PRIME REBASED FLAGSHIP RETAIL INVESTMENT - … · prime rebased flagship retail investment 36/40 northumberland street newcastle upon tyne

PRIME REBASED FLAGSHIP RETAIL INVESTMENT

36/40NORTHUMBERLAND STREET NEWCASTLE UPON TYNE

36/40 NORTHUMBERLAND STREET NEWCASTLE UPON TYNE

76% OF THE INCOME WAS REBASED AT THE 2013 LEASE RENEWALS WHERE THE H&M AND WH SMITH RENTS DROPPED BY 26%

36/40 NORTHUMBERLAND STREET | NEWCASTLE

z Newcastle is the regional capital and principal economic focus providing the main cultural and commercial centre for the North East of England.

z Significant primary catchment population of 1,502,000, ranked 3rd in the UK on this measure – (Promis.)

z Excellent retail offer with anchor retailers including John Lewis, Fenwick, Primark, M&S, Waitrose, Debenhams and Apple.

z Situated in a 100% prime trading position on the pedestrianised Northumberland Street, opposite Fenwicks, whilst in close proximity to the main entrance to the Eldon Square Shopping Centre and Monument Mall.

z Over 90,000 sq ft of prime, well configured, modern retail accommodation.

z Freehold

z Reversionary investment let to multiple covenants of H&M Hennes, WH Smith and Clas Ohlson with a WAULT to expiry of 7.38 years.

z Over 76% of the income has been significantly re-based, with both WH Smith and H&M having gone through lease renewals.

z We have been instructed to seek offers in excess of £32,500,000 (Thirty Two Million Five Hundred Thousand Pounds), subject to contract and exclusive of VAT. This reflects a net initial yield of 5.26% and a reversionary yield of 5.45%, assuming standard purchaser’s costs.

INVESTMENT SUMMARY

THE CITY OF NEWCASTLE IS A REGIONAL CAPITAL AND PRINCIPAL ECONOMIC FOCUS OF THE NORTH EAST OF ENGLAND AND ONE OF THE UK’S MOST DYNAMIC CITIES.

COMMUNICATIONSThe City benefits from

strong road links, served

by Junction 65 of the A1(M),

which connects the region with the rest

of the UK’s motorway network from

Edinburgh to London.

Newcastle is served by

2 City Centre railway

stations; Newcastle Central

Station and Manor Station. The City

is located on the East Coast Mainline

connecting London to Edinburgh with

a fastest journey time to London King’s

Cross of 2 hours 37 minutes and to

Edinburgh Waverley in 1 hour 25 minutes.

Outside of London,

Newcastle is the only city in

the UK to benefit from an

underground rail network. The Tyne and

Wear Metro provides a rapid transport

system, connecting the Inner City with

the wider Tyneside area, stretching

from Sunderland in the South East and

the airport in the North West. It stops

at 60 destinations across the City and

is considered one of the most efficient

public transport systems in the UK.

Newcastle International

Airport is located

approximately 6 miles north

west of the City Centre and with over

4.6m passengers flying to more than 80

destinations worldwide, it is recognised

as being one of the top ten regional

airports in the UK.


LOCATIONNewcastle is located approximately 277 miles north of London,

93 miles north of Leeds and 103 miles south of Edinburgh.

A1(M)

M6

M6

M6

A1(M)

A69


DEMOGRAPHIC & ECONOMIC PROFILE

The total population of the primary catchment area is 1.502m (ranking the city 3rd in the UK

on this measure), whilst the shopping population of 616,000 ranks 6th in the UK. The City also

ranks 3rd in terms of the volume comparison retail spend available in the catchment area.

RANKPRIMARY CATCHMENT

POPULATION RANK

SHOPPING POPULATION

RANK*

PER CAPITA IN-STORECOMPARISON RETAILEXPENDITURE RANK*

1 Glasgow Glasgow Glasgow

2 Manchester Manchester Manchester

3 Newcastle Birmingham Newcastle

4 Leeds Liverpool Leeds

5 Birmingham Leeds Birmingham

6 Cardiff Newcastle Cardiff

*Excludes London

TOTAL POPULATION OF THE PRIMARY CATCHMENT AREA

TOTAL SHOPPING POPULATION OF THE PRIMARY CATCHMENT AREA

Newcastle is one of the UK’s leading retail centres and is the

primary destination for shoppers in the North East of England.

The City Centre’s estimated retail space extends to 2.6m sq ft,

ranking 6th in the UK (Promis) and generating a retail spend of

£1,003M per annum.

The prime retailing is centred on the pedestrianised

Northumberland Street and Intu Eldon Square Shopping Centre.

Northumberland Street is anchored by M&S, Fenwick, Primark and

H&M, where rents have historically peaked at £330 Zone A.

Intu Eldon Square is one of the largest city centre shopping

destinations in the UK and comprises 1.4 million sq ft of retail space

and is anchored by John Lewis with both Fenwicks and Marks and

Spencer having entrances in the centre. The centre has 500 car

parking spaces and we understand there are a further 10,000 in

the city centre. The scheme has been transformed by a £170m

investment involving a series of development projects. Tenants

include JLP, Fenwick, Debenhams and flagship stores for Top Shop,

Next, River Island, New Look, Apple and Superdry. The centre has

an annual footfall of c34 million.

The Aberdeen Standard Investments owned Monument Mall

has undergone a significant redevelopment and is anchored

by TK Maxx, with entrances onto both Blackett Street and

Northumberland Street. Tenants include Hugo Boss, Jack Wills, Fat

Face, Jamie’s Italian, Sports Direct, Michael Kors and Molton Brown.

The block was purchased by Standard Life in December 2015 for

£75m, which reflected a net initial yield of 4.3%.


RETAILING IN NEWCASTLE

NEWCASTLE RANKS 3 IN

TERMS OF THE VOLUME OF

COMPARISION RETAIL SPEND

HOUSING

OPTIONS

TESCO

EXPRESS

TESCO

EXPRESS

NORTH


For Identification purposes only

PILGRIM STREET REDEVELOPMENT


PILGRIM

STR

EET

NO

RTHUM

BERLA

ND S

TREE

T

NEW BRIDGE ST WEST

BLACKETT ST

GREY

STR

EET

JOHN D

OBSON STREET

PILGRIM QUARTER

MONUMENT MALL

ELDON SQUARE

P

P

P

SAVILLE ROW

SITUATIONThe subject property occupies a 100% prime trading

location at the junction of Northumberland Street and

Saville Row, immediately opposite Fenwicks, whilst

in close proximity to Marks & Spencer, Sports Direct

and Primark.

DESCRIPTIONThe property is a purpose-built retail store constructed

in the mid 1960’s and the store was subdivided to

provide 3 retail units, with landlord’s common areas,

storage and loading areas.

The property is arranged over sub-basement,

basement, ground and two upper floors, together with

an extensive roof level plant room.

PRIME TRADING LOCATION

THE H&M GROUP IS ONE OF THE WORLD’S LEADING FASHION COMPANIES WITH 43 ONLINE MARKETS AND MORE THAN 4,500 STORES IN 69 MARKETS.

WH SMITH IS A BRITISH RETAIL BUSINESS WHICH CELEBRATED ITS 225TH ANNIVERSARY IN 2017.

ACCOMMODATIONWe have measured the property and set out our floor areas below.

ADDRESS TENANT AREA DESCRIPTION AREA (SQ FT) AREA (SQ M)

34 Northumberland

Street

WH Smith Retail Holdings Ltd

Gross Frontage 48/1 14.66

Net Frontage 37/8 11.46

Internal Width 37/11 (min) widening to 46/6

11.56

Shop Depth 225/6 68.73

Ground Fl Sales 9,419 875.05

Ground Fl ITZA 1,995 185.34

First Fl Sales 9,265 860.74

Second Fl Storage 9,578 889.82

Third Fl Plant 2,974 276.29

Total Area 31,236 2,901.89

36 Northumberland

Street

H&M Hennes Mauritz UK Ltd



Internal Width 35/7 widening to 49/3 10.85 to 15.01


Ground Fl Sales 11,251 1,045.25

Ground Fl ITZA 2,021 187.78

First Fl Sales 11,833 1,099.32

Second Fl Storage 11,400 1,059.09

Third Fl Plant 1,680 156.07

Total Area 36,164 3,359.72

38 Northumberland

Street

Clas Ohlson Limited (now vacated)




Ground Fl Area 361 33.54

Basement Sales 23,060 2,142.27

Total Area 23,421 2,175.8

OVERALL FLOOR AREA

90,821 SQ FT 8,437.5 SQ M


TENANCIESThe property is let to three tenants, producing a current rent of £1,825,000 pa, as detailed below.

ADDRESS TENANT LEASE TERM RENT (PA) RENTAL VALUE (PA)

34 Northumberland Street WH Smith Retail Holdings Ltd5 year FR&I lease from 15/06/2015, expiring on 28/09/2020.

£600,000 (£206.25 ZA)*

£730,000 (£240 ZA)

36 Northumberland Street H&M Hennes Mauritz UK Ltd

15 year FR&I lease from 29/09/2013, subject to 5 yearly upward only rent reviews. (TBO 29/09/2020 - 9 months’ notice).

£790,000 (£222 ZA)**

£855,000 (£240 ZA)

38 Northumberland Street

Clas Ohlson Limited (Company Number 06298382) Guarantor Clas Ohlson AB (Company registered in Sweden – 556035-8672)

15 year FR&I lease from 04/05/2011, subject to an upwards only rent review on 04/05/2021. (TBO 04/05/2021 - 6 months’ notice).

£435,000£305,000

(c. £13 psft)

TOTAL RENTAL INCOME: £1,825,000 £1,890,000* Rent fell from £895,000 in 6/2015 ** Rent fell from £975,000 pa in 9/2013

RENTAL VALUEIt is our opinion that the rental value as of today’s date would lie in the region of £1,890,000 pa as detailed in the tenancy schedule.

The investment offers excellent rental growth prospects given that the historical rental tone peaked at £330 ZA. The Intu owned Eldon

Square achieved a rack ZA rent of £293 per sq ft on a letting in 2017 and they have achieved a rack Zone A rent of £264.50 per sq ft

in the Metro centre.

There are currently no voids on this section of Northumberland Street and it is in our opinion that the next open market letting could

achieve significantly in excess of £240 per sq ft Zone A. Prime Zone A rents are currently £300 per sq ft in Manchester, £285 per sq ft in

Birmingham and £250 per sq ft in Leeds and Liverpool.

YEARS TO WAULT EXPIRY

TENUREFreehold

VATThe property has been elected for VAT purposes.

It is anticipated that the investment will be treated

as a Transfer Of a Going Concern (TOGC).

EPCThe property has the following EPC ratings.

Further details are available from this office.

34 NORTHUMBERLAND STREET




PROPOSALWe are instructed to seek offers in excess of £32,500,000 (Thirty Two

Million Five Hundred Thousand Pounds), subject to contract and

exclusive of VAT, for the benefit of the freehold interest, which reflects

the following yield profile net of purchaser’s costs at 6.77%.

NET INITIAL YIELD 5.26% REVERSIONARY YIELD 5.45% EQUIVALENT YIELD 5.46% TRUE EQUIVALENT YIELD 5.65%

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

• 60/62 Northumberland Street, Newcastle (DSG and Cotswold Outdoor)

Freehold retail investment sold in January 2017 for £12.65m which

reflected a net initial yield of 4.99% and equivalent yield of 4.44%.

The property was let to DSG Retail Limited on a FR&I lease, for a

term to expire 24/06/2020 at a rent of £500,000 pa (£300 ZA). Part of

the ground and upper 2 floors were let to Cotswold Outdoor Limited

on a lease to expire 10/08/2025, at a rent of £175,000 pa.

• 90/100 Market Street, Manchester (Sketchers, New Look, Pure Gym)

Freehold retail / leisure investment sold in October 2017 for £21m,

which reflected a blended net initial yield of 4.6%.

• 55/57 Buchanon Street, Glasgow (Kiko, Russell & Bromley and Molton Brown)

Freehold retail investment sold in February 2017 for £22.1m which

reflected a net initial yield of 3.99%.


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. 100263. Designed by TCC 01/18.

For further information or to arrange an inspection please contact:

PHILIP HAY

020 7637 [email protected]

BROOK WANNOP

020 7637 [email protected]

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PRIME REBASED FLAGSHIP RETAIL INVESTMENT - … · prime rebased flagship retail investment 36/40 northumberland street newcastle upon tyne