Quadrant and CarVal team up for £250m Boots buy

Asset manager Quadrant Estates and CarVal Investors have exchanged contracts to buy a £250m portfolio of Boots stores from BMO Real Estate Partners.

The portfolio includes 311 stores and was put up for sale in April 2017.

The sale process has been part of a consensual agreement between BMO and lender FMS Wertmanagement, the German publicly owned “bad bank”.

The £250m sale price reflects a circa 7% yield.

Brookland Partners and JLL have been running the sale process, which is one of the last legacy portfolio sales from the financial crisis.

Quadrant and CarVal outbid other interested parties that included Tristan Capital, Addington Capital, Orion and the original borrower, BMO.

The Boots portfolio was originally bought in 2006 by Leo Noe’s F&C Asset Management in a £298m sale-and-leaseback deal.

Boots agreed a 15-year leaseback on the properties at £15m. BMO acquired the assets through its merger with F&C in 2008.

An arrangement put in place with Boots in 2006 dictates that it is allowed to surrender a proportion of the leases each year, but it is understood that it has withdrawn from very few. The portfolio has an average unexpired lease length of around three years.

The new owners will likely look to regear the leases with Boots, as well as explore asset management opportunities.

Despite the headwinds currently facing the high street, pharmacists and health and beauty retailers such as Boots are regarded as having a healthy covenant.

In addition to its pharmacy element, Boots remains buoyed by its health and beauty offering, which people prefer to buy in store rather than online.

According to EG data, online sales account for only 4.5% of health and beauty sales compared with a national average of 15%.

In its latest results, the retailer posted a 3.7% slip in sales in the three months to February 28. The US owner of the company, Walgreens Boots Alliance, blamed the reduction in pharmacy funding in the UK for the fall in results.

Amber Rolt - Estates Gazette