Ediston splashes out on retail park and ripples stagnant property market

SCOTTISH firm Ediston Properties has bought the Heathfield retail park in Ayr for £32 million through a joint venture, in a rare deal for the still stagnant commercial property market north of the Border.

Ediston, which was founded in 2003 by a former senior investment director at Standard Life Investments, has joined forces with property heavyweight Europa Capital to take advantage of deflated prices in the so-called "grade B", or below prime asset class, which they intend to refurbish and upgrade to grade A quality.

The joint venture has so far invested 65m in a portfolio of seven properties across the UK but according to Danny O'Neill, founding partner of Ediston, it still has 150m at its disposal to spend over the next 12-18 months.

Europa Capital has invested a substantial amount of equity into the partnership but it is also able to draw on a debt facility with Royal Bank of Scotland.

O'Neill said that although markets remain tough, especially in the regions, there are opportunities across the UK. "We want to fund assets that aren't quite prime that we can turn into prime assets through refurbishment," he said.

Despite the turmoil currently befalling the retail sector, O'Neill said Heathfield was still a good deal as there is demand for extra space at the park.

The joint venture intends to add a further 30,000 sq ft of space to the existing 142,000 sq ft. "There is some good demand for units and it's the only retail park in Ayr," O'Neill added.

Although a few notable deals have been completed in Scotland this year, the storm clouds are once again gathering over the commercial property sector as the public spending cuts take their toll - especially on the occupational market.

Several cash-rich foreign funds are hovering over the UK market, but O'Neill said they are generally only interested in prime assets - most of the time in London.

"There's no getting away from the fact it's a tough market," he said. "There's not a lot of good news particularly in the occupational market."

Stuart Heslop, head of real estate finance in Scotland for RBS, said despite perceptions that banks aren't lending, his team is likely to conclude a number of deals over the summer. The Ediston partnership has the option of drawing on a further 90m from a 150m facility agreed with RBS.

"This deal ticks all the boxes," Heslop said. "It's a management team with a good track record which is buying assets we like."