

CoStar News revealed in April that Internos Global Investors, which was appointed by the Local Shopping REIT Board to execute the proposed orderly sell down of the REIT’s investment property portfolio last year, had appointed Allsop to bring to market the portfolio.

The Local Shopping REIT plc was founded in January 2005 by Grahame Whateley and joint chief executives Mike Riley and Nick Gregory with the objective of building a portfolio of properties and letting units in the convenience shopping market. LSR was floated on the London Stock Exchange in May 2007.

In the latter part of that year the company adjusted its property purchasing programme in response to the downturn in the UK property market, focusing activities on active asset management.

From 2009 it developed its asset management proposition and established a number of joint ventures to complement its wholly-owned portfolio.

In July 2013, following a strategic review, the company’s shareholders resolved to change the investment policy to enable the orderly liquidation of its assets, the repayment of debt and the return of the remaining capital to shareholders.

The Board appointed Internos Global Investors to manage the process. Steve Faber, Head of UK Markets at Internos Global Investors, has primary responsibility for operating the agreement between Internos and LSR for the management of LSR’s investment property portfolio.

A revaluation of the Local Shopping REIT’s directly owned portfolio in published results in December of last year revealed it comprised 640 properties with 2,037 unit lettings with a valuation of £168.9m with a yield of 9.48%. In 2012, the portfolio was valued at 177.2m.

The void rate across the portfolio has been improving to stand at 11.97% (end-October 2013).

Announcing the new investment strategy in July of last year the REIT said it had secured consent to a change of management from Indus (Eclipse 2007 1) plc (an affiliate of Barclays Bank plc) (“Indus”), the service provider to loans in two subsidiaries (for loans totalling £69.2m). In connection with the consent, the company agreed to amortisation on the facilities in the amount of £300,000 per quarter. These loans were due to be repaid in January 2017.

It added at the time that HSBC Bank is the provider of loans to two remaining subsidiaries (for an aggregate amount of £66.3m). These loans had been extended, to expire in April 2018.

The net proceeds of the sales are being applied to reduce the company’s indebtedness.

pnorman@costar.co.uk

About CoStar News

Finance Editor, CoStar News
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