British Land has bought a portfolio of seven retail parks from Canadian investment giant Brookfield for £441 million.
The leading REIT also announced in a stock market listing a proposed equity placing of approximately £300 million, by way of an accelerated bookbuild offering, to fund the acquisition, with the remainder of the consideration financed from existing cash and in place facilities.
The retail parks comprise the majority of those Brookfield bought from Hammerson in 2021, as reported.
British Land separately published a trading update for the six month period ending 30 September 2024, ahead of half year results on 20 November 2024, which confirms guidance for full year 2025 earnings per share of 27.9p given at its full year 2024 results.
Simon Carter, chief executive of British Land, said in a statement: "The acquisition of this high quality portfolio builds upon our market leading position in retail parks. Parks remain the preferred format for retailers and we have deployed £711 million of capital into this subsector since 1 April 2024."
"These assets offer an attractive yield and strong rental growth prospects in line with our guidance of 3-5%."
He added: "The broader business also continues to trade well with a good level of leasing in the period and cost discipline underpinning our profit performance. We expect portfolio values to be marginally up for the half year, with continued estimated rental value growth across the portfolio."
The acquisition price for the parks reflects a net initial yield of 6.7% and topped up net initial yield of 7.2%. The assets have a passing rent of £29.5 million, a topped up passing rent of £31.9 million and ERV £30.4 million.
The assets are 99% occupied and all have a major superstore anchor.
BL, one of the UK's largest owners and operators of retail parks, said the asset class is affordable and easily accessible by the end consumer. Retail parks now comprises 32% of the total portfolio up from 22% 18 months ago.
The portfolio totals 1.9 million square feet. The weighted average unexpired lease term is 4.5 years to break and 5.9 years to expiry.
The parks are: Elliott's Field Shopping Park, Rugby; Central Retail Park, Falkirk; Wellington Retail Park, Waterlooville; Ravenhead Retail Park, St Helens; Cleveland Retail Park, Middlesbrough; Telford Forge Shopping Park, Telford; Chilwell Retail Park, Nottingham.
In today's trading update, BL reported underlying profit of £142 to £144 million (HY24: £142 million) "despite a number of properties entering development and the prior year surrender of 1 Triton Square". Resulting underlying earnings per share were 15.2-15.4p (HY24: 15.2p).
It said portfolio values are to improve marginally by around 0.2%
For the five months to 31 August there was 1.5 million square feet of leasing across the portfolio, 8.5% ahead of ERV, with a further 665,000 square feet under offer, 3.9% ahead of ERV.
Between 31 August and 25 September, 249,000 square feet of leasing completed and under offers at 25 September were 858,000 square feet.
Brookfield said it has ultimately sold on a portfolio of nine retail parks this year that it bought in two off-market transactions in 2021, during the "peak of pandemic uncertainty".
It said it has subsequently grown net operating income through active asset management, grown overall occupancy to 99% by expanding key tenant relationships, and significantly grown footfall across the portfolio. It is Brookfield’s second recent exit of a pandemic investment, following the sale of 150 Champs Elysees in Paris to LVMH, following an 18-month repositioning of the asset.
Dominic Williamson, Managing Director, Brookfield Asset Management, said in a statement: “Periods of dislocation are where we find some of our most interesting opportunities. In 2021, at the height of the pandemic uncertainty, we acquired a portfolio of nine retail parks in two off-market transactions. During our ownership, we have driven operational performance across the assets, increasing overall occupancy, footfall and covenant strength, and growing net operating income through active asset management, enabling us to continue to deliver value for our investors throughout different market cycles.”