threadneedle street PRIME CITY OF LONDON SALE AND LEASEBACK OPPORTUNITY

Transcription

1 london ec2 PRIME CITY OF LONDON SALE AND LEASEBACK OPPORTUNITY

2 threadneedle T EE MIL KS STOCK EXCHANGE TR WOOD STREET ST PAUL S BLOOMBERG HQ UNDER CONSTRUCTION NM ROTHSCHILD & SONS MONUMENT STATION ST PAUL S CATHEDRA 122 LEADENHALL STREET L 20 FENCHURCH STREET THE WALKIE-TALKIE DLR BANK STATION BANK OF ENGLAND THE CHEESEGRATER ROYAL EXCHANGE thre adneedle s tree t TOWER 42 WILLIS LLOYD S OF LONDON MANSION HOUSE 30 ST MARY AXE THE GHERKIN 2

3 EET threadneedle E AT O EET SG THR RY TR ON S OP SH BI OA LA TRE LE S ET NE ST RE CH ET 122 LEADENHALL STREET E W E S THR EED EADN LAN ME INC OLD OL LO JEW RY HO PR BANK OF ENGLAND thre adneedle s tree t D RT BR BA KI NG ST RE ET D LOTHBU RT GMO ET T RE AM ST REE ST EMA COL GRESH TOWER 42 MOOR N ST R GATE FIN THE CHEESEGRATER ROYAL EXCHANGE ET LLOYD S OF LONDON BANK WI BIR NG M ST RE OOK ET LBR AR D ST RE ET WA MB UR IA UNDER CONSTRUCTION LEADENHALL MARKET CH LL BLOOMBERG HQ LO ECH MANSION HOUSE EET SE S TRE STR HOU AC ST T REE GR VIC RIA SION EET ALL STR N L ANE EEN TO MAN LEADENH CO RN H IL L KI QU TRY CHI QU EE N ST RE ET POUL FENC CAN NON STR H ST RE ET EET CANNON STREET Not to scale. HURC 20 FENCHURCH STREET THE WALKIE-TALKIE 3

4 Ov erview Proposal Prime City of London sale and leaseback opportunity. Situated 200 metres from the Bank of England and Lloyd s of London. Offers in excess of million are invited, subject to contract, for the long leasehold interest. Located on one of the City s premier thoroughfares. The property will be comprehensively refurbished to provide circa 12,530 sq.ft. of Grade A office and ancillary accommodation. This reflects a net initial yield of approximately 5.50%, assuming purchaser s costs of 5.80%. New 15 year occupational lease, subject to a tenant s option to determine at the 10th anniversary. Securely let with a parent company guarantee from Business Environment Holding Ltd. Business Environment provides serviced offices and related services and undertakes conventional lettings at properties it owns, leases or manages. The Group has traded for in excess of 20 years. Long leasehold from The Merchant Taylors Company expiring The Freeholder is entitled to a head rent of 40,000 per annum, reviewable in January 2018 to 10.00% of ERV. Anticipated net rental income of 578,488 per annum exclusive, following deduction of the current head rent. The proposed rent equates to per sq.ft. overall. This affords excellent scope for rental growth and capital appreciation. 4

5 Location The property is prominently situated within the central core area of the City of London less than 200 metres from the Bank of England and Lloyd s of London. Threadneedle Street is a prestigious thoroughfare linking Bishopsgate to the East with Poultry, Princess Street, Cornhill, King William Street and Queen Victoria Street to the West. The immediate vicinity is home to numerous high profile organisations. Notable examples include; NM Rothschild & Sons, Deutsche Bank, VTB Bank, Nationwide, Bloomberg, UBS, White & Case, Toronto Dominion, Bank of China, Canada Life, Royal London Asset Management, AON, Aviva and RSA Group. A wide selection of restaurants, bars and retail concessions are provided within The Royal Exchange, Leadenhall Market, Cheapside and One New Change. 5

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7 DLR DLR threadneedle Connectivit y The property is within 200 metres of Bank station and 650 metres from Monument station (Central, Northern, District and Circle and Docklands Light Railway). 1 BANK STATION MOORGATE STATION LIVERPOOL STREET STATION Mainline rail and underground services are also provided at Cannon Street, Moorgate, Fenchurch Street and Liverpool Street stations, all of which are within five minutes walk. London City Airport is located within 22 minutes from Bank underground station (via the DLR) and provides connections to all Europe s major cities. CANNON STREET STATION FENCHURCH STREET STATION Travel times from Bank station LIVERPOOL STREET WATERLOO KINGS CROSS/ST PANCRAS BOND STREET CANARY WHARF VICTORIA LONDON CITY AIRPORT PADDINGTON Source:tfl.gov.uk and rac.co.uk Crossrail connections (operational 2018) HEATHROW AIRPORT PADDINGTON BOND STREET FARRINGDON TOTTENHAM COURT ROAD threadneedle LIVERPOOL STREET STRATFORD Central Jubilee DLR Overground Piccadilly Heathrow Circle Hammersmith & City Bakerloo Central Jubilee Northern Central Circle Metroplitan Hammersmith & City Circle Metroplitan Hammersmith & City CANARY WHARF * Airports not on the Crossrail route - to travel to these airports passengers will need to travel on other connecting rail services District * * Luton Gatwick * Northern Central Stansted Jubilee DLR 7

8 BANK OF ENGLAND 8

9 Description Accommodation 32 Threadneedle Street is an impressive period building. The property will be comprehensively refurbished by the Vendor to an agreed specification and is anticipated to provide circa 12,530 sq.ft. (1,164 sq.m.) of Grade A office and ancillary accommodation. The works are scheduled to be completed by Q The property is accessed via a well proportioned entrance from Threadneedle Street. Floorplates are regularly configured with excellent levels of natural daylight (above grade) from the front and rear elevations. The specification will include:- A new eight person passenger lift. New VRV air conditioning via ceiling mounted FCU s. Raised access floors (110mm minimum void). Metal tiled suspended ceilings. The ground and mezzanine floors will have plaster ceilings. LG compliant light fittings. New kitchenettes on each office floor. Gym, showers and changing rooms. The property will be measured upon completion of the refurbishment and is anticipated to provide the following net lettable areas:- FLOOR USE AREA (SQ.FT.) AREA (SQ.M.) Fifth Offices Fourth Offices 1, Third Offices 1, Second Offices 1, First Offices 1, Mezzanine Offices 1, Ground Offices 1, Ground Reception Lower Ground Meeting Rooms 1, Basement Gym & Storage TOTAL 12,530 1,164 9

10 Floor Pl ans (post refurbishment) threadneedle Ground Floor Typical Upper Floor Threadneedle Street Office Entrance Office Lift Office Lift Kitchenette WC WC For indicative purposes only. Not to scale. 10

11 181300m threadneedle Tenure Pl anning Held by way of a headlease from Groundmere Ltd (The Merchant Taylors Company) for a term of 99 years expiring 17th January The property is Grade II listed and situated within the Bank Conservation Area. The Freeholder is entitled to a head rent of 40,000 per annum, reviewable upwards only, on 18th January 2018, and five yearly thereafter to 10.00% of the Market Rental Value of the premises. A summary of the main provisions of the headlease is set out at Appendix m For indicative purposes only. This plan is based upon the Ordnance Survey map with the sanction of the controller of H.M. Stationary Office. Crown copyright reserved. The area shaded blue at ground floor level is excluded from the title. This area is used by the Merchant Taylors Company to access the livery hall. 11

12 Tenancy The property will be let in accordance with the tenancy schedule set out below. The net internal floor area will be calculated by an independent referencing agency upon completion of the refurbishment. The annual exclusive rent will be calculated by reference to the p.s.f. rental values set out in the schedule below. The lease will be drawn on effective full repairing and insuring terms. Tenancy Schedule TENANT FLOOR USE AREA TERM NEXT RENT ANTICIPATED RENT COMMENTS (SQ.FT.) REVIEW DATE RENT ( PA) ( P.S.F) Business Environment Theadneedle Street Ltd Fifth Offices years from 5 yearly 618, Fourth Offices 1,570 completion, subject to a tenant s option Third Offices 1,695 to determine at the Second Offices 1,910 10th anniversary First Offices 1, Mezzanine Offices 1, Ground Offices 1, Ground Reception Lower Ground Meeting Rooms / 1, Breakout Basement Gym & Storage Inside 1954 Act. Business Environment Holding Ltd will act as surety for the first five years of the term. TOTAL 12, , HEADRENT - 40,000 NET 578,488 Anticipated Net Lettable Area post completion of refurbishment works. 12

13 The Tenant Business Environment is a UK private company providing serviced offices throughout England but predominately in the City of London. It has successfully traded for 21 years making it one of the most established companies in the sector. Business Environment has twelve centres of which eight are owned and four will be leased. Of this total, ten are in the south east, meaning that 80% of the company s income is derived from this economically advantaged region. The following financial highlights have been reported:- Business Environment Holding Ltd 31/12/ /12/ /12/2015 Audit Management Forecast Turnover 21,392,000 22,676,866 24,497,499 Operating Profit 2,938,000 6,135,777 7,165,023 Shareholder s Funds / Net Worth 13,879,943 17,638,631 22,022,690 Business Environment has two unique selling propositions over most of its rivals. Firstly, it has structurally reduced its business risk by mixing its property portfolio into owned and leased. Secondly, it has achieved excellent goodwill and client retention by a market leading level of customer service. Business Environment has been awarded Best Centre in the country five times in the last eight years, plus an outstanding leadership award in Beating competition from FTSE companies, Business Environment also won the 2013 National Customer Service award. The Group has also been a Sunday Times top 100 employer for the last seven years. Future prospects for Business Environment are extremely encouraging. Historically low vacancy levels and rising revenues are being recorded across all of its centres. Coupled with this there is a growing trend towards occupational flexibility across the financial services industry generally. With its quality fit out, exceptional levels of customer service and its geographical density in the high margin south east, Business Environment s success and future growth is well placed. Further information is available online at 13

14 Occupational Market Inv estment M arket The City of London vacancy rate Q stood at 5.40%, the lowest for eight years. Prime City rents have risen by 4.00% quarter-on-quarter to per sq.ft. and are projected to rise to per sq.ft. by the end of Top City headline rents of per sq.ft. have been achieved at The Leadenhall Building, Leadenhall Street. As well as renewed activity by financial and insurance firms, the City continues to grow as a media and technology hub. The Insurance & Financial services sector still account for the majority of take-up (24%). However Business & Consumer services are close (22%), followed by the TMT sector (17%) and the Professional services sector (14%). Availability continued on a downward trend with insufficient supply, particularly within the central core area. Prime rents are predicted to continue to increase for the next three years and most commentators are also forecasting further reductions in tenant incentives. Rent on a per sq.ft. basis is becoming increasingly less relevant on best in class small floorplate buildings within the City core, particularly where occupiers are afforded a high degree of occupational flexibility. Recent leasing transactions: Small lot sizes in the City of London are a rare commodity. Seldom does the opportunity arise to acquire a securely let holding of this nature, particularly where no ongoing capital expenditure or management capability is required by virtue of the long term occupational lease. The City investment market is experiencing an acute shortage of good quality stock. Prime yields hardened by 25 basis points during Q driven by weight of money, strong rental growth forecasts and poor income returns offered by other asset classes. Prime City yields now stand at 4.00% compared to 3.50% in the West End. Recent capital transactions: Date Address Purchase Price (PSF) Net Initial Yield Purchaser Apr Coleman St, EC2 27,000,000 ( 975) 4.80% Corpus Sireo Dec Eastcheap, EC3 18,600,000 ( 900) 3.90% Royal London AM Dec Eastcheap, EC3 27,400,000 ( 700) 3.89% Private Overseas Dec St Andrew St, EC4 13,460,000 ( 800) 4.35% Meadow Partners Nov Copthall Avenue, EC2 19,300,000 ( 637) 4.67% KFIM Date Address Tenant Area Reported Headline (Sq Ft) Rent (PSF) U/O Tower 42 (Part 38th Floor) N/A 3, Apr Cheapside (9th Floor) Ashtead plc 1, Mar Tokenhouse Yard (5th Floor) Gianni Origani GP 3, Jan Cornhill, EC3 (6th Floor) Healthcare REIT 1, Dec Threadneedle St, EC2 (7th Floor) Calanos 5, Dec Moorgate, EC2 (5th Floor) Japan Invest 1, Nov Threadneedle St, EC2 n/a 3, Oct Cornhill, EC3 (2nd Floor) DHL 4, Dec Fenchurch St, EC3 (6th Floor) Hua Nan Bank 3,

15 Capital Allowances Further Inform ation No capital allowances are available. For further information please contact the Vendor s joint sole agents:- EPC An EPC assessment will be undertaken upon completion of the refurbishment. PROPERTY INVESTMENT ADVISORS VAT The property is elected for VAT. Proposal HALL KEMP Lime Street London EC3M 7AY Douglas Hall Tel: douglas.hall@hallkemp.com MICHAEL ELLIOTT 3 Hanover Square London W1S 1HD Nathan Sugar Tel: nathansugar@michaelelliott.co.uk Offers in excess of million are invited, subject to contract, for the long leasehold interest. This reflects a net initial yield of approximately 5.50%, assuming purchaser s costs of 5.80%. 15

16 A ppendix 1 - Summ ary of the M ain Terms of the Headlease Landlord Development / Alterations Use Groundmere Ltd c/o The Merchant Taylors Company. Demise 32 Threadneedle Street, London, EC2. Term 99 years commencing on 18/01/2008 and expiring on 17/01/2107. Rent & Rent Review The current headrent is 40,000 per annum. Rent is paid quarterly in advance on the usual English quarter days. The rent is subject to upwards only rent review on 18/01/2018 and five yearly thereafter to 10.00% of the Market Rental Value of the premises. Market Rental Value is defined as the aggregate of the yearly rack rents which might be obtained, in the open market, between willing landlord and a willing tenant on the assumption that 32 Threadneedle Street is let as a whole or in parts, without a premium and upon expiry of any rent free period. The hypothetical term at review is that which accords with normal market practice at the time. The Tenant is permitted to undertake two redevelopments during the term. The building Grade II listed and situated within the Bank Conservation Area. Planning and other necessary consents would therefore be required in order to redevelop the property. The Tenant may, with the consent of the Landlord (not to be unreasonably withheld or delayed), make alterations to the airspace above the roof of the premises of 10ft or less measured from the current level of the roof and / or more than 10ft measured from the current level of the roof provided that alterations would not materially adversely affect the Landlord s and / or Merchant Taylor s Company s rights to light. All major alterations require the Freeholder s consent. Structural alterations are not permitted. The Tenant is permitted to install, remove or reposition non-load bearing demountable partitioning and to make associated electrical and services alterations without Freeholders consent. The Tenant is permitted to replace aerials and / or air conditioning units and / or solar panels and / or other plant and equipment installed on the roof without Landlord s consent (provided they are of a similar size and no heavier than the existing items). Offices within Use Class of the Town and Country (Use Classes) Order The ground floor and basement may be used as a high class shop within Class A1. The Tenant is not permitted to do anything on the premises which is illegal or immoral or which would cause a nuisance. Alienation The sale of part of the premises is prohibited. The sale of the whole; underletting of the whole; and /or underlettings of permitted parts, all require the Freeholder s consent, not to be unreasonably withheld. The Tenant is permitted to sub-let complete floors or part only of a floor providing it is capable of being occupied as a separate self-contained unit. Underletting(s) are not to be undertaken at less than the market rental value. Repair The Tenant covenants to keep the premises in good and substantial repair and condition. Redecoration The Tenant covenants to decorate the exterior of the premises in every fifth anniversary and in the last year of the term. The windows are to be redecorated not less frequently than every seven years. The Tenant covenants to decorate the interior of the premises every seven years and in the last year of the term. The Tenant covenants to clean the exterior stonework every twentieth year. The Tenant is permitted to make non-structural alterations without the Landlord s consent. The Tenant is permitted (with Landlord s consent not to be unreasonably withheld) to make alterations in the airspace of:- (i) 10ft or less measured from the current level of the roof and / or; (ii) more than 10ft measured from the current level of the roof, provided that such alterations do not materially adversely affect the Landlord s rights to light and / or air in respect of their adjoining or neighbouring property. Insurance The Landlord insures the property. The cost of the premium is recovered from the Tenant. 16

17 MISREPRESENTATION ACT 1967 AND DECLARATION Hall Kemp (trading name of HK Property Services Ltd) and Michael Elliott LLP for themselves and for the vendors of this property who agents they are give notice that: a) the particulars are set out as general outline only for the guidance of intending purchaser s and do not constitute, not constitute part of, or an offer or contract b) all descriptions, dimensions, references or 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 purchaser s should not rely on them as statements or representations of fact but satisfy themselves by inspection or otherwise as to the correctness of them c) no person in employment of Hall Kemp (trading name of HK Property Services Ltd) or Michael Elliott LLP 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. June