Atlantic Leaf Properties Limited has announced that it has concluded the disposal of its wholly owned subsidiary, Hyder Limited, to Elite Logistics Properties for GBP 34 million.
Hyder Limited holds a single property in Runcorn, UK, which is leased to DHL Supply Chain Limited.
Atlantic Leaf CEO, Paul Leaf-Wright commented on the transaction, “The Board viewed this as an opportune time to dispose of the property based on its position within the valuation cycle, and the value to be gained from the property’s pending rent review.”
Based on the property’s sale price of GBP 34.0 million, Atlantic Leaf will realise a profit of GBP 4.2 million. The property has delivered an overall IRR of over 16% after tax since it was acquired in November 2016.
“We are seeing a common theme in the current market where quality assets are achieving selling prices in excess of independent valuations. The disposal is also consistent with Atlantic Leaf’s track record of being able to sell investments at prices exceeding book values. While this also demonstrates an active market in the UK for certain assets, particularly in the industrial sector, overall the market remains challenging with reduced transactional volumes. Industrial properties, however, continue to be desirable, which will support the industrial property valuations in the Atlantic Leaf portfolio. Atlantic Leaf is well placed with almost 80% exposure to this sector.”
The majority of the net sale proceeds will be deployed into other property investment opportunities, with a focus on a diversification of industrial assets similar to the investments made during the current financial year. Management also intends utilising a portion of the net sale proceeds to reduce debt in line with the company’s strategy of gradually reducing its loan-to-value ratio, which they believe is an important step to reduce overall risk in the balance sheet.
As part of a business update, Atlantic Leaf noted that in December 2019 it had commenced with marketing of the space previously tenanted by Thomas Cook at its Peterborough property. Occupier demand appears strongest for mid-sized lettings, so the space will be converted into a multi-let format to maximise value generation. Refurbishment is expected to be completed for re-letting in the second half of the 2020/21 financial year. Atlantic Leaf is confident in the quality of the building and its re-letting prospects.
As a result of some of these key asset management initiatives, including the decision to retain cash reserves to carry out the required refurbishments at the Peterborough property, and the plan to reduce gearing, the full year distribution for the 2020 financial year is likely to be approximately 9.5 GBP pence per share, slightly lower than earlier forecast of 10 GBP pence per share. This is still slightly ahead of the 9.3 GBP pence per share distribution in the prior year. The final 2020 financial year distribution will be communicated as part of the annual results announcement in April 2020.
“Atlantic Leaf is pleased with the very positive outcome of the disposal which has realised a significant capital gain for the company.”