Exit Announcement - DPD Property

News: Investment News | 21 April 2017

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Private investors see returns of 17% IRR – or 1.7x money within four years.

The £8.2million sale of a distribution warehouse let to leading parcel delivery company DPD UK Ltd has delivered impressive returns for private investor clients of Connection Capital, the specialist private client investment business, 18 months ahead of schedule.

Connection Capital clients have realised a 17% Internal Rate of Return (IRR) from the deal – receiving back 1.7 times their original investment within less than four years. Private investors were able to participate in multiples of £25,000, each of which provided a total return of £42,381.

Connection Capital purchased the freehold property in conjunction with its property partner, Riverside Capital, for £4.7million in July 2013, with Connection Capital clients committing £2.5million of equity. The purchase price reflected a net initial yield of 7.29%.

The property was a newly constructed logistics warehouse near Wellingborough, Northamptonshire, located between the M1 and A1 major transport routes. It is leased to DPD for a 20-year unbroken term with upward-only five yearly rent reviews.

Connection Capital and Riverside Capital were able to add value to the property post-acquisition by purchasing a neighbouring piece of land and turning it into a car park for the tenant.

It was sold off-market to Southampton City Council’s Property Investment Fund. The sale price reflects a net initial yield of 4.85%.

Earlier this year, Connection Capital invested in two other strategically-located logistics units tenanted by DPD near Lincoln and Aberdeen for a combined total of £14.9million.

Connection Capital says that commercial properties in the logistics sector are particularly attractive as the growth of e-commerce continues to drive demand, which is currently outstripping supply.

DPD group is one of Europe’s largest international delivery companies, and represents a strong tenant covenant, with the strongest Dun & Bradstreet credit rating.

Claire Madden, Partner at Connection Capital says, “We are delighted to have delivered excellent returns in line with our best-case business plan well ahead of our targeted timeframe.”

“Our clients have been able to add a high quality commercial property in an in-demand sector, tenanted by one of the biggest brands in the business to their portfolios – and it has paid off well.”
Dominic Wright at Riverside Capital comments, “There is strong appetite among private investors for this kind of opportunity but they don’t come across their radar very often. Together with Connection Capital, we are changing that.”