London and Scottish Property Investment Management (LSPIM), the asset-manager for regional office specialist Regional Reit, has acquired the portfolio of 31 predominantly multi-let regional offices from Squarestone Growth LLP.
More than 93 per cent of the portfolio’s value comes from 27 regional office properties that provide more than 1.6 million square feet to 192 tenants.
The properties in Scotland involved in the deal are Quantum Court in Edinburgh (expected to complete at the end of September), and in Glasgow, 133 Finnieston Street, Buchanan Gate, and Lightyear at Glasgow Airport. Also included are St James Business Park in Paisley, St James Business Centre, and the Tim Hortons at St James Business Park, Paisley.
The contracted annual rent roll for the portfolio is £21.9m, corresponding to a net initial yield of 7.8 per cent, but LSPIM expects to ultimately realise a yield of 11 per cent. “This will be achieved through a series of asset-management initiatives in the coming years to improve occupancy, rental income and capital value,” it said.
LSPIM added that the acquisition marks a “significant step” in the execution of its strategy to focus the Regional Reit portfolio on high-yielding office property “that is either mispriced in the market or offers significant asset-management potential”.
Of the Reit’s portfolio, which was valued at £732.4m at December 31, 2020, more than 83 per cent was in office assets. This acquisition, combined with the recent disposals in August of about £60m of industrial property, “significantly” increases the portfolio’s regional office focus.
Additionally, the small number of non-office properties in this acquisition will be included in LSPIM’s ongoing disposal programme for non-core assets.
LSPIM chief executive Stephen Inglis said: “This deal is a major milestone for us in terms of its scale, and sourcing it is testament to the strength of our network.
“Our asset-management platform is based on a multi-disciplinary team of 62 professionals working across a range of disciplines including asset and property management, financial management, research, legal, corporate and corporate finance... we expect to achieve significant returns in terms of income growth and ongoing asset-management initiatives.”