LONDON—Kennedy Wilson Europe announces that ithas closed on a portfolio of 180 mixed use properties locatedacross the UK from multiple receivers on behalf of AvivaCommercial Real Estate Finance for a purchase price of$785 million (£503M), reflecting a net initial yield of 6.9% (grossyield 7.2%).

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The acquisition is expected to complete at the end of Januaryand will be funded from the company's cash resources and a new $549million (£352.3M) secured loan facility with Aviva.

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"This significant portfolio acquisition allows us to access ahigh quality mixed use portfolio with strong tenant covenantsgenerating robust income streams at a material discount to theoriginal loan amounts, said Mary Ricks, presidentand CEO of Kennedy Wilson Europe. “The portfolio benefits from anumber of institutional quality investments with good individualasset liquidity across the remaining portfolio. There aresignificant asset management angles, including growing incomethrough lease re-gears, renewals, rent reviews and the leasing upof vacant space. We are pleased to have vendor finance provided onsuch a material transaction and to be adding Aviva to KWE'sportfolio of lenders."

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The 3.5 million square feet portfolio is 98%occupied with a WAULT of 9.6 years (11.1 years toexpiration) and generates total net rental income of $56 million(£36.1M) million. Its geographic concentration is predominatelyEngland, 54% weighted towardsLondon and the South East with 5%of value weighted towards Scotland andWales. The primary sector use is retail,food and convenience, comprising 62% of the value of theportfolio followed by leisure at 14%,industrial at 12%, and office andhotels at 6%, respectively.

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Ewan Tocher, managing director, Aviva UK lifecommercial mortgage restructuring, added:

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"The sale of this portfolio was central to concluding ourproperty restructuring strategy for 2014 and we are very pleasedthat the high quality nature of the assets and income streams wereattractive to KWE as an investor. The sale has allowedBarry Fowler's team in Aviva Commercial Finance toestablish a new relationship with KWE through the provision of anew long term debt facility. With gilt yields at all timelows, we can offer attractive and competitive all-in financingcosts for quality portfolios owned by experienced operators and weare keen to develop this relationship further."

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The portfolio includes strong institutional grade propertieswith the top ten assets representing 31% of the purchase price anda combined value of $240 million (£153.5M). These include the likesof the Travelodge hotel in King's Cross, London,the Waitrose Superstore in Saltash, Cornwall andthe Asda Superstore in Hemel Hempstead.

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The top ten tenants represent 32% of total net rental incomewith a WAULT of 12.6 years (14.9 years to expiration). Theseinclude robust covenants such as Wincanton, Debenhams,Travelodge, Waitrose andMatalan.

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Upon completion of the acquisition, the KWE investment portfoliowill have a value of $3,040 (£1,948.5M), with net rental income of$203 (£130.1M), generating a net initial yield of 6.5% (gross yield6.7%). The portfolio geographic split will be 72% UK and 28%Ireland with an asset mix of 89% direct real estate and 11% loans.The main sector splits will be 40% office, 27% retail and 8%industrial.

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CBRE advised Kennedy Wilson, and andJones Lang LaSalle advised Aviva.

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David Phillips

David Phillips is a Chicago-based freelance writer and consultant with more than 20 years experience in business and community news. He also has extensive reporting experience in the food manufacturing industry for national trade publications.