AEW UK REIT plc (LSE: AEWU) has announced that it has acquired the multi-let Westlands Distribution Park in Weston-super-Mare for a purchase price of £5.4m.
The purchase price reflects a low capital value of £175,000 per acre which provides strong potential for future capital value growth based upon nearby comparable land transactions which range between £350,000 and £500,000 per acre for other commercial and residential uses.
The estate provides a net initial yield of 6.4% which is expected to increase to at least 7.4% within the medium term. The average passing rent of £1.50 per sq ft also provides strong potential for rental growth.
The established 323,437 sq ft estate is let to 15 tenants including North Somerset Council who make up 30% of the income stream. It is located 3 miles from the M5 Motorway and 20 miles south of Bristol city centre.
Alex Short and Laura Elkin, Portfolio Managers, AEW UK REIT, commented: “Following the very profitable sale of our largest asset in Corby during May, we have undertaken cautious analysis of the investment market and our pipeline in the intervening months when looking to replace Corby and its income stream within the portfolio. This latest acquisition is an excellent fit for the portfolio as it offers significant potential for future value accretion in addition to its very low level of passing rent which provides strong prospects for future rental growth”