Savills IM Fund Backed by ARA’s Lim Family, Straits Trading Acquires 4 UK Assets

A Savills Investment Management fund backed by the family office of ARA founder John Lim and Singapore conglomerate Straits Trading has acquired four UK assets for £75 million ($97.6 million), according to a statement last week.

The four retail parks, including two in England and one each in Wales and Scotland, were acquired for a combined yield of almost 7.5 percent, Savills IM said. The acquisitions are the first for the UK Value Boxes fund, a “contrarian” strategy backed by The Land Managers — a unit of JL Family Office — and Straits Trading.

“We are delighted to have successfully deployed this amount of capital in such a short time into parks precisely fitting the strategy, especially given the competitive nature of the buyers’ market,” said Harry de Ferry Foster, Savills IM’s head of UK. “These acquisitions will provide a strong yield profile to our investors and exposure to a variety of household names as tenants off very low rents.”

Savills IM had tied up with its Singapore backers to launch the investment vehicle last October, with the aim of capitalising on the returns available from big-box retail in UK suburban centres and exploiting the mismatch between the relatively low property prices and high yields available in British retail parks as institutional investors increasingly focus on logistics, data centres and other more fashionable segments of the market.

Off the Beaten Path

True to its contrarian mission, the retail fund’s initial acquisitions are well away from London in provincial centres, with the two England assets located in Stafford, a town northwest of Birmingham in the West Midlands region, and Catterick, a village in North Yorkshire.

Hough Retail Park sits less than a mile from the Stafford town centre and provides 101,799 square feet (9,457 square metres) of retail space and 415 customer car parking spots.

In launching the fund last year, Savills IM indicated that it would be targeting properties leased to downturn-resistant retailers such as grocery, discount and DIY stores, and the Stafford asset aligns with this thesis with its tenant roll including such daily necessity providers as home improvement giant B&Q and catalogue-retailer Argos, as well as discount store Home Bargains and Starbucks.

The Princes Gate property in Catterick Garrison lies opposite a Tesco Extra store and features tenants including discount store Poundland, Pets at Home, Sports Direct and Boots.

In addition to its English assets, the fund also acquired Avenue Retail Park in the Welsh capital of Cardiff, anchored by M&S Foodhall, B&M and Home Bargains, and a retail park in Scotland’s Aberdeen leased to Aldi, Matalan, B&M and Argos.

The average passing rent on the four assets is £13.50 ($17.54) per square foot, Savills IM said, and the average unexpired lease term is seven years.

“The UK retail parks sector continues to demonstrate resilience to e-commerce trends given the high proportion of daily necessity and value-oriented items, and we look forward to making further purchases in the future to ensure the fund is fully invested,” de Ferry Foster said.

Digging for Discounts

The cornerstone investors of UKVB are The Land Managers, which serves as the real estate investment division of JL Family Office, and Straits Real Estate, the real estate investment subsidiary of Straits Trading.

The Land Managers, led by ARA Asset Management co-founder Lim’s son Andy Lim, is a boutique real estate investment firm under the JL Family Office, which manages the private investments of the elder Lim. The family office used to hold a 10 percent stake in its partner in UKVB, Straits Real Estate, but it announced last April that it would sell its interest for S$105 million ($78.3 million) in cash to a subsidiary of Straits Trading.

“We are pleased to work with Savills IM in our first investment into the UK,” Andy Lim said when the fund launched last October. “The country is experiencing a rapid recovery and its growth is set to be the fastest in Europe. By investing in a defensive retail asset class, we hope to capitalise on the pent-up demand from the COVID-19 restrictions over the last couple of years.”

SGX-listed Straits Trading disclosed in an October bourse filing that its subsidiary would commit up to £60 million to UKVB as part of a strategy to redeploy capital from its existing high-quality but low-yielding property portfolio into potentially higher-return real estate opportunities.