Green Light For Secondary Market as FG Burnett Sells Burgundy Portfolio

The £9.35 million sale of an industrial and retail warehouse portfolio in central Scotland underlines a reinvigorated demand in the secondary market, claims commercial property specialist FG Burnett.

The Burgundy Portfolio comprised two multi-let industrial estates, two solus industrial units and a multi-let retail warehouse property located in Edinburgh, East Kilbride and Uddingston.

Extending to a total of 252,208 sq ft, the four asset portfolio is let to 18 tenants and features a mix of single and multi-let assets, with an 88%-12% split between industrial and retail warehouse use and zero vacancy rate.

FG Burnett acted for the vendor Aberdeen Asset Management while the new owner, Tilstone Investments, was represented by Savills. The price reflects a net initial yield of 10.5%.

Ewen White, a director in FG Burnett’s investment team, forecast that renewed investor confidence and greater availability of finance from new funding sources is paving the way for investment in similar ‘good secondary’ assets in 2014.

He said: “Compared to 18 months ago, there is now a quite mature market for this type of portfolio but it has to be priced accordingly. Previously fund managers would not have been confident of executing a sale for this type of property but there is now a great deal more activity.

“We had six bidders at a closing date and I would attribute the majority of interest from new entrants who have funds available and who have stepped in to fill the void left when the major banks withdrew from the market.”

Mr White said that since the summer there had been yield compression in the secondary asset sector.

He added: “This is a reflection of prime yields sharpening substantially and investors identifying secondary sector stock as good value and worthy of investment.”