9-16 Empire Square & 36 Long Lane, Borough, London SE1 4AU Virtual Freehold Mixed Use Investment February 2015
Contents 1. Executive Summary... 2 2. Location... 3 3. Communications... 3 4. Description... 3 5. Specification... 3 6. Accommodation... 4 7. Tenure... 4 8. Tenancies... 4 9. Covenant Information... 5 10. Planning... 6 11. VAT... 6 12. EPC... 6 13. Asset Management Opportunities... 6 14. Proposal... 6 15. Further Information... 7 Appendix 1 Tenancy Schedule Appendix 2 Location Plan Appendix 3 Ordnance Survey Extract 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 1
1. Executive Summary Empire Square, Long Lane, Borough, SE1 4AU Empire Square is a unique investment opportunity offering a diverse mix of leisure, retail, office and D1 / D2 uses located in a vibrant area of south east London situated just off Long Lane. The property is within 150 metres of Borough underground station (Northern Line). The development was built by Berkeley Homes in 2007 and comprises the ground floor and part basement commercial elements of an award winning residential development comprising 517 apartments set around a landscaped public square. Comprises a supermarket/convenience store, private gym, day nursery and office with a total area of 25,337 sq ft (2,353.9 sq m). Tenants include Tesco Stores Ltd, Ovalhouse Ltd (trading as Soho Gyms), and Bright Horizon Family Solutions Ltd. Total current rent is 361,643 subject to further index linked reviews from 25 th December 2015 onwards. An average weighted unexpired lease term of 12 years (8.78 years to tenant break). Held on a 999 year lease from January 2003 at a peppercorn. Offers sought in excess of 7m (Seven Million Pounds). A purchase at this level reflects an attractive net initial yield of 4.9% with significant reversions anticipated from December 2015 onwards and a capital value of 276 psf. 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 2
2. Location 2.1 Empire Square is located on the south side of Long Lane close to its intersection with Borough High Street and within 150m of Borough underground station. Southwark has seen high level of investment and regeneration in recent years and now provides a dynamic and vibrant working environment with a larger number of diverse occupiers attracted to the area by its excellent transport links, leisure and other amenities. 2.2 Borough High Street is immediately to the west of the property with Elephant & Castle to the south and London Bridge to the north and the City of London. Both Borough Market and London Bridge Station (Jubilee Line and Northern Line) are within a 5 minute walk to the north of the property. 3. Communications 3.1 Empire Square benefits from a diverse range of transport communications with both mainline rail networks and London Underground easily accessible. The Eurostar Terminal St Pancras is within 15 minutes via London Bridge station. 3.2 Numerous bus routes on Borough High Street and Long Lane provide access to the City and the West End. 4. Description 4.1 Empire Square comprises the ground floor commercial elements of a major award winning residential scheme of 517 apartments constructed in 2007 by Berkeley Homes. The subject property comprises a supermarket, crèche/nursery, gym and office with a total area of 25,337 sq ft arranged mainly over the ground floor. 4.2 The property has prominent and extensive frontages both to Long Lane and Tabard Street with accesses provided on both frontages. 5. Specification Generous floor to ceiling heights Aluminium double glazed windows Suspended ceilings with integral lighting Comfort cooling Basement store (supermarket) 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 3
6. Accommodation 6.1 The property has the following internal floor areas (provided by the vendors) Unit Use Sq Ft Sq M 36 Long Lane A1 Retail 4,895 454.8 13-16 Empire Square D2 Leisure 12,623 1,172.7 10-12 Empire Square D1 Day Nursery 6,895 640.6 9 Empire Square B1 Office 924 85.8 TOTAL 25,337 2,353.9 7. Tenure 7.1 Empire Square is held leasehold under Title No. TGL311689 for a 999 year term less 10 days from 1 st January 2003 at a peppercorn. 8. Tenancies 8.1 The property is currently let to four tenants and produces a total current rent passing of 361,643.26 pa reflecting a low overall rental of 14.24 psf. Three of the leases are subject to Index Linked reviews with the next being the Bright Horizon day nursery which is due on 25 th December 2015. 8.2 The weighted average unexpired lease term is 12.05 years (8.83 years to the tenant break). All leases except Design Clean incorporate the Security of Tenure provisions of Part II of the Landlord & Tenant Act 1954. 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 4
9. Covenant Information Tesco Stores Limited (Registered No. 00519500) 23/02/2013 25/02/2012 26/02/2011 Turnover 42.662bn 41.981bn 40.149bn Pre-tax Profit 921m n/a 2.243bn Net Worth 3.113bn 6.894bn 6.954bn Ovalhouse Limited (Registered No. 01709244) 31/1012013 31/01/2012 31/01/2011 Turnover 6.433m 6.087m 5.935m Pre-tax Profit 0.106m n/a 0.443m Net Worth ( 0.383m) ( 2.787m) ( 0.034m) Bright Horizon Family Solutions Limited (Registered No. 02328679) 31/12//2013 31/12/2012 31/12/2011 Turnover 102.298m 68.446m 48.674m Pre-tax Profit 6.540m n/a 1.358m Net Worth (- 30.744m) 6.345m - 0.581m Design Clean Limited (Registered No. 01225884) 30/11/2013 30/11/2012 30/11/2011 Turnover n/a n/a n/a Pre-tax Profit n/a n/a n/a Net Worth 9,000 45,000 44,000 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 5
10. Planning 10.1 Empire Square lies within the London Borough of Southwark. The property is not listed and lies within the Borough High Street conservation area. 11. VAT 11.1 The property is elected for VAT and therefore VAT will be chargeable on the purchase price. 12. EPC 12.1 To be confirmed. 13. Asset Management Opportunities 13.1 There are a number of asset management opportunities including:- Restructure existing leases to extend lease terms. Implement Index linked rent reviews Negotiate lease surrenders and relet at market rents Potential for change of use to more valuable uses including B1 offices. 14. Proposal 14.1 Offers are sought in excess of 7,000,000 (Seven Million Pounds) for the leasehold interest subject to contract and exclusive of VAT. This reflects a net initial yield of 4.9% and a low capital value of 276 psf. 14.2 On the assumption of an averaged increase in RPI of 2.5% pa the property has the following income and yield profiles:- December 2015 377,114 pa 5.01% June 2017 388,283 pa 5.24% September 2017 406,143 pa 5.48% 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 6
15. Further Information 15.1 For further information or to arrange an inspection please contact:- Jonathan Gilbert MRICS T: 020 7788 3817 F: 020 7491 3032 E: [email name]jonathan.gilbert@htc.uk.com Or Christopher Wright MA MRICS T: 0207 788 3818 F: 020 7491 3032 E: Christopher.wright@htc.uk.com 9-16 Empire Square & 36 Long Lane, Borough, SE1 4AU www.htc.uk.com Page 7
Appendix Appendix 1 Tenancy Schedule 9-16 Empire Square & 36 Long Lane, Borough, London SE1 4AU www.htc.uk.com
9-16 Empire Square & 36 Long Lane, Borough SE1 4AU Tenancy Schedule Address Tenant Area Rent ( Psf) Lease Term Start Date End Date Break Clause Rent Review Next Rent Review Comments 36 Long Lane Tesco Stores Limited 454.8 4,895 84,995.00 ( 17.36) 15 24/06/2007 23/06/2022 n/a 5 yearly 24/06/2017 Rent reviews RPI linked collared & capped at 1% pa & 4% pa respectively. 13-16 Empire Square Ovalhouse Ltd (t/a Soho Gyms) 1172.7 12,623 135,913.26 ( 10.77) 25 29/09/2007 28/09/2032 n/a 5 yearly 29/09/2017 Rent reviews RPI linked collared and capped at 1% pa and 3% pa respectively. 10-12 Empire Square Bright Horizon Family Solutions Ltd (guaranteed by Bright Horizons Family Solutions Inc.) 640.6 6,895 117,735.00 ( 17.08) 20 25/12/2005 25/12/2025 25 th December 2015 and 2020 on 6 months notice 5 yearly 25/12/2015 Rent reviews RPI linked capped at 2.5% pa. Tenant option to extend lease for further 5 years. Rent penalty on exercising break 34,883 (2015) and 17,442 (2020). 9 Empire Square Design Clean Limited 85.8 924 23,000 ( 24.89) 3 28/11/2014 27/11/2017 n/a n/a n/a Stepped rent increased 24,000 for second year 25,000 for the final year TOTAL 2,353.9 25,337 361,643.26 Hartnell Taylor Cook LLP is Regulated by the RICS Page 1 Hartnell Taylor Cook LLP is a Limited Liability Partnership registered in England and Wales OC 313211 www.htc.uk.com
Appendix Appendix 2 Location Plan 9-16 Empire Square & 36 Long Lane, Borough, London SE1 4AU www.htc.uk.com
Empire Square, Long Lane, Borough, London SE1 4AU Ordnance Survey Crown Copyright 2014. All rights reserved. Licence number 100022432. Plotted Scale - 1:7500
Appendix Appendix 3 Ordnance Survey Extract 9-16 Empire Square & 36 Long Lane, Borough, London SE1 4AU www.htc.uk.com
MAIN CONTACT: 7-10 Chandos Street Cavendish Square London W1G 9DQ Jonathan Gilbert MRICS T: 020 7788 3817 F: 020 7491 3032 E: jonathan.gilbert@htc.uk.com Hartnell Taylor Cook LLP is a Limited Liability Partnership registered in England and Wales OC 313211 Offices in London, Bristol, Plymouth / Hartnell Taylor Cook LLP is Regulated by RICS LONDON 7-10 Chandos Street Cavendish Square London W1G 9DQ T: 020 7491 7323 F: 020 7491 3032 BRISTOL Somerset House 18 Canynge Road Clifton Bristol BS8 3JX T: 0117 923 9234 F: 0117 923 9237 PLYMOUTH No. 1 The Crescent Plymouth PL1 3AB T: 01752 671167 F: 01752 671856 www.htc.uk.com