MOUNT. Cambridge Multi-let Office Investment Opportunity PLEASANT. Mount Pleasant House, Huntingdon Road, Cambridge CB3 0BL. House

Transcription

1 MOUNT PLEASANT House Cambridge Multi-let Office Investment Opportunity Mount Pleasant House, Huntingdon Road, Cambridge CB3 0BL

2 investment considerations Located in Cambridge, a core South East office market with excellent access to the A14 and M11. Take up in Cambridge for the first half of 2013 was recorded at an exceptional 304,000 sq ft compared to an annual average of circa 350,000 sq ft since MOUNT PLEASANT House Prominent office building arranged across two wings over four storeys. The property comprises a total Net Internal Area of 3, sq m (41,614 sq ft) of office accommodation. Fully occupied by 9 tenants providing a current net rent passing of 740, per annum. Freehold. 145 car parking spaces providing an excellent ratio of 1:287 sq ft. Opportunity to drive performance through active asset management initiatives and comprehensive refurbishment programme. Potential for redevelopment, subject to obtaining necessary planning consents. Offers are sought in excess of 7,780,000 subject to contract and exclusive of VAT, reflecting a net initial yield of 9.00% and a capital value of per sq ft, assuming standard purchaser s costs of 5.80%. For further information and data room access please contact: DAVID HAYNES Tel: +44 (0) David.haynes@dtz.com CHARLES HOWARD Tel: +44 (0) Charles.howard@dtz.com SAUL WESTERN Tel: +44 (0) Saul.western@bidwells.co.uk CHARLIE FLATHER Tel: +44 (0) Charlie.flather@bidwells.co.uk DICK WISE Tel: +44 (0) Dick.wise@bidwells.co.uk

3 location Cambridge is a world famous university city, county town and major commercial centre and is also widely recognised as one of the world's leading high technology business clusters. Over the last thirty years the Cambridge economy has experienced a dramatic Cambridge transformation. It is now at the heart of one of the most dynamic sub-regions within the UK and the recent decision by Astra Zeneca to relocate its worldwide HQ to Cambridge signifies the city's importance in the R&D sector. TRANSPORT 50 miles north of London, 30 miles east of Bedford and 40 miles south-east of Peterborough. Strong communication links with Junction 13 of the M11 less than 2 miles west, providing direct motorway access to London and the M25. The A14 is less than 2 miles north, linking the Port of Felixstowe to the east with the M1 and M6 to the west. Cambridge Rail Station is located approximately 2 miles south east of the Property, providing regular rail services to London King s Cross and Liverpool Street with a fastest journey time of about 46 minutes. The nearest international airport is Stansted, situated approximately 26 miles to the south. Stansted is the UK s fourth busiest airport, serving 17.5 million passengers annually and flying to over 150 destinations.

4 ECONOMY In the Centre for Cities, Cities Outlook 2013 report, Cambridge is ranked in the UK: 1st for Innovation with 94.5 patents granted in 2011 per 100,000 residents; this was more than the next 9 most innovative cities combined. At over 50%, 2nd in terms of residents with high level qualifications. 4th for highest earning with residents earning 574 per week on average. DEMOGRAPHICS Cambridge is ranked 1st in the UK with the largest share of its population of working age at 75% (Source: Centre for Cities Census City Snapshot - September 2012). Current population - 123,900 (Source: 2011 census). Cambridge is ranked 5th in the UK in terms of percentage change in population growth between 2001 and 2011 at 12.7% (Source: Centre for Cities Census City Snapshot - September 2012). Latest projections by the County Council forecast that the city is set to expand by almost a sixth over the next decade to 153,700 by TOURISM Tourism generates approximately 351m of revenue for the local economy and employs over 6,500 people. The city attracts 4.6 million visitors each year, and of those, 900,000 stay one night or more, spending an average of 242 in the local economy (Source:

5 MOUNT PLEASANT House situation MOUNT PLEASANT House The Property is situated to the north west of the city centre at the junction of Mount Pleasant and Huntingdon Road (A1307), one of the main arterial roads to Cambridge city centre from the A14. It is within a 10 minute walk to the historic centre, River Cam and shopping area and a 10 minute drive from the mainline railway station. Several local bus services run from outlying villages to the city centre. The Property is situated opposite Castle Park office scheme and forms part of an established office location with nearby occupiers including Cambridgeshire County Council, Gleeds, Siemens, Honeywell, PWC, EVI Technologies, AWD Chase De Vere, Tees Law and Citibase. This area forms one of three main office clusters in the city centre, the others being to the south on Station Road and Hills Road, and to the east on Newmarket Road. The area also comprises good quality housing and a number of Cambridge Colleges are located nearby, including Lucy Cavendish, Murray Edwards (formerly New Hall), St Edmunds, Fitzwilliam, St John's and Churchill. Various pubs, cafes and restaurants are located nearby on Castle Hill. On the opposite side of Huntingdon Road, the former Texaco petrol filling station has achieved planning permission for a student accommodation scheme which will comprise 98 units.

6 Castle Mound Shire Hall Cambridgeshire County Council Lucy Cavendish College St Edmund s College Murray Edwards College To Historic City Centre M11 Castle Street Mount Pleasant Huntingdon Road (A1307) To A14/M11 Histon Road (B1049) Victoria Road (A1134) Wessex House (student accommodation) Black Horse House Offices Cambridgeshire County Council Castle Park Offices Former Texaco PFS site (now with student accommodation consent)

7 description The Property comprises a prominent brick built four storey office building arranged across two wings around a central core. The site extends back from Huntingdon Road with undercroft car parking at the front and an extensive surface level car park to the rear. The main pedestrian entrance is off Huntingdon Road, close to its junction with Mount Pleasant. There is a secondary entrance from the undercroft car park at lower ground floor level. At ground floor there is a main reception area comprising 104 sq ft and building manager s office, along with three 8 person passenger lifts and stairs to all floors. The ground and third floors have been divided into two demises, each comprising a wing. The second floor is in single occupation, while a recent refurbishment of the first floor has divided the north wing into 4 smaller suites, allowing flexible occupation. The offices comprise solid floors with perimeter trunking, carpets and suspended ceilings with recessed lighting. The ground floor west wing has a raised floor. The majority of suites have air conditioning cassette units, most of which are the tenants responsibility with the exception of the ground floor north suite which has no air conditioning and the first floor north suites 1 and 2 which is the landlord's responsibility. In 2011, a partial refurbishment of the Property was undertaken which encompassed the following: A refurbishment of the first floor common areas and the provision of a new shared kitchen facility for the benefit of the first floor north wing occupiers. A full refurbishment of the first floor north wing to provide a subdivision of the office into four suites. A full refurbishment and overhaul of the ground to third floor male and female WCs. An overhaul of the electrical power supply, heating and water services including replacement of control panels, valves and thermostats throughout.

8 MOUNT PLEASANT House site The Property sits on a landscaped site extending to around 0.58 hectares (1.43 acres). tenure The Property is held Freehold. The adjoining owner benefits from access rights across the area shaded red on the Site Plan.

9

10 tenancy and accommodation The Property is let in accordance with the tenancy schedule below. It has been measured in accordance with the RICS Code of Measuring Practice (6th Edition) and provides the following net internal floor areas: Description Tenant Size Size Gross Gross Lease Lease End Next Break Outside Comments (Sq ft) (Sq m) Rent* Rent psf Start Review 1954 Act Ground Floor North Voiceability Advocacy 4, , /08/ /06/2014 Yes The Vendor will provide a rent, rates and service charge guarantee until 29/06/2014. Demise is currently let to Voiceability Advocacy until 29/06/2014 at 30,000 per annum (inclusive of service charge). Lease grants right to use 13 car spaces. Lease subject to Schedule of Condition. Ground Floor West Amadeus Capital Partners Ltd 5, , /01/ /01/ /01/2014 No Lease grants rights to use 25 car spaces. First Floor Raspberry PI (Trading) Ltd , /02/ /02/ /02/2014 Yes Lease grants rights to use 3 car spaces. Rent is inclusive of service North Suite 1 charge, business rates and insurance. Tenant break at any time after 06/02/2014. Rent Deposit of 10,000 (excl VAT). First Floor Irena Spence & Tracey , /02/ /02/ /02/2014 Yes Lease grants rights to use 3 car spaces. Rent is inclusive of service North Suite 2 Spilsbury t/a Irena Spence & Co. charge, business rates & insurance. Tenant break at any time after 25/02/2014. First Floor North Broadcrown Ltd 2, , /06/ /06/ /06/2015 Yes Lease grants rights to use 8 car spaces. Rent is inclusive of service Suites 3 & 4 charge, business rates and insurance. Tenant only break option. First Floor Mouchel Ltd 5, , /01/ /01/2014 Yes Lease grants rights to use 15 car spaces. West & Core Second Floor Displaylink (UK) Ltd 10, , /03/ /06/ /06/2014 Yes Lease grants to use 27 car spaces. Displaylink Corp guarantor. Rent deposit of 43,084 (excl VAT). Tenant only break option. Third Floor North Netbanx Ltd t/a Optimal 6, , /03/ /01/2014 Yes Lease grants rights to use 15 car spaces. Lease subject to Schedule of Payments Condition. Rent deposit held of 30, Third Floor West Cambridge Communication 4, , /01/ /01/ /01/2015 Yes Lease grants rights to use 10 car spaces. Lease is subject to a Systems Ltd 08/01/2017 Schedule of Condition. Rent deposit held of three months rent plus VAT. If the tenant only break option is not exercised tenant is to receive a rent free period of 3 months. If 2017 break option is not exercised tenant is to receive a rent free period of 2 months. Roof Telecoms T-Mobile (UK) Limited and , /03/ /03/ /03/2015 Yes Rent review is to the higher of passing rent, OMR or RPI. Equipment Hutchisons 3G UK Limited 5 Car Parking Spaces Netbanx Ltd t/a Optimal - - 3, /03/ Mutual rolling break option subject to 28 days' notice. Payments 5 Car Parking Spaces Netbanx Ltd t/a Optimal - - 4, /12/ Mutual rolling break option subject to 28 days' notice. Payments Fixed annual uplift of 3% Total 41,614 3, , Reductions to All Inclusive Rents for net rent calculation Service charge expenditure 21,962 Rates expenditure 20,931 Building insurance expenditure 632 Total Current Net Income 740, * Exclusive of VAT

11 service charge The service charge budget for the year ending March 2014 is 208,631 which equates to 5.01 per sq ft. A permanent Building Manager is employed at the site. Further information regarding TUPE is available upon request. environmental survey A Phase I Environmental Survey has been carried out by WSP, dated September 2013, which concludes that the site represents a low/medium risk with regards to environmental considerations. Further information is available on request and the purchaser will be able to rely on the WSP Report. An asbestos management plan has been put in place as a result of asbestos being present at the Property. A report has been produced which demonstrates the asbestos condition is managed effectively with a risk rating of low or very low for the potential of asbestos fibre disturbance. The asbestos register is contained in the data room. MOUNT PLEASANT House

12 opportunities OFFICE There are several options to enhance the building s value: The sub-division of the first floor north wing in late 2012 has demonstrated the depth of demand for smaller suites on flexible terms. Net rents equate to around 22 per sq ft and all four suites let within 6 months. Several tenants have been in occupation for a number of years, benefiting from the building s attractive car parking ratio and rental discount to prime levels. There is the potential to add value through lease extensions and removal of breaks. Passing rents can be increased closer to prime levels by refurbishment of the office accommodation and new open market lettings. Increase site density for office use, subject to planning. PLANNING The site s highly strategic gateway location gives significant potential for a range of uses including hotels, offices, student accommodation and retail, as well as the residential use identified in the Local Plan submission document (see opposite). The amendments to the Use Classes Order (SI/2013/1101) grant permitted development rights to allow change of use from offices (B1) to residential (C3) until 30th May A detailed planning summary is available in the data room. The Property is located in a conservation area and trees located on site are subject to TPO s. RESIDENTIAL The Property has been identified within the Cambridge Local Plan: Proposed Submission document as a residential Proposal Site (reference R17). The site is identified as having an area of 0.58ha (1.43 acres) and a redevelopment capacity for 50 dwellings. Therefore, a change of use to residential is likely to be achievable, assuming that the plan is adopted. We are aware that other similar sized sites in Cambridge have achieved significantly greater densities than that proposed at the Property. Consequently there is a strong likelihood of being able to achieve a higher density on this site, subject to planning. Representations are currently being made by our client to the Local Authority as part of the Local Plan consultation process. STUDENT ACCOMMODATION The Property is in close proximity to a number of Cambridge Colleges, Anglia Ruskin University and several private language schools. The site would be suitable for the development of student accommodation (subject to planning). This would allow for a substantial student accommodation scheme with good critical mass to be developed.

13 cambridge market commentary OFFICE OCCUPIER MARKET The Cambridge office market continues to show strong growth. Prime rents in the city centre have now achieved 34 per sq ft and shown annual growth of 11.5%. However, with limited supply of grade A accommodation, quality second hand space is achieving rents of 28 per sq ft, up 16.7% over the year, and lesser quality second hand space has reached rents of per sq ft with substantial annual growth of 25%. Take up for the first half of 2013 was recorded at an exceptional 304,000 sq ft compared to an annual average of circa 350,000 sq ft since Supply of good quality accommodation continues to fall with very limited city centre availability. Brookgate s town centre Cb1 scheme has successfully secured over 135,000 sq ft of office pre-lets, as a result of this tight supply. Demand continues to grow with over 1.65 million sq ft of active office requirements for Cambridge. 55% of this demand is for accommodation of less than 20,000 sq ft which fits well with the range of suite sizes that can be offered at Mount Pleasant House. This demand does not take into account Astra Zeneca's proposed worldwide headquarter relocation of 750,000 sq ft to the Cambridge Biomedical Campus at Addenbrooke's Hospital, which has significantly raised Cambridge's R&D profile worldwide. Year Annual Office Take Up (Sq ft) , , , , , , , , ,200 (6 months to June) Source: Bidwells Data Book Recent transactions include: Address Tenant Grade Area Headline Rent Date Terms (sq ft) Achieved (sq ft) Compass House, 80 Newmarket Road Vacant Unrefurbished 38, cap val May 2013 Purchased by Anglia Ruskin University. 22 Station Road, CB1 Birketts LLP New 15, April year lease. 15 years term certain. 9 months rent free. 22 Station Road, CB1 Mott Macdonald Ltd New 44, March year lease. 10 year term certain. 7 months rent free. 35 Hills Road 35 Finance Refurbished 2, February year lease. 5 year term certain. 6 months rent free. 37 Hills Road Vacant Unrefurbished 10, cap val December 2013 Purchased by Pace Investment. 24 Hills Road Good Technologies Refurbished 2, October year lease. 3 year term certain. 3 months rent free. Botanic House, 100 Hills Road KPMG New 7, September year lease. 5 year term certain. 12 months capital contribution. Titan House, Catle Park, Castle Hill Tees Law Refurbished 10, May year lease. 5 year term certain. 12 months capital contribution. 21 Station Road CB1 Microsoft New 77, March year lease. 15 year term certain. 3 months rent free.

14 OFFICE INVESTMENT MARKET There remains a shortage of institutional quality office stock in the South East compared to demand from investors seeking strong location and property characteristics. Cambridge is considered to be one of the most buoyant office markets outside London and has attracted a range of overseas and UK based investors since January 2011, which since then has seen around 318m of office investment transactions. Recent key transactions include: MOUNT PLEASANT House Date Property Tenant Term Certain Price Net Initial Capital Purchaser Yield Value psf (Tenure) July Station Road Mott MacDonald Ltd, years 31.87m 6.30% 492 Tesco Pension Fund Birketts LLP (Long Leasehold) December 2012 Platinum Building, Multiple 2.95 years 7.11m 9.00% 174 St Johns College St Johns Innovation Park, Milton Road (Long Leasehold) July 2012 Unit 220/230 Cambridge Science Park Jagex Ltd, Conexant years 22.03m 7.26% 293 Legal and General Systems Ltd (Long Leasehold) December 2011 Elizabeth House, Chesterton Road GE Smallworld UK 1.56 years 8.00m 7.92% 217 Private Partnership Community Fund (Freehold) December 2011 St Andrews House and Radio House, Multiple 3.55 years 15.15m 8.20% 182 Orchard Street Investment Management St Andrews Road (Freehold) September Cambridge Science Park Jagex Ltd 2 years 6.35m 7.80% 242 Mayfield Capital (Long Leasehold) March Station Road Microsoft 15 years 37.28m 6.00% 479 Orchard Street Investment Management (Freehold) RESIDENTIAL MARKET The residential market also shows continued signs of growth both in capital value terms and rental returns with the city centre currently achieving strong sales rates. Hill Residential's Ceres development by the station in the CB1 scheme is achieving average sales rates of 550 per sq ft with the top sale reaching over 600 per sq ft. Grosvenor's scheme at Parkside Place presold and averaged 500 per sq ft and Almaren's The Marque, located on the junction of Hills Road and Cherry Hinton Road, another significant city centre scheme currently under construction, is averaging 500 per sq ft. The recent announcement that Astra Zeneca will relocate its global headquarters to Cambridge adds to current population projections for Cambridge, which anticipates population growth to over 150,000 by This is an increase of almost one sixth, and the resultant demand for new homes is expected to increase prices and the level of demand for residential investment properties.

15 STUDENT ACCOMMODATION MARKET Cambridge is internationally recognised for education, primarily due to the high status of the University of Cambridge. There are two universities - the University of Cambridge and Anglia Ruskin University (ARU). The University of Cambridge is ranked 2nd in the UK by The Times Good University Guide 2013 and has 4.8 applicants per place. It has a total student intake of 22,820 of which 17,455 (77%) are full time. ARU is ranked 107th in the sector by The Times Good University Guide 2013 and has 4.1 applicants per place. ARU has a total student intake of 19,830 across three campuses, Cambridge, Chelmsford and Peterborough. It has a total of 6,040 full time students at the Cambridge campus. For 2012, ARU increased their number of applications recording an 18% rise, despite higher tuition fees. In addition, there are two colleges in Cambridge, Cambridge Regional College and the Cambridge Arts and Science College plus a further 26 English language schools that operate year round. Property, the former Texaco Petrol Filling Station site has secured planning consent for 98 beds and retail on ground equating to circa 306 beds per acre. Student accommodation transactions in Cambridge are generating capital values per bed of between 90,000 for new standard specification purpose built rooms rising to 155,000 for new high specification Cambridge College rooms. There is currently an acute lack of purpose built student accommodation in Cambridge with the demand for purpose built accommodation heavily outweighing supply. Student accommodation sites in Cambridge have recently achieved high densities of development. At the CB1 scheme, Phase 1 of the student accommodation achieved a density of circa 340 beds per acre and Phase 2 circa 527 beds per acre. At Brunswick House, Newmarket Road, this 251 bed development equated to 288 beds per acre. Opposite the

16 MOUNT PLEASANT House further information For further information and data room access please contact: BIDWELLS 8 Pollen Street London W1S 1NG epc An Energy Performance Certificate is available on request and provides a D(93) rating. vat The Property has been elected for VAT purposes and VAT will be applicable to the sale. The transaction is expected to be treated as a Transfer of a Going Concern. proposal Offers are sought in excess of 7,780,000 (Seven Million Seven Hundred and Eighty Thousand Pounds) subject to contract and exclusive of VAT. A purchase at this level reflects a Net Initial Yield of 9.00% after allowing for standard Purchaser s costs of 5.80%. This equates to a capital value of per sq ft. DTZ One Curzon Street London W1J 5HD DAVID HAYNES Tel: +44 (0) David.haynes@dtz.com CHARLES HOWARD Tel: +44 (0) Charles.howard@dtz.com SAUL WESTERN Tel: +44 (0) Saul.western@bidwells.co.uk CHARLIE FLATHER Tel: +44 (0) Charlie.flather@bidwells.co.uk Trumpington Road Cambridge CB2 9LD DICK WISE Tel: +44 (0) Dick.wise@bidwells.co.uk

17 Misrepresentation Clause DTZ and Bidwells for themselves and for the vendors of this property, for whom they act, give notice that: These particulars are a general outline only, for the guidance of prospective purchasers, and do not constitute the whole or any part of an offer or contract; DTZ and Bidwells cannot guarantee the accuracy of any description, dimensions, references to condition, necessary permissions for use and occupation and other details contained herein and prospective purchasers must not rely on them as statements of fact or representations and must satisfy themselves as to their accuracy. Rents quoted in these particulars may be subject to VAT in addition. DTZ and Bidwells will not be liable, in negligence or otherwise, for any loss arising from the use of these particulars; and The reference to any plant, machinery, equipment, services, fixtures or fittings at the property shall not constitute a representation (unless otherwise stated) as to its state or condition or that it is capable of fulfilling its intended condition. Prospective purchasers should satisfy themselves as to the fitness of such items for their requirements. No employee of DTZ or Bidwells has any authority to make or give any representation or warranty or enter into any contract whatever in relation to the property. September 2013.