Pre-Let to Premier Inn at the Arndale Centre

14 September 2015

Schroder Real Estate Investment Trust Limited

(the 'Company')

 PRE-LET TO PREMIER INN AT THE ARNDALE CENTRE

In January 2014 Schroder Real Estate Investment Trust Limited (the ‘Company’) acquired the Arndale Centre in Leeds for £16.16 million, reflecting a net initial yield of 9.18% per annum.  The acquisition strategy was to generate income growth from asset management and explore change of use.  Progress executing this strategy resulted in the property being valued at £19.75 million as at 30 June 2015.  

The Company now announces that it has exchanged a conditional Agreement for Lease with Premier Inn Hotels Limited (‘Premier Inn’) for a pre-letting of a new 96 bedroom hotel within Arndale House.  Arndale House is a substantially vacant office building comprising 32,000 sq ft over seven floors, which on acquisition produced a net rental income of £45,000 per annum.  Arndale House forms part of the Arndale Centre, a multi-let retail, leisure and office property totalling 125,834 sq ft that is located in Headingley, a densely populated suburb 2.5 miles from Leeds city centre. 

The Agreement for Lease is conditional on the Company securing planning consent and converting Arndale House to hotel use, including the addition of a new floor, at a cost of approximately £6.7 million.  Subject to these conditions being satisfied, Premier Inn will enter into a new 30 year lease, with a tenant only break option after 20 years, at a rent of £412,800 per annum with an initial six month rent free period.  The lease will benefit from five yearly upwards only rent reviews linked to the Consumer Price Index (‘CPI’), subject to a cap of 4% per annum compound.  The lease will be guaranteed by Premier Inn’s parent company, Whitbread Group PLC.  The target date for completion of the lease is November 2016, and the construction cost may change dependent upon on-going negotiations with the proposed contractor.

Assuming the lease completes as planned, Premier Inn will become the largest tenant at the Arndale Centre, increasing the average unexpired lease term at the property, assuming tenants break at the earliest opportunity, from 4.2 to approximately eight years.  The letting will also increase the portfolio’s defensive qualities, with Arndale House representing approximately 1.4% of the portfolio void rate that totalled 9.2% as at 30 June 2015. 

Nick Montgomery, Head of UK Investment at Schroder Real Estate Investment Management Limited, commented:

“The conditional letting to Premier Inn is attractive as the income return should exceed the return on comparable investments available in the market as well as enhance value.”

For further information:

Schroder Real Estate Investment Management Limited: Duncan Owen / Nick Montgomery	020 7658 6000
Northern Trust: David Sauvarin	01481 745529
FTI Consulting: Dido Laurimore / Ellie Sweeney	020 3727 1000