HADRIAN’S TOWER stablisation report
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hadrian’s tower rutherford street, science central, newcastle city stablisation report (12th floor) july 2017
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overview Hadrian’s Tower is a 26-storey building located within the heart of the new high-rise business and learning district of Newcastle. The area is dominated by the University, the City Council and the Hospital. Newcastle is a renowned University City that is highly specialised in Medical Sciences, Business and the Built Environment. The residents in this location are predominantly foreign students and the postgraduate professionals that remain in the hospitals and the wider City throughout their postgraduate training period. The high standing of the University within its specialist fields, means that its reach across the world is very high. We know that the family wealth of students at Newcastle University is higher than that of most other main stream university cities in the UK.
The Vita Building is a few hundred metres from Hadrian’s Tower. It is focussed on the same market as Hadrian’s Tower, based on much higher building quality than the neighbouring student blocks, as well as a ‘serviced accommodation’ lifestyle offering. When compared to other student accommodation it has the following features: • The amenity and recreational spaces are much better • The units are generally larger and finished to a higher specification • A higher level of included service provision (e.g. weekly clean, grab n’ go breakfasts, social events around the recreational spaces and inclusive utility bills)
The asset will be held as a Build to Rent block and will target those postgraduate professionals and the high-net-worth (HNW) students that are interested in a higher standard of living. Property prices and rental rates across the city are based upon Buy-to-Let rentals and purpose-built student accommodation blocks. There has been no new purpose built blocks that are designed to meet the HNW and postgraduate professional market place, until the construction of the Vita Building in Strawberry Place. We have valued Hadrian’s Tower based on comparable vacant possession values for inferior and generally aged stock across the city. Investing in Hadrian’s Tower through a stabilisation period will see significant value change as an investment asset. This report will show the value of investing in Hadrian’s Tower, until it is a stabilised rental block. Hadrian’s Tower is a higher quality asset than the Vita Building, offering an identical lifestyle offering. This report considers the returns for investing in Hadrian’s Tower on the basis that similar rental levels to Vita are achieved. We also consider the returns against a more defensive traditional Private Rental Sector (PRS) scheme and student rents. the vita building
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value added returns (acheiving vita levels) input
£ per unit
£ total
Gross Rent
returns £138,502
Total Capital Deployed
£1,626,726
Management/Service charges
£1,000
£6,000
Gross Yield (Yr 3) to total capital
9.30%
R&M
£1,250
£7,500
Net Yield (Yr 3) to total capital
7.93%
£700
£4,200
Repairs (+9 years) Voids
£5,540
Ground rent (pa)
£1,950
Equity Investment (30% of Discounted Value)
£488,018
30%
Debt Leverage (70% of Discounted Value)
£1,138,708
70%
Vacant Posession Value
£1,848,552
Total Acquisition Price (12% discount)
£1,626,726
88%
Inflation - House Price
3.00%
Inflation - Rents
3.00%
Interest - General Rate
2.00%
Construction Coupon from Developers
5.00%
Investment Debt Rate
4.00%
Vacant Posession Valuation
equity returns Equity Locked-up for 5 years Yield to Equity (Yr 3)
17.10%
IRR to Equity (6 years)
27.73%
Equity Multiplier (6 years)
15.2%
Fractional Sale Gross to Net
18.2%
income streams
Debt Requirement
Voids & Bad Debt
Major Works
Ground Rent Payment
toolbox
Year
No. of Units
1
6
£1,848,552
0%
£24,401
£24,401
£0
£24,401
£24,401
2
6
£1,904,009
0%
£24,401
£24,401
£0
£24,401
£24,401
3
4
£1,961,129
£1,138,708
58%
£151,345
£14,326
£6,054
£1,950
£129,015
£45,548
£83,466
4
6
£2,019,963
£1,138,708
56%
£155,885
£14,613
£6,235
£1,950
£133,087
£45,548
5
6
£2,080,562
£1,138,708
55%
£160,562
£14,905
£6,422
£1,950
£137,284
£45,548
LTV
Management & Maintenance
3.79 times
PRS Gross to Net
value Gross Rent
£488,018
Developer’s Coupon
Net Returns
Debt Interest
Net Return
-£ 488,018
DSCR
Void Risk
£83,466
283%
35%
£87,539
£87,539
292%
34%
£91,736
£91,376
301%
33%
Sales at 6% Gross Yield (after debt)
£1,537,322
Total Returns
£1,848,864
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base case returns (acheiving prs/student levels) input
£ per unit
£ total
Gross Rent
returns £98,660
Total Capital Deployed
£1,626,726
Management/Service charges
£1,000
£6,000
Gross Yield (Yr 3) to total capital
6.63%
R&M
£1,250
£7,500
Net Yield (Yr 3) to total capital
5.36%
£700
£4,200
Repairs (+9 years) Voids
£3,946
Ground rent (pa)
£1,950
Equity Investment (30% of Discounted Value)
£488,018
30%
Debt Leverage (70% of Discounted Value)
£1,138,708
70%
Vacant Posession Value
£1,848,552
Total Acquisition Price (12% discount)
£1,626,726
88%
Inflation - House Price
3.00%
Inflation - Rents
3.00%
Interest - General Rate
2.00%
Construction Coupon from Developers
5.00%
Investment Debt Rate
4.00%
Vacant Posession Valuation
equity returns Equity Locked-up for 5 years
15.75%
Equity Multiplier (6 years)
2.22 times
PRS Gross to Net
19.7%
Fractional Sale Gross to Net
23.9%
income streams
Debt Requirement
Voids & Bad Debt
toolbox
No. of Units
1
6
£1,848,552
0%
£24,401
£24,401
£0
£24,401
£24,401
2
6
£1,904,009
0%
£24,401
£24,401
£0
£24,401
£24,401
3
4
£1,961,129
£1,138,708
58%
£107,808
£14,326
£4,312
£1,950
£87,220
£45,548
£41,672
4
6
£2,019,963
£1,138,708
56%
£111,043
£14,613
£4,442
£1,950
£90,038
£45,548
5
6
£2,080,562
£1,138,708
55%
£114,374
£14,905
£4,575
£1,950
£92,944
£45,548
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Major Works
Ground Rent Payment
Year
LTV
Management & Maintenance
8.54%
IRR to Equity (6 years)
value Gross Rent
£488,018
Yield to Equity (Yr 3)
Developer’s Coupon
Net Returns
Debt Interest
Net Return
-£ 488,018
DSCR
Void Risk
£41,671
191%
52%
£44,490
£44,490
198%
51%
£47,396
£47,396
204%
49%
Sales at 6% Gross Yield (after debt)
£900,242
Total Returns
£1,082,601
appendix 1 - vita building comparison report
Quality of the apartments
room SP-526 - the vita building
liberty plaza quality
hadrian’s tower
The Vita Building has a much higher level of internal finishes than other nearby student accommodation. Fully fitted kitchens, floor to ceiling glazing and a good standard of finishes.
Liberty Plaza, an example of student accommodation close to Hadrian’s Tower, has a very basic level of finishes and a basic appliance kitchen.
Hadrian’s Tower has a similar specification to the Vita Building, but has much larger apartments and room layouts with a higher standard of kitchens and bathrooms.
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comparison report
Sizes of the apartments studios (vita) v 1 bed units (hadrian’s tower) The Vita Building has a simple but effective open plan layouts for its studio apartments.
the vita building 8
Hadrian’s Tower has over 56 1-Bed Apartments. The apartments are an average NIA of 52m2, and have open plan kitchen / living areas with separate dedicated bedrooms and bathrooms. Full height glazing provides views over the City.
hadrian’s tower
en-suites (vita) v 2 bed units (hadrian’s tower) The Vita Building has a simple but effective open plan layouts for its en-suite cluster units organised in clusters of 5 rooms apartments around common kitchens and lounges.
the vita building
Hadrian’s Tower has 109 2-Bed Apartments that can be sublet on a twin cluster basis (i.e. 2 double bedrooms per common lounge and kitchen). The product is superior in both room sizes and the usage of shared space (i.e. twin clusters rather than quintriple clusters).
hadrian’s tower 9
comparison report
Amenity facilites & services The Vita Building has a common room located on the ground floor of the courtyard that is used to stage parties, DJ nights and wine and food tasting events. The Living Experience in the block also includes the following support services: • Free high powered broadband • Weekly apartment clean • Inclusive utility bills • Grab n’ Go breakfasts • Bedding and Utensils • Free contents insurance
hadrian’s tower sky lounge
the vita party room
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Hadrian’s Tower has a Sky Lounge and a café with touchdown space in the foyer. All Saints Living will provide the same social events and the same support services as Vita. The Sky Lounge will provide a unique panoramic vantage point over the City Centre and the Tyne Valley. All residents will have access to the Sky Lounge and an ability to book part of the lounge for private functions.
comparison report
rental rates The rates in the Vita Building are based upon some alternative scenarios as follows:
Studio Apartments
Cluster Units / 2 Bed Apartments
4th Floor:
6th Floor:
• £294 for single occupancy paid annually up-front
• £205 for single occupancy paid annually up-front
• £307 for single occupancy paid in quarterly payments up-front
• £213 for double occupancy paid in quarterly payments up-front
• £353 for double occupancy paid annually up-front
• £246 for double occupancy paid annually up-front
• £368 for double occupancy paid in quarterly payments up-front
• £256 for double occupancy paid in quarterly payments up-front
6th Floor: • £324 for single occupancy paid annually up-front • £337 for single occupancy paid in quarterly payments up-front
Hadrian’s Tower 2 Bedroom Apartments are proposed to be have a market rent of £162 per week per sharer.
• £389 for double occupancy paid annually up-front • £404 for double occupancy paid in quarterly payments up-front Hadrian’s Tower 1 Bedroom Apartments are proposed to be have a market rent of £216 per week.
In summary, Hadrian’s Tower has significant yield potential once it is placed into the market. 11
HADRIAN’S TOWER 27 Rutherford Street, Newcastle upon Tyne