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UBS Triton Property Fund acquires prime south east industrial asset in property swap worth GBP 115 million.
UBS Triton Property Fund (UBS Triton, the Fund) and SWIP (Scottish Widows Investment Partnership) have today announced completing a swap transaction totalling GBP 115 million after exchanging The Rex office building in Central London for Worton Grange Industrial Estate (Worton Grange) in Reading.
As a part of the transaction, UBS Triton sold The Rex Building in Queen Street, EC4, for GBP 57.75 million – reflecting a net initial yield of 4.6% – to SWIP, who are acting on behalf of one of their pension fund clients. In exchange, UBS Triton has acquired Worton Grange for the same price and at a net initial yield of 6.2%. Worton Grange occupies a 29-acre landscaped site in a key distribution location in south east England and offers excellent transport links to the M4, A33 and Heathrow Airport. The site includes two detached buildings with individual units varying between 11,000–71,000 sq ft and has a diverse tenant mix occupying both office and industrial-use space. The Rex Building was comprehensively refurbished by UBS Triton in 2008, and now comprises circa 80,000 square feet (sq ft) of Grade 'A' offices let to three tenants.
The swap transaction is mutually beneficial to both funds. UBS Triton's current strategy is to reduce its exposure to Central London, and the Fund has taken advantage of the current strength in Central London office pricing to increase its exposure to south east industrials, a sector which is projected to perform strongly over the next three to five years. SWIP's clients are seeking to increase their exposure to core, modern assets and in particular those with strong growth prospects.
With its diversified tenant mix delivering a strong income return, and numerous potential asset management initiatives, Worton Grange will be a long-term hold for UBS Triton and is expected to become a flagship asset for its portfolio.
Commenting on the transaction, Howard Meaney, Portfolio Manager for UBS Triton and Head of Global Real Estate – UK, stated: "We are pleased to have acquired this promising new asset after a competitive bidding process that attracted interest from a number of institutions, and our willingness to swap The Rex, a mature asset for UBS Triton, facilitated the closing of this deal. The transaction ticks several key boxes for UBS Triton – it reduces our overweighting to Central London offices, increases our presence in a sector expected to perform strongly, and importantly, is income accretive for the Fund."
Jon Bailey, Investment Director in SWIP’s Real Estate team said: “We are extremely pleased to have bought The Rex, a modern core City office building, offering potential for future income growth and asset management opportunities. Our clients have been actively seeking exposure to the Central London office market for some time and the transaction assists our clients in achieving their goals. The Fund has owned Worton Grange since the 1980s and this transaction gives us the opportunity to lock in the strong performance generated from this asset over the years.”
Tudor Toone LLP, Olswang LLP and Mishcon de Reya acted for UBS Global Asset Management and Joiner Cummings, Jones Lang LaSalle and Addleshaw Goddard LLP acted for SWIP.