Asset overview and performance
50,000 sq ft, three-unit, retail warehouse terrace in a prominent location on Salisbury’s northern ring road. The property adjoins a strongly performing Waitrose food and home store. The property is currently let to Smyths Toys (unit 1), Homesense (unit 2), and Sports Direct (unit 3) paying a topped-up rent of £645,000 per annum, or an average rent of £12.90 per sq ft. The former two tenants are on short-term leases that expire in early 2025. As at 30 September 2024, the asset was valued at £8.575 million, reflecting a net initial yield of 3.9% and a reversionary yield of 8.1%. Over the six-month period to 30 September 2024, the asset delivered a total return of 4.2% which compared with the MSCI All Retail Warehousing over the same period of 6.0%.
Key activity
- Agreement exchanged with Lidl Great Britain Limited (‘Lidl’) to occupy unit 1 and part of unit 2, totalling 22,206 sq ft, on a new 25-year lease (break at year 20) at £440,000 per annum or £19.81 per sq ft. Lidl will receive nine months of rent free and the lease will be subject to five yearly, inflation-linked reviews with a collar of 1% per annum and a cap of 3% per annum. Lease completion is subject to planning and the Company delivering a unit split and refurbishment at a cost of £1.5 million inclusive of consultant and legal fees. Lidl is required to install photovoltaic panels to the roof in order that the overall project can achieve an EPC ‘A’.
- A planning application for the unit split has been submitted, with a view to works commencing in February 2025, when Smyths Toys and Homesense will have vacated. Assuming there are no delays to planning, we expect works to complete in summer 2025.
- Completed a new five-year lease to Sports Direct at £290,000 per annum or £14.50 per sq ft, in return for the tenant receiving 12 months of rent free.
Strategy looking forward
- The remaining vacant unit comprising the balance of unit 2, totalling 7,500 sq ft, will be marketed at a rent of £135,000 per annum or £18 per sq ft.
- Assuming the activity proceeds as planned, the combined new rent at Churchill Way West, Salisbury will be approximately £865,000 per annum or £17.30 per sq ft, a 34% increase on the current topped-up level
Important information
This communication is marketing material. The views and opinions contained herein are those of the named author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.
This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy.
The data has been sourced by Schroders and should be independently verified before further publication or use. No responsibility can be accepted for error of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.
Past Performance is not a guide to future performance. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. Exchange rate changes may cause the value of any overseas investments to rise or fall.
Any sectors, securities, regions or countries shown above are for illustrative purposes only and are not to be considered a recommendation to buy or sell.
The forecasts included should not be relied upon, are not guaranteed and are provided only as at the date of issue. Our forecasts are based on our own assumptions which may change. Forecasts and assumptions may be affected by external economic or other factors.
Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registered Number 4191730 England. Authorised and regulated by the Financial Conduct Authority.
Topics