Prime Food Led Retail Warehouse Funding Opportunity
Investment Summary Location benefiting from significant inward investment and growing catchment A1 Retail Use including food and Drive Thru s Pre-lets include: M&S Foodhall, Lidl, The Food Warehouse, Home Bargains, McDonald s and Costa with the final unit being currently under offer WAULT of 17.8 years to expiry (14.7 years to break) 73% of the income is to food led operators 41% of the income is subject to geared increments Freehold We are instructed to seek offers in excess 23,400,000, subject to contract A purchase of this level would reflect a net initial yield of 5.50% and an equivalant yield of 6.00%, adopting purchaser s costs 1.8% plus SDLT on the land sale Offers invited on a full funding or forward commitment basis 02
Location Gosport is an established Hampshire town located on the south coast of England, which provides 17 miles of waterfront to the Solent and Portsmouth Harbour. The town is famous for its military and maritime facilities and boasts 1,300 yacht berths across 3 marinas. The town still has military connections with HMS Sultan, which comprises 179 acres and employs over 3,000 people, being the UK s largest Royal Navy Training establishment and home to the engineering, marine engineering, survival schools and the Navy s Nuclear Department. The base is additionally used by Network Rail and EDF Energy as their training centres. It is estimated that 1.7 million tourist trips are made to Gosport annually, taking advantage of the attractive landscape, maritime facilities and the historical sites and museums. Tourism brings 74 million annually into the local economy. Today Gosport is the focus of significant investment across public and private residential, infrastructure and commercial sectors. An example is Daedalus, which, backed by Enterprise Zone status, is the largest employment site in the area, with potential for up to 500 000 sq ft of new business space, and is set to become the premier centre of excellence for aviation, aerospace, marine and advanced engineering businesses in the south. Communications 74 miles south west of London The A32 Trunk Road is the principal access route through Gosport, which to the north links directly to the A27 and M27, which in turn accesses Southampton and the M3, 20 miles to the west. Southampton Airport is 17 miles to the north west while the fastest train travel time to London is via Portsmouth Harbour, taking 1 hour 33 minutes. 15 miles east of Southampton 3 miles west of Portsmouth Wickham Whiteley A334 Fareham A27 Titchfield A32 Lee-on-the-Solent Legend Brockhurst Gate 10 minute from site 15 minute from site A3 Waterlooville A3[M] M27 Portchester A27 COSHAM M27 M275 A32 Gosport DRIVE TIMES FROM SITE Portsmouth A2047 Southsea A27 A2030 03
Situation The development benefits from significant prominence to the A32 Trunk Road and is located at its junction with Heritage Way. The A32 provides direct access to the A27 and M27 5 miles to the north; and to Gosport town centre and Ferry 2 miles to the south. Opposite the development is the Gosport leisure complex, which provides a full range of leisure facilities including an ice rink, which has been recently refurbished. The complex receives 600,000 visits a year. Additionally, adjacent to the complex is a recently extended 99-bed Premier Inn and The Sailmakers Pub/ Restaurant. Indicative site outline Catchment & Demographics Gosport has a town population of 86,000, while 174,000 people live within a 15 minute drive and 360,000 people in a 10km radius. cc-by-sa/2.0 - T Wiffen - geograph.org.uk/p/148734 Gosport typically has an older, affluent and skilled demographic with CACI recording that skilled workers account for 36.7% of the population against a GB average of 12.8%. Unemployment is impressively low at only 1.1%, with the GB average being 4.9%. The area is subject to a number of major key developments, which alongside the subject development will further improve Gosport and its environs: Royal Haslar Developers, Our Enterprise, plan to redevelop the former military Hospital into a luxury residential and retirement village with ancillary uses. The 63 acre site will comprise 500 private homes, 60 bed care home, 74 bed hotel, 200 retirement units and associated commercial uses. Rowner Regeneration - The Local Authority and Taylor Wimpey in partnership are undertaking a phased redevelopment of the former Rowner Estate. The development, whose last phase is under construction, is to total 620 new homes and commercial space over 45 acres. Fort Blockhouse, a current naval establishment and submarine depot, is set to be released in 2020 for private development. The site, which covers 57 acres, benefits from a number of quays and historic buildings and will comprise a major regeneration focusing on commercial, maritime and marinas alongside extensive residential and general commercial uses. 04
Retail Warehouse Provision There is no modern retail warehousing in Gosport, with the nearest closest competition being in Fareham. Brockhurst Gate will therefore be the first modern purpose-built scheme to serve the local catchment. A Southampton Road Retail Park Southampton Road, PO14 4PH Open A1 non-food planning consent (with certain exceptions) Scheme comprising three units totalling approximately 67,400 sq ft Occupiers include Carpet Barn, Argos Extra and Dunelm Mill B Southampton Road cluster Southampton Road, PO14 4PH Range of planning consents including Open A1 including food, non-food, bulky goods and restricted C Broadcut Retail Park Broadcut, PO16 8SU Open A1 non-food planning consent Scheme comprising units let to Poundstretcher, Dreams, Boots and a Sainsbury s nearby D Collingwood Retail Park Newgate Lane, PO14 1AN Open A1 non-food planning consent comprising 5 units totalling 75,000 sq ft Occupiers include Homebase, Poundstretcher, Matalan, Pets At Home and Costa Coffee E Newgate Lane cluster Newgate Lane, PO14 1AN Range of planning consents including open A1, with food, non-food and leisure Cluster of units including B&M, Wickes, Asda, Carpets 4 Less, Topps Tiles, Lidl and McDonald s B A Whiteley Titchfield C A27 A334 Fareham D E A32 COMPETITION MAP M27 Portchester A27 Cluster of retailers including B&Q, Harveys, Smyths Toys, Currys/PC World, Halfords, CarpetRight, Home Bargains and Pets at Home Lee-on-the-Solent A32 Gosport 05
Planning indicative site plan Planning permission has been confirmed for the development of a terrace of 5 units and 2 designated A3 drive thru units. Units 3-6 benefit from A1 retail use, including food and excluding fashion. The scheme is to be served by a 332 space car park, which includes dedicated car parking for the A3 drive thru units. The developer will undertake to provide leisure facilities on an adjoining site as part of the development. Football pitches and a clubhouse for public use are to be constructed. Further information and copies of all relevant Timing The developer is expecting to be on site in November 2017 with a targeted Practical Completion date of September 2018. 06 Un de ro ffe r documents are available in the dataroom.
Tenancy Schedule Unit 1 Tenant McDonald s Restaurants Limited t/a McDonald s GIA Term Rent Rent (sq ft) (years) (Per Annum) (psf) Notes Ground floor 2,784 sq ft plus a first floor of 2,663 sq ft at half rate 5,447 20 117,000 28.23 At year 5 rent to be reviewed to OMRV or 10% minimum uplift. 5 yearly reviews to OMRV thereafter Rent free - 3 months 2 Costa Limited t/a Costa 1,800 15 60,000 33.34 Rent review based on OMRV subject to a minimum 5.1% and maximum 15.93% uplift (1% to 3% pa) Rent free - 8 months Rent review 5 yearly based upon 2% pa compounded 3 Lidl U.K. GmbH t/a Lidl 20,268 25 364,824 18.00 Tenant break options at 15 and 20 years Rent free - 3.5 months 4 5 6 Marks and Spencer plc t/a M&S Foodhall T.J. Morris Limited t/a Home Bargains Iceland Foods Limited t/a The Food Warehouse Additional mezzanine area of 5,000 sq ft (not to be rentalised) 11,000 15 220,000 20.00 Rent reviews based on OMRV, capped at 13.14% (2.5% pa) Rent free - 3 months 15,000 15 225,000 15.00 10,749 10 188,108 17.50 7 Under Offer 6,759 135,180 20.00 Total 71,023 1,310,112 Rent reviews based on OMRV, capped at 10.41% (2.0% pa) Rent free - 12 months Rent review based on OMRV Rent free - 12 months The development is 90% pre-let to a range of national multiple retailers on full repairing and insuring terms with the final unit being currently under offer. Agreements for Lease have been exchanged with all tenants, while discussions are ongoing on the vacant unit 7. The initial rent is to be 1,309,932 per annum, with 41% of the income being subject to fixed increases at rent review. On the basis of minimum fixed increase and an established rental value of 20.00 psf the income will run to a minimum of 1,412,954 per annum at first review and 1,483,949 per annum at the second review. The developer will make up any income shortfall post completion resulting from residual tenant rent free periods. Copies of the Agreements for Leases are available in the dataroom. Tenant Covenant Sales Pre-Tax Shareholders Unit Tenant Year End Turnover Profits Funds (000s) (000s) (000s) 1 McDonald s Restaurants Ltd 31/12/2015 1,535,510 270,826 922,513 2 Costa Limited 03/03/2016 835,037 117,498 545,353 3 Lidl U.K. GmbH 29/02/2016 38,277,000 2,114,000 9,061,000 4 Marks and Spencer plc 02/04/2016 10,555,400 488,800 6,019,300 5 T.J. Morris Limited 30/06/2016 1,602,865 136,993 614,800 6 Iceland Foods Limited 24/03/2017 2,770,500 67,300 805,000 7 Under offer 07
Tenure The site is freehold. VAT The property is elected for VAT. The sale is expected to be dealt with as a TOGC. Developer Millngate is a medium-sized UK based developer, established in 1997, with a track record of successful mixed-use development projects around the country that have benefitted local communities and the economy. For further information, please view: www.millngate.co.uk A full set of warranties will be available to the purchaser and a full list of the professional team is available in the dataroom. Proposal We are instructed to seek offers in excess of 23,400,000, subject to contract, reflecting a net intial yield of 5.50% and an equivalant yield of 6.00%, adopting purchaser s costs 1.8% plus SDLT on the land sale. Method of Funding Our clients will consider the following methods of funding: Full funding, including land sale and interim finance Forward Commitment For Further Information: Access to the dataroom is available upon request. Simon Eddy Director Capital Markets 020 3824 4729 seddy@lsh.co.uk www.brockhurstgaterp.co.uk Jeremy Green Director Capital Markets 020 7198 2220 jgreen@lsh.co.uk John Butt Director Retail Agency 02380 713076 jbutt@lsh.co.uk Lambert Smith Hampton September 2017. Details of Lambert Smith Hampton can be viewed on our website www.lsh.co.uk This document is for general informative purposes only. The information in it is believed to be correct, but no express or implied representation or warranty is made by Lambert Smith Hampton as to its accuracy or completeness, and the opinions in it constitute our judgement as of this date but are subject to change. Reliance should not be placed upon the information, forecasts and opinions set out herein for the purpose of any particular transaction, and no responsibility or liability, whether in negligence or otherwise, is accepted by Lambert Smith Hampton or by any of its directors, officers, employees, agents or representatives for any direct, indirect or consequential loss or damage which may result from any such reliance or other use thereof. All rights reserved. No part of this publication may be transmitted or reproduced in any material form by any means, electronic, recording, mechanical, photocopying or otherwise, or stored in any information storage or retrieval system of any nature, without the prior written permission of the copyright holder, except in accordance with the provisions of the Copyright Designs and Patents Act 1988. Warning: the doing of an unauthorised act in relation to a copyright work may result in both a civil claim for damages and criminal prosecution. 08