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LONDON-Development Securities has started building up a portfolio of high street retail investments, aiming to take advantage of an over-correction in values in the sector. According to Insignia Richard Ellis in-town retail values fell by 7.1% in the year to June 2001, and Development Securities believes this is overdone.

To kickstart its portfolio it has bought properties in Richmond, Southwest London and in Reading, Berkshire, for a total of £4.56 million ($6.5 million).

In Richmond, it has bought 9-11 The Quadrant for £2.79 million ($3.96 million). The property comprises three lower and ground floor retail units let to Britannia Building Society, Ryman and Early Learning Centre and 6,400 sf of self-contained offices over three floors, which are currently vacant. The purchase shows a net initial yield of 3.85%, rising to 9.13% on the completion of rent reviews and the letting of the office space.

And in Reading, Development Securities has bought 81-82 Broad Street–in a prime location between the Oracle Shopping Centre and the Broad Street Mall–for £1.76 million ($5.54 million). The property provides 1,653 sf of ground floor sales and 1,864 sf of ancillary space let to the Paige Group. The purchase price shows a net initial yield of 8.27%.

Development Securities plans to buy more undervalued assets in the retail sector, according to director of investments Matthew Weiner. ‘To some extent, the retail property markets have overreacted to current economic indicators,’ he says. ‘The subsequent mis-pricing has given rise to a number of opportunities to secure properties in strong retail centres while achieving competitive yields.’

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