SREF and SEGRO agree landmark £345 million industrial swap deal

Schroder UK Real Estate Fund (SREF) has announced that it has completed a significant swap deal with SEGRO plc which involves seven industrial assets based across the UK.

The recently completed transaction consisted of the sale of Matrix Park, in Park Royal London and a £65 million capital payment in exchange for the simultaneous purchase of a portfolio of six multi-let industrial and logistics assets located across the UK, worth a collective £205 million.

SEGRO, a UK property investment and development company, will acquire Matrix Park, which was developed by SREF in the early 2000s, for £140 million. It comprises 256,000ft2 of multi-let industrial accommodation and a 1.4-acre development site. The estate is fully let to seven tenants across 11 units, and the sale reflects a capital value of £546/ft2.

The industrial portfolio SREF is acquiring from SEGRO consists of three multi-let industrial estates and one urban logistics unit located in Greater London and two national logistics assets in the West Midlands. The London assets include X2 in Hatton Cross, 14 Advent Way in Edmonton, and Oakwood Business Park in Park Royal, as well as the DPD distribution facility in Radlett. The Midlands logistics units include the DHL at Hams Hall in Birmingham and the Asda distribution centre at Brackmills in Northampton.

The portfolio comprises a total of 880,000ft2 and benefits from strong sustainability credentials. Two of the properties (Edmonton and Radlett) benefit from BREEAM ‘Very Good’ ratings, as well as having 100% ‘A’ EPC ratings. Within the portfolio, assets also feature PV panels, rainwater harvesting systems, ground source heat pumps and multiple EV charging points. On a unit-by-unit basis, 68% of the EPC’s in the portfolio are rated as a score of B. The portfolio purchase price of £205 million reflects a capital value of £232/ft2.

The swap deal is the latest transaction involving the two companies after SEGRO agreed to purchase SREF’s east London urban logistics park, Electra Business Park in Canning Town, in October 2020 for £133 million.  

“This landmark transaction with SEGRO is in line with several key strategic targets for SREF including growing the fund’s income returns, increasing exposure to the industrial sector, strengthening future capital performance potential, and improving portfolio sustainability credentials. The UK industrial sector continues to thrive due to the acceleration of the shift in consumer behaviours over the last 18 months, which we expect will continue longer term. This has led to an unwavering demand from occupiers for strategically located, edge of conurbation, last mile facilities. The portfolio we have acquired consists of six high quality assets in strategic locations, close to major cities such as London and Birmingham which we anticipate will benefit from longer term rental growth and can deliver resilient income to the fund going forwards. We are delighted to have worked closely again with SEGRO on this transaction.

“We have several considerable development and Capex projects underway or due to begin imminently in Croydon and Cambridge and also at our industrial schemes in Hartlebury, Wolverhampton and Crayford. The capital generated from the sale of Electra is maintaining the progress of these projects so that we can seek to continually deliver strong returns for our investors.”

Gerald Eve acted for Schroders with Montagu Evans advising SEGRO