UK Comm Prop buys warehouse development for £22m

UK Commercial Property Trust has bought a distribution warehouse development in Burton upon Trent for about £22.2m, as part of the company’s strategy to focus on assets that deliver higher and sustainable income.

The £22.2m reflects a yield on capital of 5.8% and will be funded from the proceeds of the January sale of a property in London for £30.5m.

The acquisition, comprises of 14.8 acres of land at Centrum West in Burton upon Trent where the previous owner, logistics developer Goodman, is developing a large scale distribution warehouse that has been pre-let to Palletforce, a palletised freight company.

Palletforce has committed to a 15-year lease at £5.58 per square feet, or £1.4m per year, with retail price index inflation linked rent increases between 1% and 3% per year, paid every five years.

The development of the warehouses is expected to be completed in the summer, when a balancing payment will also be paid.

Will Fulton, fund manager at Standard Life Investments who advised the company on the acquisition, said: "We are very pleased to have completed this acquisition such a short time after the sale of Great Marlborough Street, and together the two transactions are a real example of what we are trying to achieve with the UKCPT portfolio, in terms of deploying cash into higher yielding assets let on long term leases to deliver sustainable income. Goodman is a very well respected specialist developer and the asset we are buying will be of the highest quality in a strong UK logistics location.

He added that the deal represented around 25% of the capital it has available for investment while improving dividend cover and it will also increases the company's weighting in the industrial sector, which it favours due to the growth trajectory of online retail in the UK.

Shares in UK Commercial Property Trust were down 0.45% to 81.03p at 0831 GMT.