Alternative Income REIT PLC on Tuesday said it acquired a Virgin Active gymnasium in Streatham, London for £5.1 million on a lease of over 10 years.

The London-based investor, which specialises in alternative and specialist real estate sectors such as hotels and healthcare, said the unexpired lease term is subject to five-yearly upwards only uncapped rent review linked to retail price index.

Alternative Income REIT said the asset has a passing rent topped up by the vendor to £390,121 per year, equivalent to the current annual estimated rental value level, until the next rent review, which is due toward the end of September 2024.

The £5.1 million reflects a net initial yield of 9.8% and a discount to replacement cost, while redeploying the majority of the net proceeds from the group’s disposal of the Mercure Hotel in Glasgow for £7.5 million at a higher initial yield.

Alternative Income REIT expects to invest the remainder of the proceeds in the first quarter of 2024.

The gym is fully let to Virgin Active Health Clubs Ltd and is guaranteed by Virgin Active Health Club Holdings Ltd, part of the Virgin Active Group.

Alternative Income REIT said the club is trading well in this location just off Streatham High Road,‘ benefitting from a densely populated residential area and the hybrid work ethos’.

‘We are pleased to have acquired for £5.1 million the Virgin Active in Streatham, south-West London, which is a premier leisure club that is trading well in an excellent location and is let on a long lease with uncapped index-linked rent reviews,’ said Chair Simon Bennett.

‘The board remains confident that the group is well positioned, given its diversified and fully let portfolio that delivers secure, long-term and index-linked income flow.’

Shares in Alternative Income REIT were up 1.3% to 71.40 pence each in London on Tuesday afternoon.

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