Schroder UK Real Estate Fund (SREF) has completed the sale of Electra Business Park in Canning Town, East London, to Segro for £133 million, reflecting a 2.58% net initial yield (NIY) and capital value of £586 per sq ft.
Developed in 2002 on the site of the former West Ham power station, Electra is one of the UK’s premier urban logistics parks, providing 228,137 sq ft of accommodation across 10 highly specified warehouse units within an independent and well-maintained business park environment.
Located 4.5 miles east of the City of London, the property is in a key location for London centric occupiers owing to its proximity to Central London, the City and Canary Wharf (London’s largest financial hub outside of the City of London). Some 81% of the income is secured against covenants rated ‘Minimum Risk’ or ‘Lower than Average Risk’ by Dun & Bradstreet, with occupiers including CCF Limited, HSBC Bank Plc, Swiss Post Solutions Limited and Cubic Transportations Limited.
SREF’s decision to sell the business park comes upon completion of the business plan for the asset, after recently agreeing terms on the last remaining unit with a US tech firm at £22 per sq ft. The latest letting achieved a rent 10% higher than the previous letting of Unit 5 to Carrington Hull Associates Limited in March 2020, demonstrating continued strong underlying rental growth for last mile prime logistics.
SREF will now focus on crystallising the strong performance from Electra by reinvesting the capital into the Fund’s development pipeline and higher yielding investment opportunities, such as the recently announced acquisition of One Cambridge Square, Cambridge.
Jessica Berney, Fund Manager of Schroder UK Real Estate Fund, commented: “SREF’s strategy is to divest out of low yielding assets where the business plan has completed and reinvest into performance enhancing assets. We received extremely strong demand for Electra Business Park so were delighted to sell the asset for £133 million, significantly above our original asking price, delivering a yield of 2.58%. Investor appetite for the best industrial assets is at an all-time high, reflected in the price achieved for Electra. We have several considerable development and capex projects underway or due to begin imminently in Croydon and Cambridge and at our industrial schemes in Hartlebury, Park Royal and Crayford. The capital secured from this transaction will maintain the progress so that we can seek to continually deliver strong returns for our investors.”
Gerald Eve acted on behalf of SREF, while JLL represented SEGRO.