An Arcadia-let property in Eastbourne, East Sussex, bucked the market at auction this week when it sold at a yield of 7.24%.
The property achieved a price of £1.9m for major UK fund manager Threadneedle, which is slightly ahead of valuation. It was guided at £1.7m.
The Eastbourne lot contributed to a total of £65.7m at the final Allsop commercial sale of 2018, and an 80% success rate.
Auctioneer George Walker said the yield achieved came down to the specific dynamics of the property. Located in the middle of the pedestrianised Terminus Road, it is sublet to Hotel Chocolat and footwear chain Pavers at £45,000 per annum and £89,200 per annum respectively. The retail is sublet until the 30-year lease to Arcadia expires in 2024 and three flats above are also sublet. The total income to the purchaser is £138,250 per annum.
“If it was just an Arcadia property then the value might have been halved. High street investors are scared witless, but having those sublettings allows the rent to be proven,” Walker said.
Threadneedle selected the asset for sale after seeing valuation gains on other asset classes in the fund, allowing it to test what could be achieved on a high street investment.
Other successes at the sale included a portfolio of Job Centres, all let on leases expiring in 2027, in Newquay, Cornwall; Yeovil, Somerset; Accrington, Lancashire and Caerphilly, Wales. They were offered with guides of £600,000-£1.35m and yields from 7.5%. All of the centres sold, achieving an average yield of 7.3%, demonstrating the depth of the private investor market seeking security.
Strong private investor appetite for industrial lots was demonstrated by a 16,000 sq ft, two-floor industrial unit in Batley, West Yorkshire. Let to Tuffnells Parcels Express for 10 years from 2014, it sold for £1.56m, a 6.77% yield. The idea of achieving a yield at that level would have been laughable three years ago, Walker said.
A 32-bedroom Travelodge hotel in Brierley Hill, West Midlands – let to the operator until 2039 – sold for £1.45m, a yield of 6.1%.
The sale took place on 4 December at the Berkeley, SW1.
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