Retail park owner sees profit soar as portfolio value increases

THE owner of a Yorkshire retail park saw its net profit soar by over 370 per cent in the first half of the year after the value of its property portfolio increased.

UK Commercial Property Investment Trust, whose best performing asset is Junction 27 retail park in Birstall, near Leeds, said net profit in the first six months of the year leapt to £85.4m, from £17.9m the previous year.

The trust’s portfolio was valued at £1.1bn at the end of June, up by six per cent.

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Chairman Christopher Hill said: “The UK is currently experiencing a sustained recovery coupled with improving business confidence that is now resulting in the expansion of most sectors of the economy and has resulted in considerable yield compression over the last 12 months.

“We believe this trend will continue throughout 2014 and increasingly extend beyond London, playing to the strong weighting of the company’s portfolio to the UK regions.”

The trust reported a net asset value total return of 10.8 per cent in the six months to June, ahead of the IPD benchmark of 8.3 per cent.

The company’s industrial portfolio was one of the major contributors to performance over the first half of the year, with a total return of 10.4 per cent.

Meanwhile the trust said the last six months has witnessed a ‘definite increase’ in investment demand for regional office and reported overall returns for its regional office portfolio of 9.7 per cent compared to the benchmarket of 8.3 per cent.

Asset management activity at Junction 27, its largest property, boosted the performance of the trust’s retail division. It bought the site, which borders Ikea and Marks & Spencer, for £54m in 2010.

Last month, home furnishing retailers Multiyork and Betta Living signed 15-year leases with the trust for two new units, totalling 9,967 sq ft, at Junction 27. The spaces were created through the subdivision of the former Comet store following its administration in 2013.

The combined deals are expected to increase the retail park’s income by £449,730 per annum.

Robert Boag, senior investment director at manager Ignis Investment Services, said: “We are seeing generally in the market a lot of investors are wanting to invest in the retail warehouse sector at large retail parks.

“Junction 27 is fully-let and part of a bigger retail area, which are qualities that the market is looking for.”

Overall, retail generated the weakest total returns of 7.4 per cent but above the 6.5 per cent benchmark.

Mr Boag added: “Market sentiment and investor appetite, particularly from overseas investors, UK institutions and REITS, have improved over the past six months at the prime and good secondary end of the market.”

Over the last 18 months, the company has acquired assets in excess of £100m, including an industrial pre-let development in Aberdeen and Regent Circus, a leisure and supermarket scheme in Swindon.

Mr Boag said it is looking for opportunities across the UK.

Mr Hill said: “Whilst London and the core south east markets continued to be the best performing locations, the broader UK market is now contributing to the impressive returns that commercial property is producing.”