Arena acquired in £436m portfolio deal

Secure Income REIT has acquired two property portfolios for £436m, including Manchester Arena and 160,000 sq ft of associated office and leisure space.

The first of Secure Income’s purchases was a leisure portfolio, bought off-market for £224m representing a net initial yield of 5.9%, with a weighted average unexpired lease term of 18 years.

This includes the eight-acre site, home to the arena, the UK’s largest indoor arena by capacity, alongside 160,000 sq ft of office and leisure space, as well as a 1,000-space multi-storey car park.

Secure Income estimates the investment will produce £5.8m of net income per annum, which will rise to £6m per annum on expiry of a lease incentive and following the next rental uplift on the arena’s lease in June this year.

Tenants in the office and leisure space include Serco, Manchester City Council, Unison, JC Decaux, and go-karting operator Teamsport. These generate a combined passing rent of £2.7m per annum.

The arena itself is let to venue management company SMG for 27 years, which has a current passing rent of £3.7m per year.

Alongside the arena, the leisure portfolio also includes 17 hotels let to Travelodge, and 18 freehold high street pubs let to Stonegate Pub Company, whose brands include Slug & Lettuce. The portfolio also features events space The Brewery on Chiswell Street, London, which is let to a specialist venue operator until July 2031.

The second portfolio includes 59 hotels across the UK let to Travelodge, and has been acquired at a gross cost of £212m, representing a net initial yield of 6.1%.

The acquisitions are to be part-financed by a share placing of up to 86.4m new shares, with the company targeting gross proceeds of up to £315.5m. The remainder will be funded by debt facilities totalling £128.7m.