Prime South East Open A1 Retail Park Investment
Airport Retail Park Rochford Road, Southend-On-Sea, SS2 6FW
“Southend-On-Sea’s dominant open A1 retail park”
2
Investment Summary ▪ Southend is a major commercial town in the south east with an extensive and affluent catchment population estimated at 310,000. ▪ Prominent site fronting onto the roundabout junction of the A1159 Manners Way and Rochford Road, 1.5 miles north of the town centre. ▪ Purpose built retail warehouse park of 9 units and a restaurant totalling 91,794 sq ft with 425 car spaces providing an excellent ratio of 1:215 sq ft. ▪ Open A1 non food planning consent, which permits further subdivision. A number of units have existing mezzanines in place. ▪ Fully let to national retailers with a weighted unexpired term of over 11.5 years. ▪ Total contractual income of £2,027,235 per annum, reflecting low passing rents of £19.93 - £23.14 per sq ft. ▪ Asset management opportunities. ▪ Offers in excess of £23,970,000 (Twenty Three Million, Nine Hundred and Seventy Thousand Pounds), subject to contract and exclusive of VAT. ▪ A purchase at this level would show the following attractive yield profile, assuming purchase costs at 5.725%:
Net Initial Yield
8.00%
Reversionary Yield
8.56%
Nominal Equivalent Yield
8.27%
True Equivalent Yield
8.71%
3
Location Southend-On-Sea is a major commercial centre located in Essex within the Thames Estuary, approximately 45 miles east of central London, 15 miles east of Basildon and 20 miles south east of Chelmsford. The town benefits from excellent communications with the A127 and A13 providing direct links to the M25, approximately 18 miles to the west. In addition, the A127 connects with the A130 approximately 13 miles to the west, which in turn provides direct access north to Chelmsford and south to Thurrock. Rail services are provided from Southend East and Central Stations to local destinations and London Fenchurch Street, with a journey time of 50 minutes. Victoria Station provides rail links to London Liverpool Street, with an average journey time of 1 hour.
Airport
London Southend Airport is situated 2 miles north of the town centre and currently provides a range of domestic and European services. There are major growth plans for Southend and in 2005 a public-private urban regeneration company called “Renaissance Southend” was established to focus on achieving regional centre status for Southend.
Retail Park
A1159 A127
By 2021, there are plans to generate 13,000 new jobs and 6,500 new dwellings, secure the expansion of the University of Essex, improve the quality of the Borough’s employment land supply and premises, with a focus on London Southend Airport, and deliver on a programme of major physical change and renewal in Southend town centre.
Greyhound Retail Park
Further details can be found at:
www.renaissancesouthend.co.uk
Catchment and Demographics
Weybridge
9
Sanderstead
7
A2
0
A2
1
2
4
M20 M25 Otford 2 M26 5
M25
4
5
6
Westerham Leigh
Penshurst
6
A2
5
9
A24 7
Bearstead
M2
6
Doddington
8
Coxheath Hadlow Marden Paddock Wood
A299
4
3 3
Eastchurch Leysdown-on-Sea
9
4 A2
Sutton Valence
A229
Horley
M23
Edenbridge
Grain
Hoo
Meopham Eynsford
1 A2
Salfords
A22
Holmbury St Mary
2
Biggin Hill
S
6
8
Allhallows -on-Sea
7
A2
Blean
Cliftonville
A28
Manston
A28
Broadstairs
A253 Minster
Sturry
Dunkirk
Wingham
A2
SURREY
A2
Orpington
2
9
Great Wakering Shoeburyness
Coryton
Cliffe
BIGGIN HILL
A2
10
A3
M25
A232
Esher
A2 4
11
Bromley
7
M20
Challock Lees
Hothfield Headcorn
9
8
Barham
A256
Streatham
1 The site totals approximately 2.6 hectares (6.5 acres) with a site cover of approximately Chertsey 32%.
A12
A2
KENT
260
HEATHROW
LONDON A205
Rochford
SOUTHEND
28
A4
Retail Park
Basildon
Stanford le Hope
30 31
Southminster
Airport
South Woodham Ferrers
A2
H
28
2 1
A2
14
S
1
A10
A10
3
Latchingdon
Billericay
8
4
Holland-on-Sea
Bradwell-on-Sea
Danbury Ingatestone
A12
Site
A13
Tiptree
Tollesbury
A414
M25
Barking
CITY
2
A1
ESSEX
A127
Walton-on-the-Naze Frinton-on-Sea
Brightlingsea
Chelmsford
7
GREATER LONDON
A13
30
Leaden Roding
M11
Ealing
A24
4
A1
7 2 1 The shopping population is estimated Bovingdonto 22 Epping Ongar spend £542m annually on comparison 20 goodsRadlett 26 24 M25 25 19 items and according to 2006 expenditure 5 Theydon Borhamwood 5 Bois 18 catchment forecasts, the 10 minute drive time M1 4 S 17 M11 28 was estimated to spend £32.13m on Rickmansworth textiles Finchley A12 Edmonton 6 Pinner 2 Northwood A40 4 Hainault and furnishings which is 16% above the 29 Romford Ruislip 1 A41 A40 national average. 1 06
The subject property is situated in a highly accessible and prominent location approximately 1.5 miles north of Southend town centre fronting onto the roundabout junction of the A1159 Manners Way and Rochford Road, immediately adjacent to Southend Airport.
Great Dunmow
A120
Sawbridgeworth
3
A4
Situation
S
A1 3
M10
8
Much Hadham
A12
8
at-Stone
A130
According to CBRE catchment statistics, the shopping population ranks 83 nationally by size out of more than 2,000 trading locations.
2 Watton
A23
The primary catchment population is estimated at 310,000 (promis).
A60
LUTON
Knebworth The town has a good socio-economic10profileCodicote Welwyn with 55.7% of the population classed within 6 9 Harpenden ABC social groups, compared to the UK HERTS. 5 4 average of 51.1%.
A133
11
Southend-On-Sea has a substantial urban population of 160,257 and an estimated 240,927 people within a 20 minute drive time.
Temple Ewell
Walmer
A2
Kingsdown
Description and Accommodation The subject property comprises a purpose built retail park constructed in two phases over 1997 - 1998. The property is well configured with 9 retail units arranged in an L-shaped terrace with customer car parking spaces laid out to the front of the units and separate rear servicing. There is a standalone drive-thru restaurant at the entrance to the scheme. In total there are 425 car spaces providing an excellent car parking ratio of 1:215 sq ft.
Tenant
Sq ft
Sq m
Comments
Pets at Home
8,842
821.42
2,688 sq ft trading mezzanine
Dreams
5,808
539.56
2,273 sq ft trading mezzanine
Carpetright
9,689
900.11
Argos
9,832
913.39
7,192 sq ft storage mezzanine
Harveys
9,858
915.81
6,050 sq ft trading mezzanine
Allied Carpets
9,892
918.97
PC World
14,804
1,375.29
2,553 sq ft storage mezzanine
Staples Sports Direct
10,033 10,010
932.07 929.93
8,496 sq ft trading mezzanine
McDonalds
3,026
281.12
Total
91,794
8,527.67
“Fully let to ten national retailers with an average unexpired term of 11.5 years”
5
Planning The subject property benefits from an open A1 non food consent. Outline planning consent was originally granted for units 1-6 in May 1995 and reserved matters approved in 1997. The planning consent contains a restriction that “no part of the permitted development shall be used for the sale of food, drink or tobacco, other than where sold in a cafeteria or canteen ancillary to the use of any building.” There are no restrictions on subdivision or minimum unit size.
Unit 7 was approved in 1998 for a building of 1,858 sq m and alterations to the car parking subject to the same use restrictions as outlined above but with a restriction against subdivision. Consent was subsequently granted later in 1998 for variation of the consent to allow subdivision into not more than two units, with the proviso that no unit shall be smaller than 900 sq m gross. The McDonalds unit was granted planning consent in December 1997.
Tenancy
Tenure
The subject property produces a current total contractual income of £2,027,235 per annum. All leases are drafted on institutional full repairing and insuring terms with 5 yearly upwards only rent reviews as set out below:
The property is held freehold.
Unit
Tenant
Area
Lease Start
Lease Expiry
Next Rent Review
Rent (psf)
1a
Pets at Home Ltd
8,842
29/10/2002
23/06/2022
29/10/2012
£198,945 (£22.50)
1b
Dreams plc
5,808
31/01/2003
23/06/2022
31/01/2012
£134,390 (£23.14)
2
Carpetright plc
9,689
24/06/1997
23/06/2022
24/06/2012
£218,000 (£22.50)
3
Argos Ltd
9,832
24/06/2004
23/06/2019
24/06/2009
£196,000 (£19.93)
4
Harveys Furnishing Group Ltd
9,858
24/06/1997
23/06/2022
24/06/2012
£221,805 (£22.50)
5
Allied Carpets Properties Ltd
9,892
24/06/1997
23/06/2022
24/06/2012
£222,570 (£22.50)
Surety from Allied Carpets Group plc
6
DSG Retail Ltd
14,804
12/06/2000
11/06/2020
12/06/2010
£317,500 (£21.45)
Tenant option to break on 12/06/2015 subject to minimum 12 months notice.
7a
Staples UK Ltd & Staples International Inc
10,033
24/06/1999
23/06/2024
17/01/2011
£210,525 (£20.98)
Subject to 5 yearly 3% pa compound fixed uplifts.
7b
Sportsdirect.com Retail Ltd
10,010
27/02/2006
26/02/2021
27/02/2011
£225,000 (£22.48)
A3
McDonalds Restaurants Ltd
3,026
25/12/1997
24/12/2022
25/12/2012
£82,500 (£27.26)
Sub-station
EDF Energy Networks (EPN) plc
-
27/07/1998
26/07/2097
-
91,794 6
£2,027,235
Comments
06/2009 review not yet initiated
ad Ro
Eastwoodbury Cresent
d or
f ch Ro
A1159
ch Ro
d a Ro rd fo
Railway
7
11% 11% 5A / 5A1 4A1 3A1
11%
61%
4A3 N4
6%
D&B Rating
Tenant Covenants A summary of the tenant’s latest accounts and Dun & Bradstreet ratings is set out below: Tenant
Turnover
Pre-tax Profit
Net Worth
D&B Rating
% of income
Pets at Home Ltd
27/03/2008
£350,800,000
£53,564,000
£56,440,000
5A1 – minimum risk
10%
Dreams plc
24/12/2007
£166,772,000
£13,278,000
£21,284,000
4A1 – minimum risk
6%
Carpetright plc
03/05/2008
£521,500,000
£59,500,000
£12,100,000
3A1 – minimum risk
11%
Argos Ltd
01/03/2008
£4,099,773,000
£439,987,000
£1,381,659,000
5A1 – minimum risk
10% 11%
Harveys Furnishing Group Ltd*
28/06/2008
-
-
(£46,746,000)
N4 – high risk
Allied Carpets Properties Ltd
29/12/2007
£55,114,000
£3,515,000
£23,089,000
4A3 – above average risk
Allied Carpets Group plc
29/12/2007
£206,547,000
(£3,665,000)
£6,914,000
2A3 – above average risk
DSG Retail Ltd
03/05/2008
£4,657,189,000
£140,141,000
£763,720,000
5A1 – minimum risk
Staples UK Ltd
02/02/2008
-
-
£58,872,000
5A – risk level undetermined
-
-
-
-
O – risk level undetermined
Sportsdirect.com Retail Ltd
27/04/2008
£957,863,000
£101,030,000
£121,159,000
5A1 – minimum risk
11%
McDonalds Restaurants Ltd
31/12/2007
£1,069,780,000
£39,973,000
£87,332,000
5A1 – minimum risk
4%
Staples International INC
8
Year End
11% 16% 10%
* Subsidiary of Harveys Furnishings Ltd, which has a net worth of £127,232,000 and a 5A2 risk rating.
Rental Value The passing rents on the subject scheme reflect levels of £19.93 - £23.14 per sq ft. We consider these levels to be low for a dominant south east open A1 consented scheme in a town of this size. The most recent open market letting on the scheme was to Sportsdirect.com in February 2006 following a downsize of the Staples unit. A rent of £22.50 per sq ft was achieved with only a 4 month rent free period granted. Prior to that, an open market letting to Argos in September 2004 achieved £20.00 per sq ft.
Adjacent to a Waitrose supermarket to the south east of the subject property on Fossets Way, there is a bulky goods retail warehouse scheme anchored by a 107,416 sq ft B&Q Warehouse. Comet occupy a 15,000 sq ft unit and are paying £20.00 per sq ft and Magestic Wine have recently taken a 3,255 sq ft unit at £20.00 per sq ft. Greyhound Retail Park is a secondary scheme totalling approximately 116,000 sq ft with an open A1 part food planning consent with retailers including Matalan, Paul Simon, Instore, Lidl, Farmfoods and a Mecca Bingo unit.
Elsewhere in Southend, London Road Retail Park totals approximately 75,700 sq ft of open A1 non food accommodation with retailers including Homebase and Currys. A June 2006 rent review on the Currys unit (21,150 sq ft) achieved £19.00 per sq ft.
Asset Management Opportunities Our tenant audit indicates that all the retailers are trading successfully from this park and none are actively seeking to dispose of their units. However, we consider the property offers a number of asset management angles and initiatives to further soften and upgrade the tenant line up. Firstly, we understand Pets at Home have previously considered relocating within the scheme to a larger unit, which would free up the most prominent unit at the entrance to the scheme. This could either be let as a whole or further subdivided with a view to moving rental values forward.
Secondly, subject to acceptable terms, we consider there may be an opportunity to secure a surrender of the adjacent Allied Carpets and Harveys units to either facilitate the above asset management initiative, or look to secure an anchor letting to an open A1 retailer. Finally, with only 32% site cover and a generous car parking ratio, we also consider there is potential, subject to planning, to develop an additional retail or A3 pod unit in the car park and our client has received positive planning advice in this regard. It should be noted that Pets at Home, Argos and Sportsdirect.com have minimum car parking requirements or no build zones within their leases.
9
10
VAT The property has been elected for VAT and therefore VAT will be payable on the purchase price. However, it is anticipated that the sale will be by way of a ‘transfer of a going concern’.
Proposal Our client is seeking offers in excess of £23,970,000 (Twenty Three Million, Nine Hundred and Seventy Thousand Pounds), subject to contract and exclusive of VAT. A purchase at this level would show the following attractive yield profile, assuming purchase costs at 5.725%:
Net Initial Yield
8.00%
Reversionary Yield
8.56%
Nominal Equivalent Yield
8.27%
True Equivalent Yield
8.71%
11
Further Information
Mark Girling Direct Line: 020 7312 7460 Email: mark.girling@montagu-evans.co.uk
James Gulliford Direct Line: 020 7182 2216 Email: james.gulliford@cbre.com
Nick Richardson Direct Line: 020 7312 7420 Email: nick.richardson@montagu-evans.co.uk
James Hurst Direct Line: 020 7182 2659 Email: james.hurst@cbre.com
Subject to contract June 2009
On the instructions of
Misrepresentation Act 1967 Montagu Evans LLP and CB Richard Ellis for themselves and for the vendors or lessors of this property whose agents they are, give notice that: (i) The particulars are set out as a general guideline only for the guidance of intending purchasers or lessees and do not constitute the whole or any part of an offer or contract. (ii) All descriptions, dimensions, references to condition and necessary permissions of the use and occupation, and other details are given in good faith without responsibility whatsoever and any intending purchasers or tenants should not rely on them as statements or representations of fact, but must satisfy themselves by inspection or otherwise as to the correctness of each of them. (iii) Neither Montagu Evans LLP nor CB Richard Ellis nor their employees has any authority to make or give any representation or warranties whatsoever in relation to the property. (iv) Unless otherwise stated, all prices and rents are quoted exclusive of VAT and intending purchasers or lessees must satisfy themselves independently as to the applicable VAT position. (v) All the plans and maps provided within the particulars are for identification purposes only. JN: 105843 / 06-09