Teesdale House. Modern Office Investment Opportunity in a Strategic Location with Secure Government Income. Stockton TS17 6BL

Transcription

1 Teesdale House Modern Office Investment Opportunity in a Strategic Location with Secure Government Income Stockton TS17 6BL Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

2 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Executive Summary Modern, purpose-built office extending to 15,964 sq ft with generous parking provision Strategically located on Teesdale Business Park, the prime office location on Teesside Fully let to NHS Property Services Limited at a low, re-based rent of 9.99 per sq ft with fixed uplift of 38% in June 2018 Significant tenant s improvements undertaken throughout 2014, providing a strong indication of the tenant s commitment to the unit Excellent asset management and rental growth potential Offers in excess of 1.6M are sought for the freehold interest reflecting a net initial yield of 9.42%, and a reversionary yield of 13.00% after deduction of standard purchaser s costs of 5.8%.

3 Riverside Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Location A68 A69 Durham A69 62 Sunderland Stockton-on-Tees is situated approximately 250 miles north of London, 58 miles north of Leeds and 35 miles south of Newcastle upon Tyne. The town is an important sub-regional centre and is a major focus for retail and leisure activity in the area. The Teesdale Business Park is positioned to the east of the town centre, within the curve of the River Tees. Stockton is positioned at the intersection of the A19 and A66 Trunk Road, which provide easy access to the A1 (M), approximately 15 miles to the west. Travelling via the A19, it is possible to connect to Leeds, York, Durham and Newcastle within one hour s drive time. urban conurbation and the wider region of the North East of England. It has an urban area population of circa 85,000 people and a wider district population of approximately 190,000 people, with an estimated 350,000 people living within 6 miles of the town centre. Immediate access to the National Rail Network is provided by Thornaby Station, which is approximately two to three minutes walk from the subject property. Thornaby Station connects to Darlington and the East Coast Main Line. In turn this provides direct services to London s Kings Cross (2½ hours travel time) and Edinburgh (2 hours travel time). A688 A688 A A1(M) A19 Stocktonon-Tees Middlesbrough Darlington The Property A19 Stockton-on-Tees is an astutely located commercial centre within both the immediate A1046 N Shore Rd Stockton -on-tees Yarm Ln A1305 Prince Regent St A1305 A1130 The Property Westpoint Rd Yale Cres River Tees Harvard Ave Princeton Dr East Dr Princeton Dr A135 A66 Mandale Rd A1300

4 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Situation Teesdale Business Park is situated to the south of Stockton town centre on the River Tees and extends to over 700,000 sq ft of office, education, leisure and residential space. It is estimated that 4,500 people are employed on the park and it is widely recognised as the commercial heart of Teesside in addition to being one of the major business centres in the north east. Major occupiers on the park include Inland Revenue, Santander, DVLA, Swift Insurance, Barclaycard, Siemens, Atkins, the Royal Bank of Scotland, First Choice Holidays plc, Cummins Ltd, Halcrow Group, Serco, Allied Bank and Bond Dickinson solicitors. Durham University s Queens Campus and Woolfson Research Institute are located on the estate, alongside Stockton Riverside College, creating demand for retail and leisure use alongside residential accommodation, the conversion potential for which underpins capital values across Teesdale Park. There are proposals from Muse, the development arm of AMEC, to build a mixed use scheme including residential on North Bank, situated immediately on the opposite side of the River Tees. GVA are involved in advising Muse and we are aware that the scheme is targeting rents of per sq ft for Grade A space on a pre-let basis. The first office building extending to an area of 43,000 sq ft, has been pre-sold to Thirteen Group Housing Association with completion due in Spring 2015, for a price exceeding 165 per sq ft. Over 50 new homes have already been completed and sold at Northshore as part of the award-winning Vivo residential scheme. A further 76 new homes will be built this year.

5 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Description The property comprises a modern, purpose built office building over three storeys, with brick / block walls and a pitched, hipped roof with tile covering and dormer windows. The uppermost floor is situated in the roof void. The internal accommodation is set out to provide cellular and open plan offices, meeting rooms, stores, kitchen areas and WCs, alongside a well-appointed reception. Vertical access is via a passenger lift and stair to all floors. The building benefits from suspended ceilings and recessed lighting to the office areas, alongside a combination of perimeter radiator heating and air conditioning cassette units. Externally, there is a large block paved car park providing 60 marked parking bays with a generous ratio of 1:266 sq ft. The property occupies a site 0.89 acres (0.36 ha) with a low site coverage ratio of 20%.

6 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Accommodation Tenancy The property provides the following accommodation. Floor Areas (NIA) Sq m Sq ft Ground ,425 First ,476 Second ,063 Total 1, ,964 Please note that the above areas do not include tenant s improvements. The property is fully let to NHS Property Services Limited on fully repairing and insuring terms from 29 January 2013 until 25 June The rent passing is 159,440 per annum ( 9.99 per sq ft), with a fixed uplift on 24th June 2018 to 220,000 per annum ( per sq ft), an increase of 38%. The tenant has an option to break on 24th June 2018, subject to 9 months notice. The current lease is a renewal and alongside substantial recent improvement works, reflects the tenant s continued commitment to the unit. The property is the NHS s regional headquarters and as such is occupied by Hartlepool & Stockton Clinical Commission Group (HSCCG). HSCCG represents over 30 GP practices across the Hartlepool and Stockton area and are responsible for planning and paying for a range of health services covering everything from routine operations, emergency and urgent care, learning disabilities, long term conditions, end of life and mental health care. HSCCG is directly funded by the NHS with an annual budget of 370 million. Tenure Covenant Freehold. NHS Property Services (NHSPS) is a limited company wholly owned by the Secretary of State for Health, with a remit to provide estate and facilities management for NHS facilities across the UK, from GP practices to administrative buildings. NHSPS maintains, manages and improves over 4,000 properties, working in partnership with NHS organisations and taking over the former Primary Care Trust and Strategic Health Authority portfolio. As the Secretary of State is the sole shareholder in NHS Property Services, the covenant provided by the tenant can be considered as undoubted.

7 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Occupier Markets/ Asset Management The North East occupational market has witnessed a return to strength, with prime headline office rents regaining their pre-recession peaks and year on year take up starting to increase significantly, exceeding recorded levels for the preceding four years. Added to this, a lack of development during the economic downturn has led to a shortage of good quality office space across the region, with supply shortages appearing in key locations. The Teesside Occupier Market covers the areas of Middlesbrough, Stockton, Billingham and Hartlepool, together with surrounding smaller settlements, with an approximate population of 650,000 people. Teesdale Business Park is the prime office location on Teesside, located adjacent to Stockton town centre. It is the largest park on Teesside and attracts the region s major occupational requirements. Rents on the park peaked in 2007, when they reached rates of per sq ft for the smaller new build space of up to 5,000 sq ft with per sq ft generally accepted as the rental tone at the time. We are aware that some modern stock on the estate is currently let at rents of per sq ft, rising to per sq ft. Asking rents on the park for equivalent accommodation are between 11 and 18 per sq ft. The rebased rent within Teesdale House of 9.99 per sq ft therefore provides an excellent platform for growth moving forward and allows flexibility to emplace value-add asset management initiatives. Notably, removing the rental uplift in 2018 in return for non-activation of the break option or agreeing a term extension presents an obvious method of enhancing value, particularly against a backdrop of improving occupier demand. The quoting price reflects a capital rate of 110 per sq ft, which appears favourable compared to the most recent sale at Northshore due to complete in Spring 2015.

8 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Investment Market The North East investment market has mirrored a recovery in other provincial centres, with strong demand for both single and multi-let offices in key locations supported by improved economic conditions and prospects for rental growth. Details of a number of recently completed single and multi-let investment sales are provided in the table below. Investment Considerations Address Description Lease terms Price Date & NIY Yield Unit 2 Staithes, The Watermark, Gateshead Dunedin House, Teesdale Business Park Tyneside House Skinnerburn Road, Newcastle Business Park Detached office unit located on an established estate within Ω mile of the A1(M). Unit extends to 3,850 sq ft 98,268 sq ft multi-let office on the same estate as the subject, constructed Mid 1990 s office building on established business park extending to 26,580 sq ft with garage store of 6,553 and 195 CPS. Freehold Let to WHP Partnership at a rent of 70,500 per annum ( per sq ft) with 3 years unexpired at the time of sale 62% let to tenants including Secretary of State for the Environment, Atkins and RBS 25 years to Environment Agency from June 1995 at 350,000 pax ( 12/ sq ft) FR & I terms with 5 yearly OM reviews (6.25 years UT) 695,000 September % 4.75M August % Triple Net 4.135M June % Comments Rent passing equates to per sq ft Significant capex required throughout common parts and office suites. Located on eastern (city centre) edge of rate 1980 s early 1990 s business park. Government tenant. Asking price was 3.675M We consider the following points are of particular relevance when assessing the investment. Prominent office building in a prime commercial location, providing 15,964 sq ft of modern, high specification accommodation Excellent transport links and in close proximity to a well-educated workforce pool Let to an undoubted government tenant who fully utilise the space Passing rent has been rebased to below the market tone and the income profile benefits from a fixed increase of 38% in 2018 Excellent value-add opportunities through removing the tenant s break option with leverage available in the form of fixed uplifts. The tenant has recently undertaken significant improvement works and the lease was renewed in January 2013, demonstrating their commitment to the building. Q8, Quorum Business Park, Longbenton, Newcastle Upon Tyne 100,353 sq ft Grade A office building, completed 2010 Fully Let to Tesco Bank PLC with 10.6 years unexpired. Passing rent 1.5M ( per sq ft) M June % Anchor tenant on an out of town estate with high vacancy rates.

9 Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Further Information EPC The property has an EPC rating of 66 - Band C. VAT The property has been elected for VAT and it is envisaged that the transaction will be treated as a TOGC. Proposal Our client is seeking offers in excess of 1.6M (One Million, Six Hundred Thousand pounds) subject to contract and exclusive of VAT. A purchase at this level reflects a net initial yield of 9.42%, and a reversionary yield of 13.00% after deduction of standard purchaser s costs of 5.8%. Luke Symonds luke.symonds@gva.co.uk Simon Beanland simon.beanland@gva.co.uk gva.co.uk/8615 GVA Central Square, Forth Street Newcastle upon Tyne, NE1 3PJ Subject to Contract February 2015 Or for any other investment sales please visit: gva.co.uk/investment

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