Investor Forced To Sell Dublin Logistics Facility To Reduce Debt On U.K. Retail Assets
Investment company New Frontier Properties is selling off a logistics facility it acquired in Dublin last year to reduce its debt levels after a £79M — 30% — drop in the value of its U.K. retail portfolio in just 12 months.
The U.K-based company, which is listed on the Mauritius and Johannesburg stock exchanges, said last week that the fall in the value of its properties has resulted in the loan to value covenants with its two lenders being exceeded.
New Frontier bought Unit 1, Stadium Business Park in Ballycoolin, Dublin 11 in November 2017 for €8.65M. The 78K SF property is let to office stationery supplier Viking Direct on a 20-year lease from August 2007. The €743K annual rent represented an initial yield of 8.23%.
At the time, New Frontier Properties CEO Mike Riley said the purchase was in line with the company’s investment strategy to buy European logistics and warehouse properties to benefit from increased e-retailing activity across Europe.
In 2015, New Frontier paid £284M for three shopping centres: Coopers Square, Burton on Trent; The Cleveland Centre, Middlesbrough; and Houndshill Shopping Centre. Their value dropped to £266M in 2017 and to just over £187M by August 2018.
The company said the "significant reduction" in value could be attributed to several factors, including recent company voluntary arrangements, company receiverships and tough trading conditions across the U.K. retail sector.
“This combined with rising interest rates, the fall in the value of sterling, rising costs and concerns over Brexit has resulted in a weakened investor market, particularly outside London and the south east. Consequently, investment yields have moved out, which has exacerbated the valuation fall,” the company said.
As well as selling the Dublin logistics facility, New Frontier said it will not be going ahead with its previously announced €13.75M acquisition of a logistics property in Hassfurt, Germany.