German fund targets mega-shed

A German investor is close to agreeing one of the largest shed investment deals of the year, with the purchase of a 920,000 sq ft mega-shed in Kent.

Commerz Real is in advanced negotiations to buy the warehouse for £85m – a 6.4% yield – from Standard Life Investments.

The distribution unit in Sittingbourne is being developed by Gazeley, and is let to supermarket chain Morrisons for 20 years at a rent of £6.05 per sq ft.

The investment was offered to a select group of buyers six months ago after the supermarket, which takes occupation of the building in April, agreed to lease the space.

Sources said that the yield would soften as fixed uplifts kick in. The £5.4m pa rent will rise after five and 10 years, by either 2.5% or to open-market value, whichever is
the higher.

Commerz Real – formed by the merger of Commerzbank subsidiaries CGI and Commerzleasing – is one of several German funds that have started targeting UK industrial assets. The funds have previously focused their attention on City offices.

Peter Winfield, head of UK industrial investment at Cushman & Wakefield, said: “At this moment in time, the most active players in the UK industrial investment market are the open-ended German funds.

“They are attracted by the security afforded by the lease structures and the relatively long unexpired lease terms. Furthermore, the prices they can achieve compare
favourably with prices across Europe generally.”

German funds started their return to UK property investment in early 2008 after a two-year absence.

Commerz Real came back to the market in June with the £95m acquisition of Scottish Widows’ 150,000 sq ft Athene Place on Shoe Lane, EC4.