LONG LET RPI LINKED GREATER LONDON OFFICE INVESTMENT I

Transcription

1 2 LANGSTON ROAD LOUGHTON IG10 3SD LONG LET RPI LINKED GREATER LONDON OFFICE INVESTMENT I

2 CAMBRIDGE VIRGIN ACTIVE BANK OF ENGLAND PRINTING WORKS WOOLSTON MANOR GOLF & COUNTRY CLUB DEBDEN 2 LANGSTON ROAD LOUGHTON IG10 3SD MERCEDES HIGGINS BMW JUNCTION 5 CHIGWELL LANE A1168 CENTRAL LONDON 2

3 INVESTMENT SUMMARY Prime office investment within Greater London Freehold Grade A, regional HQ office building of 17,128 sq ft on a NIA basis Excellent rail and road connectivity via the London Underground Central Line and motorway Upon completion of the sale, the building will be let in its entirety to Kier Construction Limited, with a guarantee from Kier Limited for 15 years, subject to 5 yearly upwards only rent reviews linked to RPI with a collar and cap of 2-4% A passing rent of 377,190 per annum, equating to per sq ft 99 car parking spaces offering a generous town centre ratio of 1:173 sq ft We are seeking offers in excess of 5,896,000 for the freehold interest, subject to contract, reflecting a net initial yield of 6.00%, allowing for purchaser costs of 6.62% At this level, a purchase returns a reversionary yield of 6.96% in 2021 assuming annualised growth of 3% per annum 3

4 LOCATION HILLYFIELDS The town of Loughton is situated in the Epping Forest district in Essex within Greater London. Loughton is situated 12 miles north-east of Central London and set within 3,750 acres in the south west county of Essex. Loughton has a thriving town centre with a good level of retail amenity supported by a population of approximately 31,000 people. Greater London consists of 32 London boroughs and the City of London. It is Europe s largest business and financial centre and recognised as a leading global location. HIGH RD Loughton VALLEY HILL RODING RD A121 TRAPS HILL ALDERTON HILL OAKWOOD HILL Central London RECTORY LN BORDERS LN A1168 CHIGWELL LN 2 LANGSTON ROAD LOUGHTON IG10 3SD THE BROADWAY Debden A1168 A113 ABRIDGE RD LANGSTON RD Junction 5 Woolston Manor Golf & Country Club J27/6 ABRIDGE RD PUDDING L N North Luton Bishop s Stansted Braintree Luton Stortford Airport Airport A1 (M) Hertford M1 Welwyn Garden City A414 A12 St Albans A10 Epping A414 Chelmsford 27/6 A LOUGHTON 5 A12 M1 A A406 Wickford 4 Tottenham Romford A12 30 Basildon Wembley Ilford A12 M4 LONDON City A13 Richmond Brixton Airport Grays A2 M3 A3 A2 A23 A20 Opington Croydon Rochester A232 Epson M20 M2 London Heathrow Airport COMMUNICATIONS SITUATION The motorway linking Cambridge to London can be accessed at junction 5, approximately 200m from the property. The provides links to the A12 (North Circular) in the south and the is accessed via the A121 to the north. Loughton is served by the Loughton and Debden Underground stations which provide convenient access to Central London, being situated on the Central Line. Approximate journey times on the Central Line from Debden station being 20 mins to Stratford, 30 mins to Liverpool Street and 40 mins to Oxford Circus. From 2018, the Crossrail line can be picked up from Stratford station, which will significantly reduce journey times to Central and West London as well as having a journey time of 43 minutes to Heathrow International airport. London City International Airport is located 14 miles to the south and accessed via the A121 North circular. The property is situated on Langston Road east of the town centre in the commercial precinct of Debden. The building is in a convenient location off Chigwell lane at the exit from the motorway with other notable tenants in the area being; Higgins Construction and the car showrooms of BMW, Mercedes Benz and Volkswagen. The neighbouring Debden industrial precinct is best known for housing the Bank of England Printing Works. 4

5 DESCRIPTION The property was constructed in 2007 and comprises a modern, self contained office building, set over Ground and 3 upper floors. The elevations consist of double glazed glass with glare reducing aluminium cladding on the front elevation. The property has been developed to a high Grade A specification which includes: Air-conditioning Suspended Ceilings with LG7 lighting Single Kone passenger lift Chanelled electrical trunking Male, Female, Disabled Toilets and Shower Facilities on each floor Secure bicycle storage The property also benefits from 99 allocated car parking spaces providing an excellent parking ratio of 1:173 sq ft. 5

6 ACCOMMODATION SITE The property was measured by Lane & Frankham in accordance with the RICS Code of Measuring Practice (6th Edition) and the RICS Property Measurement (1st Edition) 2015 which incorporates the new International Property Measurement Standards (IPMS). The property occupies a rectangular L shaped site extending to approximately 0.48 hectares (1.18 acres). DEMISE IPMS NIA SQ M SQ FT SQ M SQ FT Reception Ground , ,804 First , ,326 Second , ,313 Third , ,091 Balcony Total 1, , ,128 6

7 TENANCY The property is to be let in its entirety to Kier Construction Ltd with Kier Ltd acting as Guarantor. The lease is to be for a term for 15 years subject to 5 yearly upwards only rent reviews index linked to RPI. The rent on commencement will be 377,190 per annum which equates to per sq ft, allowing half rate on reception. The lease is to be drafted on a Full Repairing and Insuring basis. TENURE Freehold RPI LINKED RENT REVIEWS The 5 yearly upward only rent reviews are to be equal to compounded annual growth linked to RPI with a collar and cap of 2-4%. Oxford Economics, a world leader in global forecasting and quantitative analysis, forecasts an average annual RPI of 3.10% for the period *. The UK historic 10 year average annual RPI is 2.99%. The table below gives a summary of the rent and yield scenarios at uplift assuming an annual RPI rate of 3% across the term: REVIEW YEAR Avg Annualised RPI - 3% 3% 3% Rent / per annum 377, , , , Rent/sq ft NIY (on quoting price) 6.00% 6.96% 8.06% 9.35% * HM Treasury Report: Forecasts for the UK Economy, a comparison of independent forecasts 7

8 COVENANT Kier Construction Ltd is part of Kier Group Plc, which employs over 24,000 staff worldwide and has a Turnover in excess of 3bn. The Group is a leading construction, services, residential and property business specialising in building and civil engineering, support services, public and private house building, property development and structured property financing. For further information please go to Below are the summary accounts for the tenant, Kier Construction Ltd, reported for the last three financial periods: 30/06/ /06/ /06/2013 Turnover 1,286,518,000 1,051,967,000 1,002,538,000 Pre-Tax Profit 19,636,000 16,746,000 15,035,000 Net Worth 34,704, ,106, ,372,000 Below are the summary accounts for the guarantor, Kier Ltd, reported for the last three financial periods: 30/06/ /06/ /06/2013 Turnover 2,434,600,000 2,146,800,000 1,868,200,000 Pre-Tax Profit 23,200,000 ( 1,200,000)* 22,400,000 Net Worth 61,000, ,200, ,500,000 * The reported loss in 2014 is related to exceptional operating expenditure, largely to support the corporate acquisition of May Gurney. 8

9 OCCUPATIONAL MARKET COMMENTARY Greater London office rents have experienced significant growth recently with average rental growth of 10.7% in Average office rental growth of 3.1% is forecast for Greater London for the period Rental growth will be further compounded by the effects of Permitted Development and the subsequent constrain on office supply. An ERV of psf is therefore considered to be conservative against a backdrop of prime rentals in the surrounding areas as illustrated. M psf WATFORD M4 HEATHROW AIRPORT A psf LOUGHTON A10 M1 A psf TOTTENHAM A5 A12 A psf psf psf STRATFORD WEST END CITY LONDON psf CANARY WHARF A2 A13 M3 A20 A3 INVESTMENT MARKET COMMENTARY Investment demand for South East offices continued to grow through 2015 with total volumes for the year in excess of 3.9bn across 183 transactions. The 2014 total of 2.5bn was easily surpassed and there remains a depth of demand from investors wishing to enter the market. This is being driven by strong underlying fundamentals and long-term confidence in the strength of the South East economy, which has supported a strong performance in the occupational market. The trend has continued in the first quarter of 2016, whilst good quality office stock remains in short supply and a weight of money continues to flow into the UK market. Investors are continually being drawn to strong property fundamentals from which the building benefits, having a long secure indexed linked reversionary income. Recent comparable transactions offering similar characteristics to the building can be seen below: DATE SOLD BUILDING NAME TOWN TENANT LEASE TERM PRICE NIY CVPSF Mar-16 Horizon Building Gloucester Horizon 15 16,400, % 290 Mar-16 GMAC House High Wycombe GMAC UK Plc 10 6,175, % 313 Jan-16 Beta Building Reading Prudential ,725, % 358 Dec-15 Key Point Bristol TSB Bank 14 16,750, % 250 Aug-15 Leonardo Building Crawley Virgin Atlantic ,350, % 420 Jul Queen Square Bristol KPMG LLP 15 33,000, % 478 9

10 EPC PROPOSAL The property has an EPC rating of E and a score of 67. A copy of the EPC and Recommendation Report is available on request. VAT We are seeking offers in excess of 5,896,000 for the freehold interest subject to contract, reflecting a net initial yield of 6.00% allowing for purchasers costs of 6.62%. At this level, a purchase returns a reversionary yield of 6.96% in 2021 assuming annualised growth of 3% per annum. CONTACT The property is elected for VAT Charlie Lake e clake@lsh.co.uk t James Shaw e jashaw@lsh.co.uk t Matt Jones e mhjones@lsh.co.uk t Misrepresentation Act 1967: Lambert Smith Hampton Group Limited and its subsidiaries and their joint agents if any ( LSH ) for themselves and for the seller or landlord of the property whose agents they are give notice that: (i) These particulars are given and any statement about the property is made without responsibility on the part of LSH or the seller or landlord and do not constitute the whole or any part of an offer or contract. (ii) Any description, dimension, distance or area given or any reference made to condition, working order or availability of services or facilities, fixtures or fittings, any guarantee or warrantee or statutory or any other permission, approval or reference to suitability for use or occupation, photograph, plan, drawing, aspect or financial or investment information or tenancy and title details or any other information set out in these particulars or otherwise provided shall not be relied on as statements or representations of fact or at all and any prospective buyer or tenant must satisfy themselves by inspection or otherwise as to the accuracy of all information or suitability of the property. (iii) No employee of LSH has any authority to make or give any representation or warranty arising from these particulars or otherwise or enter into any contract whatsoever in relation to the property in respect of any prospective purchase or letting including in respect of any re-sale potential or value or at all. (iv) Price or rent may be subject to VAT and any prospective buyer or tenant must satisfy themselves concerning the correct VAT position. (v) In the case of new development or refurbishment prospective buyers or tenants should not rely on any artists impressions or architects drawings or specification or scope of works or amenities, infrastructure or services or information concerning views, character or appearance and timing concerning availability or occupation and prospective buyers or tenants must take legal advice to ensure that any expectations they may have are provided for direct with the seller or landlord and LSH shall have no liability whatsoever concerning any variation or discrepancy in connection with such matters. April / / taylerreid.co.uk 10