lancaster house 31-37 islington high street … house, islington detai… · 74-77 white lion...

Lancaster House, 31-37 Islington High Street, London N1

LANCASTER HOUSE 31-37 ISLINGTON HIGH STREET

LONDON N1

INVESTMENT SUMMARY

• Prime Islington retail and office investment directly opposite Angel Underground Station.

• Freehold.

• Attractive mixed use building totalling 2,248.24 sq m (24,200 sq ft) comprising two retail units and modern offices above.

• Let in its entirety to Boots the Chemists, Burger King and Prudential.

• Current income of £630,750 pa which could rise upon settlement of two outstanding rent reviews to £786,860 pa.

• Realistic ongoing asset management potential through lease regears/combining of the retail units to create flagship space.

• Price - £10.2 million

• Net initial yield (on conclusion of outstanding rent reviews) - 7.3%

• Capital value - £421 per sq ft


LANCASTER HOUSE

31-37 ISLINGTON HIGH STREET LONDON N1

LOCATION Lancaster House is situated on Islington High Street in the heart of Islington, one of London’s most vibrant and well established business, residential and entertainment addresses. Located outside of the congestion zone yet only two miles from both the City and West End, it is renowned for its bohemian atmosphere centred around Islington High Street and Upper Street. The area has long been associated with its restaurant, bar, theatre and leisure amenities as well as its boutique and mainstream shopping centre along the High Street and Upper Street which was further strengthened by the opening of Metro Fund’s N1 Shopping Centre development in 2002. Islington’s close proximity to not only the financial hub of the City but to the new Channel Eurostar rail link at Kings Cross St Pancras has accelerated its development as a major attraction to businesses, shoppers and tourists alike and in March 2007, the Angel town centre was awarded with BID (Business Improvement District) status. SITUATION Islington High Street runs north-south linking St John’s Street and Upper Street. The property occupies an extremely prominent position lying on the west side of Islington High Street close to its junction with Liverpool Road and opposite Angel Underground Station. The principal pedestrian crossing sits alongside the property. COMMUNICATIONS Lancaster House benefits from excellent transport links, being situated outside the London congestion zone and strategically located within Central London’s extensive communications infrastructure. Public transport links are good with Angel Underground (Northern Line) and Highbury & Islington (Victoria Line and National Rail) stations located close by. The new Eurostar rail link, Kings Cross St Pancras and Euston mainline stations are all a short bus ride to the South West whilst numerous buses operate along Upper Street and Liverpool Road providing easy access to the rest of London.


DESCRIPTION Lancaster House comprises a highly prominent and attractive mixed use office and retail building with an extensive frontage to Islington High Street. Of traditional construction the property is set behind a decorative brickwork facade with fenestration on the office floors comprising single glazed casement windows to both the front and rear elevations providing excellent natural light throughout. The retail accommodation comprises two large ideally configured units arranged over ground and basement levels with very beneficial rear servicing via a service yard provided to the rear which is accessed from White Lion Street. Boots currently occupies a small area of self contained first floor offices with an internal staircase linking this section to the retail areas below. Access to the units is from Islington High Street. The offices are arranged over first to third floors with access provided via a designated ground floor entrance hall situated between the retail units. The floor plates are well configured around the building’s main service core with a single 8 person passenger lift serving all floors. The office space is modern and well maintained ideally suited to the local market. Landlord’s specification includes the following:-

• Central heating • 8 person Kone passenger lift. • Designated office entrance/entrance hall • Suspended ceilings • Perimeter trunking • Excellent natural light with windows to the front and rear elevations • Column free office space • Male and female WC’s on alternate half landings • The tenants have installed air-conditioning via cassette units on part of the space.


ACCOMMODATION Approximate net internal floor areas are as follows:

Address Floor Use Area Sq m Sq ft

The Prudential Assurance Company Ltd

Third Second First Sub-total

Office Office Office

314.01 428.56 428.56

1,171.13

3,380 4,613 4,613

12,606

Burger King Ltd Ground Basement Overall ITZA Sub-total

Retail Retail

260.03 214.23

(101.26) 474.27

2,799 2,306

(1,090) 5,105

Boots The Chemists Ltd Ground Basement First Overall ITZA Sub-total

Retail Retail

Ancillary

318.94 250

33.91 (131.74) 602.85

3,433 2,691 365

(1,418) 6,489

Total 2,248.24 24,200

TENURE Freehold.


TENANCIES The retail space is let to Boots the Chemists Ltd and Burger King Ltd on two leases expiring 17 December 2012 and 26 January 2013 respectively at a combined passing rent of £415,750 pa. The 2007 Boots rent review has recently been settled at £208 per sq ft Zone A and the tenant has offered to take a new 10 year lease at £300,000 pa (£212 per sq ft Zone A). The Burger King unit has been sub-let to a franchisee who pay a rent equal to 102.5% of the current rent. The January 2008 review remains outstanding and a significant uplift is expected from the current level of only £117.70 per sq ft Zone A. A number of approaches have already been made to the vendor for this unit from other retailers with the most recent offer reflecting £250,000 pa (£229 per sq ft Zone A). Offices are let to The Prudential Assurance Company Limited on a lease expiring 24 December 2012 at a passing rent of £215,000 pa (£17.06 per sq ft). The 2007 review is outstanding with a significant uplift expected to £259,360 pa (£20.57 per sq ft). The floors are currently sub-let to three separate tenants. A copy of the sub-tenancy schedule is available upon request. TENANTS FINANCIAL INFORMATION Boots The Chemists Ltd Boots the Chemists Ltd is a member of Alliance Boots Plc and is the UK’s number one health and beauty retailer operating a wide range of stores from local community pharmacies to large destination health and beauty stores. In June 2007 Alliance Boots Plc was acquired by private equity firm KKR & Co and Stefano Pessina for an estimated £11 billion and today employs over 110,000 staff in over 3,200 retail stores. For the year ending 31 March 2008 the company reported a turnover of £11.8 billion, net profits of £10 million and net assets of £4 billion.


Burger King Ltd Burger King trade as a restaurateur under the Burger King franchise and has 96 restaurants throughout the UK. The company holds the lease on assignment from United Biscuits (UK) Ltd who were the previous owners of Wimpey. The company was sold in 2001 by Diageo to a consortium of private equity firms led by TPG Capital LP and for the year ending 30 June 2007 reported a turnover of £71.4 million, a pre tax loss of £12.8 million and net assets of £3.78 million. The Prudential Assurance Company Ltd Established as the Prudential Mutual Assurance and Loan Association in 1848, today the company is an international retail financial services company with significant operations in Asia, the US and the UK. The focus is on savings and retirement and worldwide currently employ over 28,000 people. The company is listed on the London and New York Stock exchanges and for the year ending 31 December 2007 reported pre tax profits of £1.3 billion and a net worth of £3.29 billion. MARKET COMMENTARY Office Market Islington office rents have remained resilient over the past twelve months owing to its diverse occupier base. The floor plates at Lancaster House are small and functional and will therefore attract more local occupiers who are seeking low cost but efficient space in a prime location opposite Angel Underground Station. We set out below recent rental transactions in the immediate area.

Address Tenant Size (sq ft) Rent (per sq ft) Date

2-12 Pentonville Road, N1

Confidential 3,025 £23.75 Q3, 2008

144 Liverpool Road, N1

Worklife Support 1,000 £20.00 Q3, 2008

Angel Building 411 St John Street, EC1

Cancer Research 135,000 £41.00 Q2, 2008

74-77 White Lion Street, N1

London Academy of Education 3,345 £19.50 Q2, 2008

2-12 Pentonville Road, N1

Veolia Environmental Services 3,600 £23.75 Q1, 2008


Retail Market Islington has experienced significant rental growth over the past 5 years. Metro Fund’s N1 centre provided much needed space for retailers but rather than satisfy the demand, it has actually increased it. There are outstanding requirements for a host of high street multiple retailers, particularly youth fashion brands. Islington is very much in demand. The prospects for further rental growth are therefore excellent. Waitrose recently acquired (and are now fitting out) the former Woolworths store which will bolster Liverpool Road and the London Borough of Islington appears to be keen to see further retail redevelopment along Chapel Market. All of this will further enhance Islington’s retail credentials. Large and well configured retail units are rare is Islington and it is widely accepted that the subject units would today let very well on the open market. A number of landowners in the area regularly receive approaches by retailers seeking space and the Burger King unit has received a recent offer reflecting £250,000 pa (£229 per sq ft Zone A).

Address Tenant Transaction Zone A Date

4 Upper Street, N1

Carphone Warehouse Letting £234 Q4, 2008

8-9 Upper Street, N1

3 Store Rent Review £200 Q3, 2008

2-4 Liverpool Road, N1

Vodafone Letting £221 Q2, 2008

10-11 Upper Street, N1

Fat Face Letting £215 Q4, 2007

Unit 10, N1 Shopping Centre, N1

Monsoon Rent Review £216 Q4, 2006

Unit 11, N1 Shopping Centre, N1

Oasis Rent Review £216 Q4, 2006

1 Upper Street, N1

O2 Letting £220 Q2, 2005


ESTIMATED RENTAL VALUE On the basis of the above we consider the rental income to be highly reversionary. We would apply a rate of £220 per sq ft Zone A for the retail unit and £20.57 per sq ft to the offices which provides a combined rental value in the order of £811,360 pa. VAT We understand that the property is elected for VAT and therefore VAT will be charged on the purchase price. It is intended that the sale will be structured as a TOGC. PROPOSAL Offers of £10.2 million for the freehold interest in the property. Upon settlement of the outstanding rent reviews this could reflect a net initial yield of 7.3% assuming our ERV’s and after deducting acquisition costs of 5.75%. INVESTMENT RATIONALE

• Prime Islington retail pitch opposite the busy Angel Underground Station. • Freehold • Proven reversionary rents with two outstanding rent reviews – Burger King and Prudential. • Realistic asset management potential through lease re-gears. Boots have offered to take a new 10 year lease at a rent of £300,000 pa. • Opportunity upon expiry of the existing retail leases to merge/enlarge the units to create flagship space and growing the rents forward. • Good quality well configured offices which will attract local occupiers. • Mixed use investment providing a diverse income mix.


FURTHER INFORMATION

Dominic Rowe Direct Line: 020 7529 5706

Email: [email protected]

Tim Newman Direct Line: 020 7025 6919


Toby Larman Direct Line: 020 7529 5715


Jamie Strachan Direct Line: 020 7025 6916


Michael Elliott LLP 53 Brooks Mews London W1K 4EF

Tel: 020 7493 8184 Fax: 020 7409 2985

www.michaelelliott.co.uk

Harper Dennis Hobbs 15/16 New Burlington Street

London W1S 3BJ

Tel: 020 7025 6900 Fax: 020 7439 4254

www.hdh.co.uk

Misrepresentation Act 1967 Conditions under which particulars are issued: Michael Elliott LLP or Harper Dennis Hobbs for themselves and for the vendor of this property, whose agents they are give notice that: 1. These particulars do not constitute, nor constitute any part of, an offer or contract. 2. None of the statements contained in these particulars as to this property is to be relied on as a statement or representation of fact. 3. Any intending purchaser must satisfy himself by inspection or otherwise as to the correctness of each of the statements contained in these particulars. 4. The vendor does not make or give, and neither Michael Elliott LLP or Harper Dennis Hobbs nor any person in their employment has any authority to make or give, any representation or warranty whatever in relation to this

property. Property Misdescription Act 1991: These details are believed to be correct at the time of compilation but may be subject to subsequent amendment. October 2008


TENANCY SCHEDULE

Address Floor Use Area Lease Term Rent pa (per sq ft)

Rent Review

ERV pa(per sq ft)

Comments

Sq m Sq ft The Prudential Assurance Company Ltd

Third Second

First

Office Office Office

314.01428.56428.56

1,171.13

3,3804,6134,613

12,606

25.12.1987- 24.12.2012

£215,000 (£17.06)

25.12.2007 £259,360 (£20.57 psf)

Outstanding rent review. Calderbank served at £259,360 pa (£20.57 per sq ft). Entirely sub-let to 3 separate tenants.

Burger King Ltd Ground Basement

Retail Retail

260.03214.23474.27

2,799 2,306 5,105

24.06.1987- 26.01.2013

£128,250 (£117.70 ZA)

27.01.2008 £240,000 (£220 ZA)

Overall ITZA – 1,090 sq ft. Rent review activated but negotiations not commenced. Sublet to Franchisee who pays 102.5% of current rent. Recent offer from major retailer at £250,000 pa (£229 ZA).

Boots The Chemists Ltd

Ground Basement

First

Retail Retail

Ancillary

318.94250

33.91602.85

3,433 2,691

365 6,489

03.09.1987-17.12.2012

£287,500 (£208 ZA)

£312,000 (£220 ZA)

Overall ITZA - 1,418 sq ft. Rent review recently settled. Boots have just offered £300,000 for a new 10 yr lease.

TOTAL 2,248.24 24,200 £630,750 £811,360

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Islington - Chapel Market

45 metres

Harper Dennis Hobbs28/10/2008

lancaster house 31-37 islington high street … house, islington detai… · 74-77 white lion...

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