(Alliance News) - Distribution firm Connect Group PLC said Monday a subsidiary completed the sale and leaseback of six properties to Urban Logistics REIT PLC for GBP9.9 million as part of a plan to pay down debt levels.
Meanwhile, Urban Logistics also announced an acquisition of two further properties from another seller.
Tuffnells Parcels Express Ltd - a unit of Connect - sold the six distribution depots covering a combined 84,872 square feet to Urban REIT for GBP9.9 million in cash.
Funds from the sale will be used to reduce debt levels through the repayment of Connect's current revolving credit facility.
Under the sale deal, Tuffnells will leaseback the properties on full repairing & insuring leases for a period of 20 years. Tuffnells will pay around GBP700,000 per year in rent under the leases across the properties, giving the portfolio a 7.04% net initial yield.
The sale & leaseback deal follows Connect deciding to undertake a series of smaller such deals, after a proposed single larger sale & leaseback deal for a wider array of properties was deemed unlikely to be completed in financial 2019 due to market conditions.
"The sale and leaseback of this tranche of properties is another step in our strategic plan and ambition to reduce the group's net debt position to a targeted net debt/EBITDA ratio of 1x by financial 2021," Connect Chief Executive Officer Jos Opdeweegh said.
"We will continue to explore other possible sale and leaseback opportunities for the remaining Tuffnells freehold real-estate portfolio where those opportunities meet the board's expectations in respect of value, economic return and timings as this transaction with Urban Logistics does so," Opdeweegh added.
In a separate announcement, Urban Logistics said it also acquired two further logistics properties from another seller for GBP5.3 million and a net initial yield of 5.9%. These properties are currently let to DHL Parcel UK.
Shares in Connect were 0.3% lower at 38.60 pence in London on Monday. Those of Urban Logistics were marginally lower at 125.49p.
By Ahren Lester; ahrenlester@alliancenews.com
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Urban Logistics (SHED)