By Richard Hook – Tuesday 2nd October 2018
Palace Capital has signed a new 20 year lease with Aldi on the same day the German discount supermarket chain announced plans to open 130 new stores in the UK over the next two years.
The supermarket announced a £1bn investment and expansion plan for the UK alongside annual results which showed customer numbers grew by more than 1.1 million to 15.8 million, giving Aldi an all-time high 7.6% share of the grocery retail market in the UK. Aldi sales passed £10bn across the UK and Ireland in 2017 as profit increased by 29% year-on-year to £417.3m.
A planned expansion strategy, to support the company’s existing branch upgrade strategy, will see Aldi open 130 new stores between 2019 and 2020, with three new regional distribution centres also planned.
Giles Hurley, chief executive officer at Aldi UK and Ireland, said: “Our future investment plans underline our continued commitment to growing responsibly in the UK. The revolution in British grocery shows no sign of slowing. While other grocers introduced more complexity into their businesses in their struggle to win back customers, we stuck to our guns and focused on doing what Aldi does best – buying smart, staying lean, improving quality and keeping prices low.
“Our biggest strength is our simplicity – a carefully selected range of exclusive own-label brands and award-winning products at the lowest prices. Millions of Britons can put fantastic tasting food on their table every day of the week, at prices they can afford.”
In the first step of the expansion plan, Aldi has signed for Palace Capital’s retail asset in Gosport, Hampshire, securing a 17.4% uplift in rental income.
The asset was originally acquired by Palace Capital in October 2017 as part of the £71.8m RT Warren portfolio.
Aldi previously leased a 16,500 sq ft supermarket on the site from RT Warren on a lease expiring in August 2030 at a rental of £247,800 per annum. This existing lease has now been surrendered and a new 20 year lease has been agreed with the supermarket, which also now includes a small amount of additional land for car parking, until September 2038 without a break at an increased rental of £291,000 pa. The property will continue to be held as a long term investment by Palace Capital.
Neil Sinclair, chief executive of Palace Capital, added: “When we acquired the RT Warren portfolio, which was the best portfolio we has seen in the UK property market for some time, we knew that it contained significant latent potential that we would be able to unlock with our asset management expertise, and this new deal is a strong example of that.
“We have increased our income and lease term to 20 years to a strong covenant which has a positive effect on the value of this property. We continue to actively asset manage the other properties within the RT Warren portfolio and look forward to updating the market on our progress in due course.”