Texton Property Fund acquires properties in the UK for GBP15,24m

Posted On Tuesday, 03 March 2015 08:17 Published by
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Following the release last week of excellent interim results which gave shareholders distribution growth of 11.7%, Texton is pleased to announce the acquisition of two properties in the UK for a total of GBP 15,24 million.

 Rob Kane

This is the first step in the fullfilment of its UK strategy which has targeted 25% of its assets being offshore.  The investments in the UK represent a geographic diversification into an exceptionally stable and improving economy and it is a region that Texton understands well. Texton has an additional pipeline that will take its UK acquisitions to over 20,000sq metres of lettable area. All acquisitions will be low risk properties with strong tenants on long leases, typically triple net and longer than 10 years.

Stanford House is located in Warrington, Manchester,  comprises 5,100sq metres and is tenanted by Talk Talk, a FTSE 250 company on a triple net lease expiring in December 2025. The two storey property houses Talk Talk’s call centre and is in an established call centre node. BT occupies 100sq metres on the property. The acquisition cost is GBP 13,7 million at a yield of 7.19% inclusive of all costs.

The 3,825sq metre Booker warehouse is occupied by Booker Limited, a wholly owned subsidiary of the FTSE 250 company, Booker Group Limited. Booker is the UK’s largest food cash and carry wholesaler and has occupied the building for over 20 years with its triple net lease expiring in June 2025. The acquisition cost of GBP 1,54 million represents a 7.09% yield inclusive of all costs.

Both properties are well located in strong, defensible secondary nodes and are well suited for their purpose. “We have found it difficult to buy value in and around London as many buyers are foreign to the UK and are only looking for capital preservation with a low yield. Our UK strategy is similar to that in SA and we tend to avoid trophy assets, focussing on properties where we can find value. It makes sense for us to take advantage of yield accretionary transactions in a region offering significant economic stability and growth prospects, and to utilise our extensive knowledge and experience of this market,” says Rob Kane, CEO of Texton Property Fund.

The property management will be undertaken by the current managers, Agro Real Estate. All leases are triple net, payable quarterly. Texton will establish a UK office as soon as the size of the portfolio warrants a local presence.

Approximately 55% of the value has been funded with senior debt from a bank in the UK. The balance has been funded by a foreign direct investment by Texton using pound sterling funding provided by an SA bank. This loan has been secured by some Texton SA assets. Currency risk to shareholders is therefore minimised because the UK assets are matched by UK funding. Funding rates are attractive in the UK with Texton intending to fix 75% of the debt for a spread of 3 and 5 years. At current rates, the blended all-in rate on the debt is around 3.8%.

In addition to releasing details on the interim results last week, Texton also reviewed its expanded strategy both sectorally and geographically. The strategy is working well with the benefits flowing to shareholders in terms of risk diversification and strong fundamentals. The last six months have seen exceptional portfolio growth and the UK acquisitions will take the assets up to R3,37 billion. The balance of the UK assets are in the pipeline and the impending BEE equity deal will further strengthen Texton’s balance sheet. 

Last modified on Tuesday, 03 March 2015 10:18

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