FTSE 100 listed property development and investment company, SEGRO (LON:SGRO), announced on Wednesday that it agreed to pay £133 million to acquire the 13-acre urban warehouse estate in Canning Town, from Schroders (LON:SDR).
The company boasts that the estate is in a prime location, close to Canary Wharf and London City Airport, as well as being close tot he A12 and A13 main roads which connect it directly with the rest of central London. SEGRO adds that it is within ‘walking distance’ of three Zone 2 and 3 London Underground stations, which will allow workers easy access to the estate.
The company also state that Electra Park offers 21,200 sq metres of lettable space across ten units, of which nine are currently let and the final unit is currently under offer.
The average weighted average unexpired lease term on the let space is 4.3 years to break and 6.4 years to expiry. The estate expects to generate £3.4 million in topped-up passing rent, which SEGRO says reflects a low average in-place rent of around £14 per square foot, with an estimated rental value of £21 per square foot.
Illustrating these presently low rental levels and the potential of what the company described as an ‘unusually central location’, the topped-up net initial yield upon acquisition is 2.3%, which will rise to 2.6% once the vacant unit is let out.
Speaking on the Electra Park takeover, SEGRO’s Greater London Business Unit Director, Alan Holland, said:
“This acquisition is an exciting opportunity for SEGRO to consolidate its leading London footprint and is a strong fit with its well established prime urban warehouse portfolio. Situated on the edge of Zone 2, at the gateway between Central London and the rest of our East London assets, it is in an area that is currently undergoing significant redevelopment and modernisation. This should further improve the already attractive supply/ demand dynamics and create the potential for strong rental growth, as we have seen happen in other inner London markets.”
“Electra Park helps us to build further scale in an area where we have made great progress through the East Plus partnership in conjunction with the Greater London Authority. This enables us to improve choice and provide an excellent customer experience as well as represents an opportunity for us to create value by applying our asset management expertise and knowledge of the local market.”
Following the update, and its seemingly positive Q3 results, SEGRO shares dipped by 1.19% or 11.20p, to 926.60p a share 21/10/20 11:45 BST.
