Westgate House - PROMINENT FREEHOLD RETAIL AND OFFICE INVESTMENT - Market Street, Warwick | CV34 4DE
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Westgate House Market Street, Warwick | CV34 4DE PROMINENT FREEHOLD RETAIL AND OFFICE INVESTMENT
Investment Summary
—— Attractive historic town with over 3 million visitors
annually.
—— Prime town centre location benefiting from strong
pedestrian flows.
—— Prominent multi-let retail and office property
comprising a total of 56,608 sq ft of NIA
accommodation.
—— Immediately adjacent to West Gate car park and the
town’s bus terminal.
—— Key occupiers include NHS Property Services Ltd,
M&S Simply Food and Boots (73.18% of income).
—— 2,326 sq ft refurbished vacant first floor office suite
(4.11% of floor area).
—— Strong historical occupancy and tenant retention.
—— 12 car parking spaces at the rear of the property.
—— AWULT of 4.5 years to earliest terminations.
—— Further asset management opportunities.
—— Total current income of £631,325 per annum.
—— Low overall average rent of £11.15 per sq ft.
—— M&S Simply Food subject to a 10.41% fixed rental
uplift in December 2017.
—— Longer term alternative use potential.
Seeking offers in excess of £7,250,000 (seven million two
hundred and fifty thousand pounds) subject to contract
and exclusive of VAT.
A purchase at this level would show a Net Initial Yield of
8.23% rising to 8.59% upon letting of the part first floor
suite at our ERV of £12.00 per sq ft.
This assumes usual purchaser’s costs of 5.80% and reflects
a low capital value of £128 per sq ft.
Westgate House | Market Street, Warwick CV34 4DE 2
Location
The County Town of Warwickshire
Warwick is located in the heart of the country adjacent to Royal Leamington Spa and approximately
A5
97 miles north-west of London, 20 miles south-east of Birmingham and 11 miles south of Coventry.
Earliest settlements of this historic town date back to the 6th Century.
Warwick saw population growth of over 15% between 2002 to 2011 with the current estimated M6
Birmingham M1
M5 M69
population for Warwick District standing at 140,600. Warwick’s average residence-based earnings for Airport
2012 stood at £28,755, 8% higher than the average for England and Wales. The unemployment rate Coventry
also fell to a level of 1.6% as at June 2013 representing a 15.7% reduction year-on-year. Birmingham M6
M42
Road communications are excellent with access to the M40 junction 15 (for Birmingham) within
2.2 miles and junction 13 (towards Oxford and London) within 3.7 miles. The M42 is located 13 miles Rugby
M42 A46
west of Warwick providing access to both the M6 and M5. The town is well served by rail connections
M40 A4177
with a fastest journey time to London Marylebone of 1 hour 22 minutes and 30 minutes to Birmingham Warwick
Snow Hill. WESTGATE HOUSE LONDON
Due to its excellent motorway connectivity, many sizeable companies have either their head office or M5 Redditch A452 A425
major office functions in the town. These include National Grid plc, Phillips 66 and their filling station
A46 M40
brand JET on Warwick Technology Park. Other major companies in the town include IBM, Volvo Group
UK, Bridgestone, Calor, Kantar and Delphi Automotive. Stratford-upon-Avon
A423
A44
Warwick is probably best known for its historic castle located on the banks of the River Avon. The first A45
castle on the current site can be traced back to 1068 which now sits in 64 acres of grounds originally A44
A429
landscaped by Capability Brown. Warwick Castle is ranked as one of the UK’s top tourist attractions as OXFORD
well as being one of the most visited stately homes in the UK.
Banbury
Warwick University (23,000 students) and Birmingham Airport are located 8 miles and 18 miles to the
A46
north of the town centre respectively.
Westgate House | Market Street, Warwick CV34 4DE 3
Situation
Prominent town centre location
The building is situated on an island site fronting Market Street, Puckerings Lane and Brook Street. West Gate car park is
immediately opposite, with the Linen Street multi‑storey car park very close by.
The heart of the town centre, Market Place is just to the north of the subject property and boasts numerous bars and restaurants
as well as hosting a market every Saturday and a monthly farmer’s market. Warwick’s main traditional retail pitch Swan Street,
lies immediately north of Westgate House.
The main retail element of the subject property fronts the West Gate car park opposite the town’s main bus terminal, which
gives a strong pedestrian footfall past the block. The remaining retail units front Brook Street, benefiting from visibility from
Swan Street.
To the rear of the premises there is a service yard accessed via Brook Street providing delivery and loading areas for each of the
retail tenants. There are 12 surface level parking spaces currently provided.
WARWICK
RAILWAY STATION
A425 TO WARWICK PARKWAY
A429 A445
A425 SOLIHULL & BIRMINGHAM
CAPE RD
THEATRE ST
A425
WESTGATE HOUSE
A429
Westgate House | Market Street, Warwick CV34 4DE 4
Description
Substantial mixed-use block
The property is of concrete frame and brick construction built during the 1970s. The building was originally built to provide a supermarket at ground floor level with three floors of offices above. The
building now provides 56,608 sq ft of multi-let accommodation over 4 floors.
The ground floor consists of 6 units providing retail accommodation ranging from 1,083 sq ft to 4,501 sq ft. Four of the retail units front West Gate car park and make up the subject property’s main
retail pitch with Boots and M&S Simply Food being the two anchors. The upper floors provide a mix of ancillary space for the retail tenants along with 34,587 sq ft of office accommodation, over
80% of which is occupied by The NHS Property Services Ltd. These offices are served by two passenger lifts and benefit from; comfort cooling, gas fired central heating, perimeter trunking and
suspended ceilings with recessed lighting.
A further 2 retail units are located along Brook Street along with the entrance to the remainder of the office accommodation, currently occupied by Full Fat Productions Ltd.
The NHS Property Services Ltd occupies the 2nd and 3rd floor The Myton Hospice are a local charity retailer who has been in
offices extending to 27,730 sq ft. The tenant in various entities occupation since 1998 and have recently agreed a lease renewal
has been in occupation since at least 2003 and has recently for a 5 year term showing a 25% rental increase. The unit benefits
committed to a new 5 year lease as well as having completed from visibility from Swan Street.
a refurbishment. Two separate functions operate within this
space; South Warwickshire Clinical Commissioning Group (CCG)
and Arden Commissioning Support, the latter having recently
consolidated from their Coventry office.
Saffron Gold occupies unit 1 and operates an Indian restaurant.
M&S Simply Food enjoy excellent trading sales space in units 2 The licensed restaurant has traded from this unit since 1997 and
and 3 fronting West Gate car park, along with ancillary storage is well known within the local area having won numerous awards
space at 1st floor level, the majority of which they have converted for the quality of its food.
to a stock room with a lift, a large cold store and a commercial
freezer. We also understand that this store will be one of the first
to be upgraded with the new A/C system that M&S are looking to
roll out across all of their stores.
Boots have been in occupation since 1975 and occupy the Full Fat Productions are a computer games development
western most retail unit. The unit benefits from frontage to West company and recently took a lease on unit 5, as well as being
Gate car park along with return frontage along the Market Street the sub‑tenant within the self-contained part first floor. Having
elevation. We understand that they are the only chemist to offer recently carried out approximately £80,000 of refurbishment and
a prescription service within the town centre. The tenant’s demise upgrade works to their dedicated entrance/reception and office
includes ancillary storage/staff accommodation at 1st floor level. area they are now exploring the options for their ground floor
retail unit.
Heaphy’s of Warwick is a gentlemen’s outfitters established in
First Floor Office Suite (2,326 sq ft), recently refurbished and
1831, who have been in occupation of the subject since 2005. The
available to let. Comfort cooled accommodation with 2 parking
unit has substantial first floor cover utilised as stock and ancillary
spaces.
space, predominantly for the company’s suit hire service. The
return frontage of the unit provides prominence to Swan Street.
Westgate House | Market Street, Warwick CV34 4DE 5
Accommodation & Tenancies
The property has been measured in accordance with the RICS Code of Measuring Practice (Sixth Edition) and the approximate net internal floor areas are set out below:
Unit Tenant Type Size Lease Lease Next Break Rent Overall Rent Notes
Floor NIA ITZA Start End Review (£ pa) (£ per sq ft)
Ground 4,027 2,140
Permitted use is restricted to use for the business
1 Westgate House Boots UK Ltd Retail First 3,048 - 29/09/75 28/09/20 29/09/15 - 54,500 7.70 of chemist or druggists including dispensing
service.
Total 7,075 -
Unit 1 R A Ali Retail Ground 2,019 1,108 25/12/97 24/12/22 25/12/12 - 43,000 21.30 Dec 12 rent review outstanding.
Ground 4,501 2,193 Fixed rental increase to £176,145 p.a. on 21/12/17.
Marks & Spencer Simply Pre-emption agreement over units 1 & 4.
Units 2 & 3 Retail First 3,409 - 20/12/07 19/12/22 21/12/17 - 159,540 20.17
Foods Ltd 2 car spaces under separate agreement (see
Total 7,910 - below).
Ground 1,267 1,003
Tenant break 25/03/15 subject to 6 months
Unit 4 Heaphy's of Warwick LLP Retail First 1,503 - 25/03/05 24/03/20 25/03/15 25/03/15 26,000 9.39
notice.
Total 2,770 -
Schedule of condition.
Unit 5 Full Fat Productions Ltd Retail Ground 1,164 784 24/06/13 23/02/15 - - 12,000 10.31 £6,000 payable to the tenant at the end of the
term if all payments are paid up to date.
Myton Hospice Rent Deposit £3,250. Holding over. New 5 year
Unit 6 Retail Ground 1,083 756 10/09/98 09/09/08 - - 20,000 18.47
(Promotions) Ltd lease agreed at £20,000 p.a. In solicitor’s hands.
12 months rates and service charge guarantee
Part 1st Floor
Vacant Office First 2,326 - - - - - - - provided by vendor. 2 car spaces available.
Suite A Front
Currently being marketed at £12 per sq ft.
Outside 1954 Act. 6 Car spaces provided.
1st Floor Suite B Education For Health Office First 4,531 - 01/03/05 28/02/15 - - 64,840 14.31
Sub-let to Full Fat Productions at £35,000 p.a.
Second 15,757 - Recently committed to a new 5 year lease
and refurbished their space. 7 months rent free
Third 11,973 - from 25/03/14 to 24/10/14. Shortfall to be
2nd & 3rd Floors NHS Property Services Ltd Office 14/09/13 13/09/18 - 14/09/16 244,935 8.83
topped up. Tenant break is subject to 3 months
Total 27,730 - notice. Tenant receives 2 months rent free if
break not activated.
Outside 1954 Act. Licence can be determined if
Marks & Spencer Simply Car
2 Car Spaces - - - 18/01/08 17/01/23 - - 3,000 - the lease for unit 2 & 3 is determined or ceases
Foods Ltd Parking
to be vested in the Licensee.
Outside 1954 Act. LL redevelopment break on
Car 6 months notice. Basic rent increased annually
Part Car Park (Front) Warwick District Council - - - 28/10/08 27/10/33 28/10/14 - 3,510 -
Parking by RPI. Turnover rent payable equal to 6% of net
turnover where this exceeds basic rent.
TOTALS 56,608 631,325
Westgate House | Market Street, Warwick CV34 4DE 6
Tenure Market Commentary
The property is held Freehold and sits on a site area of approximately 0.68 acres. The extent of Warwick is a historic and picturesque town which sees substantial tourist numbers with Warwick
the title is outlined in red on the OS Extract for identification only. Castle being one of the UK’s top tourist attractions. The retail provision in the town is focused on
the local population and tourist industry with nearby Royal Leamington Spa, which forms part of
The Freehold title benefits from a restrictive covenant over the use of the adjacent land comprising
Equis the
House, 4 Eastern Way, Buryas
St Warwick
Edmunds, IP32
same conurbation and 7AB
is a natural extension of the town.
of West Gate car park and the bus station, limiting its use to surface level car parking and/or
surface level public transport provision and/or public open space. The title also benefits from a The constrained and historic nature of Warwick however means that retail supply is limited and
pre-emption right over this adjoining land should the Council seek to sell their interest. there is a shortage of well configured larger retail units. There are no town centre units of over
1,000 sq ft currently available to let (source: CoStar).
Warwick has a small and compact town centre office market and Westgate House provides some
of the largest and highest quality office accommodation within the town, with the majority
EASTERN WAY
of other space being converted floors over retail units. Full Fat Productions, the sub-tenant of
Education for Health has recently moved from Coventry and the main occupier, NHS in varying
12 14
20
Industrial Estate
entities has been a long standing tenant, having been in occupation for over 10 years.
C
ET
The commercial viability of the town is shown by very successful out of town locations such
S
RE
ET
N
FE
as Warwick Technology Park. The wider area has also become renowned as a centre for the
development of computer games, with companies in addition to Full Fat Productions such as,
FreeStyleGames and Codemasters based in the area.
6
2
5
4
47.1m
EASTERN WAY
42.0m
71-72
El Sub Sta
0m 10m 20m 30m
Industrial Estate Ordnance Survey © Crown Copyright 2013. All rights reserved.
El Sub Sta
Licence number 100022432. Plotted Scale - 1:1250
Westgate House | Market Street, Warwick CV34 4DE 7
Covenant Strength
73.18% of income is payable by Boots, M&S and the NHS. The remainder is secured against independent local occupiers. A brief
overview of each tenant is contained in the following table:
Tenant Percentage Financials (£’000s) Comments
of income Year Turnover Pre-tax Tangible
Profit/(Loss) Net Worth
• Two functions operate from this office:
NHS Property Services Ltd 38.79% Undoubted 1) Arden Commissioning Support.
2) South Warwickshire CCG.
2013 562,031 67,508 163,313 • One of the UK’s best known retailers.
• 766 stores throughout the UK with 303
Marks & Spencer Simply Foods Ltd 25.75% 2012 482,902 54,585 112,119
of these being M&S Simply Food
2011 419,223 46,382 72,057 stores.
2013 1,909 (142) 3,311 • Incorporated in 1995. The organisation
provides further educational services
Education for Health 10.27% 2012 1,687 (56) 3,085
for health professionals.
2011 1,839 (19) 3,127 • Sublet to Full Fat Productions Limited.
2013 6,204,000 452,000 1,328,000 • The UK’s leading pharmacy-led health
and beauty retailer.
Boots UK Ltd 8.63% 2012 6,354,000 240,000 1,168,000
• Close to 2,500 stores.
2011 6,372,000 220,000 1,289,000 • Been in occupation at Westgate House
R A Ali 6.81% No published accounts • Award winning Indian Restaurant.
Heaphy's of Warwick LLP 4.12% No published accounts • Traditional gentleman's outfitter.
2013 3,188 n/a 0
• Rent deposit of £3,250.
Myton Hospice (Promotions) Ltd 3.17% 2012 2,814 n/a (45) • Business activities include providing
nursing and health-related care.
2011 2,438 n/a (45)
2012 - - 722 • Development of Interactive leisure
and entertainment software.
Full Fat Productions Limited 1.90% 2011 - - 619
• Tenant also sublets the 1st Floor
2010 - - 994 Suite B.
Warwickshire District Council 0.56% Undoubted
Westgate House | Market Street, Warwick CV34 4DE 8
VAT
We understand that the property is currently elected for VAT and therefore VAT will be payable
Asset Management Initiatives
on the purchase price. It is envisaged that the sale will be dealt with as a Transfer of a Going We consider this opportunity presents a number of immediate asset management initiatives that
Concern (TOGC). can be explored.
—— Letting of the newly refurbished 1st floor office suite.
EPC —— Explore reconfiguration of the retail units to allow M&S to exercise their pre-emption right.
—— Enter discussions regarding Full Fat Productions’ occupation of the 1st Floor Suite B office.
The building has the following individual EPCs:
—— Work with Full Fat Productions on their plans for Unit 5.
Unit Occupier EPC Rating —— Explore the options available to make use of the disused storage area next door to Boots
along Market Street.
1 Westgate House Boots C - 61
Unit 1 Mr Ali E - 111
—— Review the longer term change of use options for the whole/part of the site.
Units 2 & 3 M&S Simply Food C - 60 —— Complete the lease renewal with Myton Hospice, showing a 25% rental uplift.
Unit 4 Heaphy’s of Warwick E - 113
Unit 5
Unit 6
Full Fat Productions
Myton Hospice
C - 64
D - 82
Investment Rationale
Part 1st Floor Suite A Front Full Fat Productions —— Historic market town with high annual tourist numbers.
1st Floor Suite B Vacant C - 71
—— Mixed use block providing some of the best clear retail and office space in the town.
2nd & 3rd Floors NHS
—— Located between the prime town centre pitch and the town’s bus station.
—— Adjacent to West Gate car park.
Service Charge —— Long term undoubted office tenant recently renewed and refurbished space
on low base rent.
The service charge budget for the year ending 31 December 2014 equates to an overall level of
£2.37 per sq ft. The budget is split into 5 schedules taking account of the different services to —— Top UK retailers provide core of retail income.
each part of the property. The service charge applicable to the retail element of the scheme is —— Immediate re-gear and re-letting opportunities.
£0.94 per sq ft, with the office space attracting an average rate of £3.03 per sq ft. —— Fixed rental uplift on the strong trading M&S unit.
There are no current service charge caps, with the only liability currently being the vacant 1st —— Longer term alternative use potential.
floor office suite. The landlord will provide a 12 month occupational costs guarantee on this
vacant suite.
Proposal
We are instructed to seek offers in excess of £7,250,000 (seven million two hundred and fifty
thousand pounds) subject to contract and exclusive of VAT.
A purchase at this level would show a Net Initial Yield of 8.23% rising to 8.59% upon letting
of the part first floor suite at our ERV of £12.00 per sq ft. This assumes usual purchaser’s costs of
5.80% and reflects a low capital value of £128 per sq ft.
Westgate House | Market Street, Warwick CV34 4DE 9
Further Information
Further information is available to view at: Robert Cass James Dunne James Waghorn
Website: www.capitaproperty.co.uk/warwick +44 (0)20 7544 2256 +44 (0)20 7544 2093 +44 (0)20 7544 2290
+44 (0)7901 518 752 +44 (0)7768 553 337 +44 (0)7976 974 056
robert.cass@capita.co.uk james.dunne@capita.co.uk james.waghorn@capita.co.uk
65 Gresham Street, London EC2V 7NQ | +44 (0)20 7709 4500 | capita.co.uk/realestate
Note: Capita for itself and as agent for the vendors or lessors (the “Seller”) of this property, gives notice that (1) These particulars do not constitute any part of an offer or a contract (2) Whilst every attempt has been made to ensure accuracy, this cannot be guaranteed and, therefore (save as set out at (6) below), (a) all statements and
descriptions in these particulars as to this property are made without responsibility or liability on the part of CSL or the Seller, (b) no such statements or descriptions are to be relied on as statements or representations of fact (c) all measurements are approximate and no responsibility is taken for any error, omission or misstatement and
(d) any intending purchasers or lessees must satisfy themselves by inspection or otherwise as to the correctness of each of the statements, measurements, photographs and other particulars (3) The Seller does not make or give, and neither CSL nor any of its employees or agents makes or gives nor has any authority to make or give, any
representation or warranty whatsoever in relation to this property. (4) Unless otherwise stated, all prices and rents are quoted exclusive of VAT and no statement is made as to the incidence of VAT and where such a statement is made it is subject to confirmation. (5) No liability is accepted and no representation is made by either CSL or
the Seller in respect of the presence, condition, adequacy or usability of any telecommunications or computer systems or equipment at the property, any software loaded thereon, or any related cabling or infrastructure. (6) Some photographs contained herein may have been subject to minor digital alteration due to weather conditions
at the time of the original image (7) Nothing herein shall exclude any liability which either the Seller or CSL would otherwise have for any fraudulent concealment or for any statements made fraudulently by it, its employees or agents.
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