reversionary freehold mixed-use investment for sale · investment highlights 45 east street and...

100% PRIME REVERSIONARY FREEHOLD MIXED-USE INVESTMENT FOR SALE

45 EAST STREET & 9/12 CASTLE SQUARE

45 EAST STREET & 9/12 CASTLE SQUARE

z Brighton is one of the largest retail centres in the UK, with a primary catchment of 515,000

persons and boasts an eclectic and vibrant mix of high end, mass market and boutique retailers.

z Catchment population is expected to grow by 7% by 2023.

z All high-income Acorn Groups over perform, Pre-family 59% above the UK average.

Brighton’s average household income is 6% above the UK average. The shopping

population is predicted to increase by 7% by 2023.

z Brighton ranks 6th in the UK’s top towns in terms of retail demand (Promis).

z The Brighton Office Market remains tightly supplied and prime office rents are now

c. £31per sq. ft.

z Prime location on the corner of East Street and Castle Square.

z Retail/office accommodation of 12,558 sq. ft.

z Over £1 billion on ongoing seafront development and regeneration projects in Brighton.

z Freehold.

z Wault of 6.8 years to expiry and 3.13 years to break.

z Current total income of £415,000 pa.

z Asset management opportunity to convert the self-contained offices to residential use,

subject to planning.

z We are instructed to seek offers in excess of £6,750,000 (Six Million Seven Hundred and

Fifty Thousand Pounds) subject to contract and exclusive of VAT for the freehold interest

in the subject property. This price reflects an attractive net initial yield of 5.76% and a

reversionary yield of 6.03%, assuming standard purchasers’ costs of 6.64%.

INVESTMENT HIGHLIGHTS

45 EAST STREET AND 9/12 CASTLE SQUARE | BRIGHTON

TOURISM ATTRACTS 10 MILLION VISITORS AND GENERATES c£267 MILLION OF NON GROCERY SPEND

LOCATIONBrighton is one of the largest commercial centres in the south

east of England, located 56 miles (90km) south of London, 25

miles (40km) west of Eastbourne and 62 miles (100km) east of

Southampton. The City benefits from good road communications

with the A23 dual carriage way linking north and joining the M23

motorway and in turn, the M25 motorway at Junction 7.

The A27 dual carriage way acts as a ring road around the City

and links Brighton with Eastbourne in the east and Southampton

to the west. Rail links are excellent, with regular train services to

London Bridge and London Victoria, with a fastest journey time

of approximately 50 minutes. London Gatwick Airport is located

only 22 miles (35 kilometres) north of Brighton, via the A23 dual

carriage way and the M23 motorway.

9

10

11

68

9

Golalming

Guildford

Dorking

Haslemere

Crawley

EastbourneSeaford

Hove

LittlehamptonBognorRegis

TunbridgeWells

Tunbridge

EastGrinstead

Crowborough

Heathfield

HaywardsHeath

Horsham

Pulborough

Lewes

Worthing

Billingshurst

A24

A27A27

A23

M23

M25A3

A21

A21A264

A22

A26

GATWICK

Newhaven

Uckfield

Redhill

Sevenoaks

A265

A272

A29

A31

BRIGHTON

DESCRIPTIONThe property comprises a highly prominent corner retail/office

building arranged on basement, ground and four upper floors.

The retail unit is arranged on ground floor and basement and

trades from both levels. The self-contained offices are accessed

from Castle Square, via a generous sized self-contained office

entrance. The offices benefit from air conditioning, raised floors,

perimeter trunking and an 8-person Schindler Lift.


NORTH

For Identification purposes only


CATCHMENT & DEMOGRAPHICS

Brighton dominates its primary catchment area and the total

population within the Brighton catchment area is in excess of

511,000, ranking the City 36 out of the PROMIS centres.

The catchment extends east to Hastings, north to Crawley and

west to Chichester and encompasses many of the popular and

affluent commuter towns and villages that include Haywards

Heath, Horsham, Hove, East Grinstead, Uckfield and Midhurst. The

estimated shopping population of Brighton is 329,000, ranking the

City 29 of the PROMIS centres. Spending in Brighton is boosted

by leisure and business tourism. Brighton and Hove City Council

estimated that tourist expenditure in 2014 amounted to £780m; an

estimated 14,600 jobs are tourism related. Brighton also boasts a

very popular student destination, attracting 32,500 students from

throughout the UK and worldwide.

The age profile of Brighton’s primary catchment population includes

a high proportion of adults aged 25-44 and Brighton’s population is

set to grow 4.9% by 2021. In 2011 the service sector accounted for

82% of total employment in Brighton. Within this sector, financial

and business services account for 27% of total employment.

Major employers include Lloyds, Legal & General and American

Express, which has its European headquarters in the City. Other

major employers include Domestic and General, Bupa, University of

Brighton, University of Sussex, Hospitals NHS Trust, Sussex Police

and the City Council. (PROMIS Retail Report January 2016).

Tourism attracts over 10 million visitors (www.brighton-hove.go.uk)

and generates c. £267 million of non-grocery spend (Shoppertrack).


Brighton’s retail City Centre floor space is estimated at 1.58m sq. ft

and is comparable with the Promis regional centre average, ranking

the city 27 of the PROMIS centres on this measure.

Brighton’s retail core is predominantly linear in nature, stretching

along Western Road and North Street, which together with Churchill

Square Shopping Centre are the main focus of mass multiple

retailing in the City. East Street and the Lanes to the east of the core

retail area provides a mix of more upmarket fashion, independent/

local and specialist retailers.

Brighton ranks 10 on the basis of its PMA retail score and 8 on

the PMA fashion score. Brighton’s retail offer is very extensive

for a city of its size. Its fashion offer is well above the average for

regional centres. The City faces below average competition from

competing retail centres and has limited out of town competition.

As a result, demand for the City is particularly strong with

outstanding requirements including Anthropology and Ikea.

The ownership sits at the entrance to East Street the premier

destination for upmarket fashion in Brighton and is opposite the

Redevco owned Hannington Estate which is being extended and

refurbished and sits at the heart of the Lanes.

Brighton ranks 1st of the Promis Centres on the basis of rental

performance between 2008-2014 and it will undoubtedly continue

to be a strong performer, given the limited supply compared to

tenant demand.

RETAILING IN BRIGHTON


OFFICE MARKETBrighton is a major south coast office centre with an

estimated total office stock of c. 4.6m sq. ft and is home

to a number of blue-chip companies.

The office market is categorised by a lack of Grade A office

supply due to development constraints, physical geography

and pressure from alternative use values.

Brighton has a highly qualified and creative population,

driving high levels of business start-ups, ranked eighth in

the UK by Centre for Cities.

The creative sector in Brighton is at the forefront of

its growth, with a plethora of digital advertising and

marketing agencies, design and gaming studios.

Development activity has been limited over the past 5

years, which combined with an upturn in demand has

meant that vacancy rates have fallen below 4%.

The prime office rent is now c. £31 per sq. ft and is

predicted to rise to £33.50 per sq. ft by 2021.

(Knight Frank M25 Report 2018).


ACCOMMODATIONWe have inspected the property which comprises the following approximate net internal floor areas: -

RETAIL

45 East Street (COS)

Ground Floor Sales 1,695 sq. ft (157.47 sq. m)

Ground Floor ITZA 1,110 units

Basement Sales 1,086 sq. ft (100.89 sq. m)

Basement Stock 809 sq. ft (75.16 sq. m)

3,590 sq. ft 333.52 sq. m

OFFICES

9/12 Castle Square (PROPELLERNET)

The offices are arranged on part ground, basement and four upper floors comprising a total area of

8,968 sq. ft, having a self-contained entrance/reception area accessed from Castle Square.

The offices comprise of the following areas: -

Ground Floor Reception 475 sq. ft (39.48 sq. m)

Basement Ancillary 254 sq. ft (24.34 sq. m)

First Floor Offices 2,080 sq. ft (204.57 sq. m)

Second Floor Offices 2,012 sq. ft (191.75 sq. m)

Third Floor Offices 2,047 sq. ft (192.68 sq. m)

Fourth Floor Offices 2,100 sq. ft (184.04 sq. m)

8,968 sq. ft 833.15 sq. m

The offices have the benefit of air conditioning, distribution trunking, raised floors and suspended

ceilings. The offices are served by an 8-person 625kg Schinder Lift.


TENUREThe property is held freehold.

TENANCIES45 East Street is let to H&M Hennes & Mauritz UK Limited (trading as

COS) on an effectively Full Repairing and Insuring lease, to expire on

28th September 2025, subject to a rent review on 29th September

2020 at a current rent of £245,000 pax. The tenant has a break

clause effective 28th September 2023 on 6 months’ notice. The tenant

extended the term via a reversionary lease from September 2020 for

a term of 5 years, subject to the break clause stated.

Propellernet Ltd occupy the self-contained offices at 9/12 Castle

Square on an effectively Full Repairing and Insuring lease from

8th March 2014 to expire 24th December 2025 at a current rent of

£170,000 pa. The lease is contracted outside the security of tenure

provisions of the Landlord and Tenant Act 1954 and is subject to a

rent review on 25th December 2019 and 25th December 2022. The

lease is subject to a tenant only break clause, effective 24th December

2019 and 24th December 2022 on 6 months’ notice. The tenant did not

operate the December 2016 break clause, which was coterminous with

the December 2016 rent review, where the rent increased.

Propellernet Ltd is in control of the maintenance of the building and

H&M are responsible for reimbursing their portion of the cost.


RENTAL VALUEThe passing rent on the Cos reflects a Zone A rent of £194.59 per sq ft while the Propellernet

office rent passing reflects c. £19.76 per sq ft.

We are of the opinion that the estimated rental value of the property as of today’s date would

lie in the region of £434,300 pa. This is based on applying a Zone A rent of £194.59 per sq. ft to

the Cos demise, applying A/10 to the basement sales and A/20 to the basement ancillary and

£22 per sq. ft to the offices, applying ½ rate to the ground floor and basement space.


TENANTS COVENANT Cos are part of H&M Hennes & Mauritz UK Ltd, which was incorporated in 1979 and operates

as a fashion retailer with 6 different brands. H&M has expanded substantially, and today has

around 3,900 stores worldwide. Cos was launched in 2007 and is an upmarket fashion brand

for women and men who want modern, functional considered design. Cos currently trade from

23 individual stores in the UK.

Propellernet are an insight driven digital marketing agency and have consistently been named

as a top UK work place by the Great Place To Work Institute. Clients of the business include

N Power, Long Tall Sally, Waitrose, Kuoni and Neilson.

30/11/2015

GBP 000

30/11/2016

GBP 000

30/11/2017

GBP 000

Sales Turnover 1,013,000 1,040,814 1,062,484

Pre-Tax Profit 50,437 50,386 37,300

Tangible Net Worth 121,359 142,198 156,360

31/03/2015

GBP 000

31/03/2016

GBP 000

31/03/2017

GBP 000

Sales Turnover

Pre-Tax Profit

Tangible Net Worth 867,167 939,278 842,894

H&M Hennes & Mauritz UK Ltd have an Experian credit score of 100 / 100. Propellernet Ltd

have an Experian credit score of 78 / 100.


INVESTMENT COMPARABLE EVIDENCE

The most salient comparable sales transactions can be set out as follows: -

Property Date Price Net Initial Yield

Purchaser

129/132 North Street, Brighton (Boots)

July 2017

£31.55m 4.52% Merseyside Pension Fund

38/42 East Street, Brighton (Sandro, Majé, Estée Lauder, Lush and Pret A Manger)

December 2016

£14.375m 4.1% Redevco Mixed use building of 5 retail units, with office and residential on the upper floors.

Brinell Building, Brighton

December 2018

c £37.1m c.4.75% Orchard Street forward commitment to purchase. c.65,000 sq. ft of Grade A multi-let office building due to pc June 2019.


VATThe property is elected for VAT and it is proposed that the sale will be treated as a

Transfer of a Going Concern (TOGC).

EPCThe property has the following EPC ratings: -

H&M C 62

PROPELLERNET C 74


PROPOSALOur clients are seeking offers for the freehold

interest in the subject property in excess of

£6,750,000 (Six Million Seven Hundred and

Fifty Thousand Pounds) subject to contract

and exclusive of VAT.

A purchase at this price reflects a blended

net initial yield of 5.76%, reversionary yield of

6.03% and an equivalent yield of 6.01%, after

allowing for normal purchaser’s costs of 6.64%.

Messrs. Jackson Criss for themselves and for the vendors or lessors of this property whose agents they are to give notice that: (i) the particulars are set out as a general outline only for the guidance of intending purchasers or lessees, and do not constitute, nor constitute part of, an offer or contract; (ii) all descriptions, dimensions, references to condition and necessary permissions for use and occupation, and other details are given in good faith and are believed to be correct but any intending purchasers or tenants should not rely on them as statements of representations of fact but satisfy themselves by inspection or otherwise as to the correctness of each of them; (iii) no person in the employment of Messrs. Jackson Criss has any authority to make or give any representation or warranty whatever in relation to this property. 101258. Designed by TCC 01/19.Messrs. Jackson Criss for themselves and for the vendors or lessors of this property whose agents they are to give notice that: (i) the particulars are set out as a general outline only for the guidance of intending purchasers or lessees, and do not constitute, nor constitute part of, an offer or contract; (ii) all

descriptions, dimensions, references to condition and necessary permissions for use and occupation, and other details are given in good faith and are believed to be correct but any intending purchasers or tenants should not rely on them as statements of representations of fact but satisfy themselves by inspection or otherwise as to the correctness of each of them; (iii) no person in the employment of Messrs. Jackson Criss has any authority to make or give any representation or warranty whatever in relation to this property. 101258. Designed by TCC 01/19.

For further information or to arrange an inspection please contact:

PHILIP HAY

020 7637 [email protected]

reversionary freehold mixed-use investment for sale · investment highlights 45 east street and...

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