Prime Retail Investment Opportunity THE FIRST PURPOSE BUILT … · 2016-05-13 · • A new 86,523...

Prime Retail Investment Opportunity

NEXT GROUP PLCCHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT

THE FIRST PURPOSE BUILTNEXT FASHION, HOME & GARDEN STORE

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Investment Summary

• A “Trophy” Retail Superstore opportunity located in Hedge End, Southampton.

• An affluent catchment with 745,237 persons livingwithina20minutedrivetime.

• Prominent position at the entrance/exit to Junction 7,M27,immediatelyadjacenttoHedgeEndRetailParkandopposite to the large M&S and Sainsbury’s superstores.

• Benefits from excellent critical mass being located attheheartofoneoftheSouth’slargestRetailWarehouseShoppingdestinations(735,000sqft).

• Freehold.

• Anew86,523sqft(GIA)qualityretaildevelopmentbuiltandwarrantedbyNexttoanextremelyhighspecification.

• OpenA1non-foodplanningconsent.

• The UK’s first purpose built Next “Fashion, Home andGarden”formatstore.

• ANew21year3monthlease,(20yearsunexpired)totheundoubtedcovenantofNextGroupPlc.

• Acommencingrentof£1,454,313paxwithafixedupliftat Year 5, measured by CPI with 1.5% and 3% collar and cap.

• Offersareinvitedinexcessof£28,940,000 (Twenty-Eight Million, Nine Hundred and Forty Thousand Pounds), which reflects a Net Initial Yield of 4.75%, assuming purchaserscostsof5.8%.AssuminganaverageCPIrateof2.5%,thereisaguaranteedReversionaryYield(2019)of5.37%andanEquivalent(Nominal)Yieldof5.23%.

A334 Charles Watts Way

M27

Junction 7


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LUTON

STANSTED

HEATHROW

GATWICK

SOUTHAMPTON

CITY

LYNEHAM

8

76

12

43

3 54

7

6

3130

4

5

2

8

9

10

11

2 134

14

13

4

3

1

11

10

99

14 1312

67

10

65

7

12

1110

9

8

7

8

5

1314

44

12

1

2 3

91110

12

17

1615

78

9

10

2019

1

32

4

56

1718

5

4

2

1

2524

22

8

7 1

4

5

29

28

8

72

3

6

5

4

8

7

12

11

10

9

11

2

26

5

3

1

M23

M1

M27

M26

M25

A3(M)

M40

M4

M3

A329(M)

M25

M25

M25

M25

M20

M1

M10

A1(M)

M11

M4

M40

M3

M5

M11

A36

A36

A338

A346

A303

A354

A338

A350

A338

A419

A31

A31

A436

A417

A40

A429

A40

A44

A348 A3

38

A303

A31

A26

A23

A232

A4

A40

A406

A41

A406

A10

A12

A13

A2A20

A205

A3

A24

A34

A27

A3

A34

A13

A127A127

A40A418

A41

A4010

A413

A41

A5

A602

A10

A414

A12

A120

A130 A131

A12

A130A420

A34

A419

A21

A229

A249

A21

A228

A21

A26

A22

A22

A22

A259

A26

A27

A23

A264

A283

A24

A272

A24

A264

A22

A22

A2

A31

A33

A339

A34

A27

A429

Stow-on- the-WoldStevenage

BrentwoodBasildon

Gravesend

Tunbridge Wells

Maidstone

Hastings

Eastbourne

RochesterGillingham

Chatham

Crawley

BrightonHove

WorthingBognorRegis

Havant

Eastleigh

Basingstoke

Guildford

WokingCamberley

Staines

Reading

PooleBournemouth

Swindon

Cheltenham

Harlow

Slough

Watford

Luton

Amersham

HighWycombe

Oxford

Fareham

Gosport

SOUTHAMPTON

Portsmouth

LONDON

Location

Hedge End, 4.8 miles to the east of Southampton City Centre, is amajor regional trading locationon theSouthCoastandoneof themostestablishedretailwarehousinglocationsintheSouthofEngland.

It is immediately located on the M27 Motorway at Junction 7, linkingthe area to Southampton, Portsmouth and theM3motorway (5.5milesnorthwest).HedgeEnd servicesboth theSouthamptonandPortsmouthcatchments,aswellasextendingintoHampshire.

Southampton International Airport and Parkway railway station are located 5 miles to the north west of the property at Junction 5 oftheM27.

The Airport serves 48 European destinations with annual passengernumbersapproaching2millionand the stationprovidesadirect service toLondonWaterloowithafastestjourneytimeof1hour11minutes.

CHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT


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Demographics

TheretailcatchmentforHedgeEndisextensivewith186,391peoplelivingwithina10minutedrivetime.Allowingforadrivetimeof20minutes,thiscatchmentincreasesto745,237anddrawsfrommostof Southampton and key centres such as Winchester, Eastleigh,RomseyandFareham,aswellaspartsofPortsmouth.

TheHedgeEndcatchmentpopulationisaffluent,withthetwomostrepresented social groups of AB andC1 accounting for circa 48%of adultsofworkingage.The cityof Southampton is theprincipalcatchmentforthescheme.Southamptonranks19intheUKintermsofthevolumeofcomparisonretailspendavailableinthecatchmentarea and is forecast to see above average percentage growth intheavailablepoolofcomparisonspendingovertheforecastperiod2013–18.

ThebelowtablecomparesthedemographicsofotherNext“Fashion,Home and Garden” stores in the South East and illustrates thedominanceofHedgeEnd.

20 minutes Drive Time Social Groups AB/C1

Hedge End 745,237 285,443

Camberley 610,902 279,173

Maidstone 524,194 200,482

Shoreham 504,191 210,660

HighWycombe 369,112 213,749

12

11

10

9

7

8

5

13

14

44

12

1

2 3

9

1110

125

3

1

M3

M3

M3

A3 (M)

A36

A338

A338

A31

A31

A338

A303

A31

A34

A27

A3

Chichester

Ryde

Newport

Fawley

Hythe

LymingtonNew Milton Cowes

Alton

Ringwood

Salisbury

Christchurch

Eastleigh

Bournemouth

Fareham

Gosport

Portsmouth

Chichester

Ryde

Newport

Fawley

Hythe

LymingtonNew Milton Cowes

Alton

Ringwood

Salisbury

Christchurch

Eastleigh

Bournemouth

Fareham

Gosport

Portsmouth

WinchesterWinchester

RomseyRomsey

SouthamptonSouthampton

20 minute drive timeThe Property

NEXT PLCCHARLES WATTS WAY

HEDGE END

Situation

The subject property is situated in a prominent position onCharles Watts Way (A334), which directly links the Hedge Endretailareaonto Junction7oftheM27motorway,approximately250mtothewestoftheegresstothesite.AccesstotheschemeissharedwiththeentranceandexitsofHedgeEndRetailParkontothewestbounddualcarriagewayofCharlesWattsWay.

Hedge End Retail Park is directly adjacent to the development.Occupiers on the park include DFS, Oak Furnitureland, ScS,Carphone Warehouse, Starbucks and Kiddicare. The M&S andSainsbury’s stores are located directly opposite on the north side ofCharlesWattsWay.


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M27

M27

7

TURNPIKE W

AY

WILD

EN LANE

A334 CHARLES WATTS WAY

B3035 BOTLEY ROAD

TOLLBA

RW

AY

A334 CHARLES WATTS W

AY

CHARLES WATTS WAY

GRANGE ROAD

A334 GRANGE ROAD

LOWER NORTHAM ROAD

LOWER NORTHAM ROAD

UPPER NO

RTHAM

ROAD

B3035 BOTLEY ROAD

B3342

B334

2 TO

LLBA

R W

AYBRADBEERS RETAIL PARK

ALLIED CARPETS, PONDEN HOMESBENSONS/HARVEYS, CARPETRIGHT

BRADBEERS, BURGER KING

HEDGE END RETAIL PARKDFS, OAK FURNITURELAND, SCS

KIDDICARE, CARPHONE WAREHOUSESTARBUCKS

HEDGE END PARKCURRYS, PC WORLD

MARKS & SPENCER / SAINSBURY’S

B&M (UNDER OFFER)

B&Q WAREHOUSE

SUBJECT PROPERTY

HEDGE END

WICKES

Retail Warehousing in Hedge End

Hedge End is an established and substantial retailwarehouse destination area comprising approximately 735,000 sq ft ofretailspace.ItisanchoredbytheMarksandSpencer(137,000sqft)andSainsbury’s(105,000sqft)superstores,oppositethesubjectproperty.

HedgeEndRetailPark,ownedbyM&GRealEstate,comprises86,000sqftandbenefitsfromabulkygoodsplanningconsent,with the exception of the Kiddicare and CarphoneWarehouse units which have Open A1 non-food consent. Kiddicaretook the formerBestBuyunit aspartof apackageofother formerBestBuy stores. Theother tenants includeDFS,OakFurnitureland,ScS,CarphoneWarehouseandStarbucks.Thetoneoftheparkiscirca£35psf,themostrecentlettingbeingtoOakFurniturelandataheadlinerentof£32.50psfin2012.TheDFS2013reviewiscurrentlyatarbitration.

OtherretailwarehousingincludesaHomebase(39,500sqft)andaPCWorld/Curry’sMegastore(45,336sqft)adjacenttotheM&S.Theschemehasabulkygoodsconsentandisletatcirca£22psf.ThereisalsothemoresecondaryBradbeersRetailPark,where tenants includeHarveys,Carpetright,BradbeersandBurgerKing.Thepark is70,000sq ftandbenefits from abulkygoodsplanningconsent.Theparkhastwoavailableunitsandthetoneiscirca£20psf.

ThereisalargeB&Q(105,000sqft),alsoonCharlesWattsWayandaformerWickes(45,000sqft)oppositeCentre27RetailPark,whichisrumouredtobeunderoffertoB&MBargains.Wickesrecentlyrelocatedtoa15,000sqftunitonHamiltonTradeParkatarentof£16psf.

Description

Thepropertyisofastrikingdesign,comprisingamodernqualitypurposebuilt three-storey retailstorewithexternalgardencentre,entrancelobbyandacafé,whichisoccupiedbyCostaCoffee.Theprincipal elevations are of full height framelessglazing, a design sought after by retailers. Thebuilding is cladwith limestone and high qualitydecorative features. The high specification oftheconstructionandtenant’sfitoutsetsitapartfromotherNextFashion,HomeandGardenstoresand is substantially superior to the traditional out of town retail warehousing formats. Next haveinvested large sums into the specification anddesignofHedgeEndandviewitastheirflagshipFashion,HomeandGardenstoreacrosstheUK.

TheprincipalcustomeraccessisfromthecarparkintoalargeentrancelobbyattheLowerGroundFloor. There are two glass customer lifts to oneside of the prominently positioned up/downescalators to the ground floor. There is also anentranceonthewestelevationforthebenefitofcustomers entering fromHedgeEndRetail Parkwithaccessviastairs,escalatorsand lifts to theFirst Floor.

The shell has a BREEAM rating of “Very Good”with a score of 68%, (“Excellent” rating higherthan70%).

Thereare211designatedcarspacesallatgroundlevel, providing a ratio of 1:174 sq ft, (over the36,743sqftarea).Thereareafurther330spacesonHedgeEndRetailPark.Servicingisattherearof the southern elevation with an additionalservicetunnel,which isservedbya lift,andwasinstalled by the tenant.

The site area is approximately 3.2 acres (1.29hectares).


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Accommodation

The leasewithNextstipulatesthatthehypotheticalareaforthestoreforthepurposesofreviewandcalculationofrentatyears10and15is36,743sqft.

ThepropertyhowevercomprisesthefollowingGrossInternalAreas,inaccordancewiththeRICSCodeofMeasuringPractice(6thEdition):

GIA(sqft) GIA(sqm)

GroundFloor 33,605 3,122

FirstFloor(includingCafé) 25,909 2,407

LowerGroundFloor(includingServiceTunnel) 19,733 1,837

SUB-TOTAL 79,247 7,366

Conservatory 3,358 312

GardenCentre 3,918 364

TOTAL 86,523 8,042


Tenure

Freehold.

Planning

ThepropertybenefitsfromanOpenA1non-foodconsent,whichwasreceivedon21stMarch2013.Itstates:

“Theretailstoreherebyapprovedshallbenogreaterthan8,310sq m gross external area and shall incorporate the followingfloorspacerestrictions:a.Nomorethan5,609sqmofpermittedfloorspace shall beused for salespurposes (net salesarea); andb.Nomorethan2,724sqmofthepermittednetsalesfloorspaceshall be used for fashion items including, clothing, shoes, bags andjewellery.”

Furtherplanninginformationisprovidedinthesaledataroom.


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Tenancy

NEXT GROUP PLC

AnAgreementforLeasewascompletedwithNexton23rdFebruary2013,annexedtowhichisa lease fora termof21yearsand3monthswhichcommencedon28th June2013,whenthe vendor completed the enabling works. The lease is an institutional FR&I Lease with acommencingrentof£1,454,313pax,paidquarterlyinadvance.

The leasebenefits fromfiveyearlyupwardsonly rent reviews throughout the term.Thefirstreview(7thAugust2019)issubjecttoafixedupliftbasedontheConsumersPricesIndex,(CPI),withacollarandcapof1.5%and3%.

Thereviewsinyears10and15areOpenMarketandaretobebasedonanotionalbuilding. Thehypotheticalpremisesassume:

• Same location on a level site,• AgroundfloorGIAof36,743sqftwiththebenefitofan8,000sqftgardencentre,• 206 car parking spaces,• Same planning consent, • Ahighqualityshellconstructedbythelandlord,• The tenant is permitted to install a mezzanine up to 85%

ofthegroundfloorGIA,and• Ahypotheticalleasetermof10years.

Furtherinformationisprovidedinthesaledataroom.


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Current income pax

£1,454,313perannumexclusive.

Therentequatestoarateof£39.58psf,assuming the area of 36,743 sq ft asstatedintherentreviewclause.

The letting reflects a clean transactionwith the total incentive provided to thetenanttotalling4monthsrentfree

Furtherinformationisprovidedinthesaledataroom.

Consumer Prices Index (CPI)

The first rent review in year 5 will beincreased in accordance with the CPI,butsubjecttoacollarof£1,566,707pax(1.5%)andcapof£1,685,947pax(3%).

TheannualratesforCPIsince2008havebeen:

Year AnnualCPIRate

2008 3.6%

2009 2.2%

2010 3.3%

2011 4.5%

2012 2.8%

2013 2.6%

(ONS)Theaveragesince2008is3.17%.


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Tenant Covenant

NextPlc isoneoftheUK’s largestspecialistclothingretailers,with541UKoutletstotallingapproximately 7,008,000 sq ft. Recent domestic expansion has primarily focused on thestand-alone“Fashion,HomeandGarden”format.NextPlchasconsistentlyachievedstrongprofitabilitydespite the recenteconomicchallenges. In January2014 it reported that salesrose5.4%toover£3.7bn,thisconsolidatedontheincreasereportedinJanuary2013of3.1%to£3.5bn.Inaddition,underlyingpre-taxprofitswereup11.8%to£695m,againimprovingonJanuary2013,whichreportedanincreaseof9%to£622m.NextPlcislistedontheLondonStockExchangeandisamemberoftheFTSE100index,theonlyotheroutrightretailersbeing J SainsburyPlc, TescoPlc, KingfisherPlc (ownerofB&Q),Marks andSpencerGroup, SportsDirect International,WmMorrisonSupermarketsPlcandBurberryGroupPlc.NextPlc isthemostexpensiveshare in theentireFTSE100at7,175.00p (September2014).Experian rateNextPlc.as“VeryLowRisk”withaDelphiScoreof100outof100.DunandBradstreetgivearatingof5A1.

TheleaseissignedwithNextGroupPlc.,awhollyownedsubsidiaryofNextPlc.NextGroupPlc.hasaDelphiScoreof100outof100andaDunandBradstreetratingof5A1.Fortheyearending25thJanuary2014,theyreportedaturnoverof£197,700,000;pre-taxprofitsof£53,000,000;aTangibleNetWorthof£1,296,600,000andNetCurrentAssetsof£1,267,600,000.

NEXT PLC

25/01/2014 26/01/2013

Turnover £3,740,000,000 £3,562,800,000

Pre-taxProfits £695,200,000 £666,500,000

TangibleNetWorth £241,800,000 £240,900,000

NetCurrentAssets £633,600,000 £391,800,000

NEXT GROUP PLC

2014 26/01/2013

Turnover £197,700,000 £212,300,000

Pre-taxProfits £53,000,000 £322,500,000

TangibleNetWorth £1,296,600,000 £1,747,900,000

NetCurrentAssets £1,267,600,000 £1,885,400,000

In2014Nextare forecasted toproducehigherprofits thanMarksandSpencer for thefirsttime. Most recently Next has increased its full-year pre-tax profit growth forecasts by £25millionto£815millionaftersalesincreased10.7%inthesecondquarter.

The Dun & Bradstreet Reports for Next Plc and Next Group Plc can be found in the saledataroom.


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Next “Fashion, Home and Garden”

NexthavestatedthattheirprincipalfocusforexpansionwillbetheFashion,HomeandGardenformat,whichwasoriginallytrialledinShorehamand“comfortablybeattheirtargets”(NextHalfYearReportJuly2012). Ithasidentified19sitestobringtheconcepttointhenextfiveyears.HedgeEndwillbetheirfirstpurposebuiltunit,withShoreham,Camberley,Warrington,SolihullandIpswichbeingconversionsofexistingretailwarehouses.Othernewstoresduetoopenwithinthenext12monthsareMaidstone,Sheffield,WilmslowandHighWycombe.

Next’spreferredrouteisnewbespokeunitssotheycantailortheirspecificneeds.Duetothelengthyanduncertainnatureoftheplanningprocedures,Nexthavehadtolookatconversionsof existing retailwarehouseswhicharemoredeliverable. ThismakesHedgeEndextremelyunique,beingNext’sfirstpurposebuilt“Fashion,HomeandGarden”store.

AlistoftheNextFashion,HomeandGardenstoresinclude:

Town Year Open Approx. Size(GIA–sqft) Landlord

Shoreham 2011 60,000 HampshireCCPensionFund

Ipswich 2012 60,500 StandardLife

Camberley 2013 78,000 British Land

Warrington 2013 60,000 M&GRealEstate

Solihull 2014 61,000 F&CREIT

Hedge End* 2014 (open) 87,000 Town Quay Developments

Maidstone* 2014(Q4) 62,000 Underoffer

Sheffield* 2015(Q2) 60,000 British Land

HighWycombe* 2015(Q2) 72,000 Underoffer

HandforthGreen* 2015(Q4) 80,000 CheshireEastCouncil

*Purpose Built Stores


The Development

ThesiteformerlycomprisedaHalfords,latterlyInteriosunit,andtheoldWildernMill.Planningfor thedevelopmentcomprisedamixuse schemewitha separate residentialdevelopmentcomprising 41 homes. The commercial element is self-contained and completely divorcedfromtheresidential.

TheDeveloperandNextenteredintoanAgreementForLeasetoconstructtheretailstoreandcarpark.

The Developer provided the cleared site and Next constructed the building and car park,subjecttotheprovisionssetoutinTheAgreementForLease.

EPC

ThepropertyhasanEPCratingof26.AcopyoftheEPCisprovidedinthesaledataroom.

VAT

Thepropertyhasbeenelected forVATwhichwill thereforebechargeableon thesalepriceunlessthetransactioncanbetreatedasaTransferofGoingConcern(TOGC).


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Thepurchaserwillbenefitfrom:

• ArareSouthEastOpenA1(non-food)retailinvestmentopportunity• Alargeaffluentcatchment• Locatedwithinanestablishedretailwarehousedestination• ExcellentaccessibilitylinkingdirectlywiththeM27Motorway(Junction7)• SubstantialcriticalmasswithHedgeEndRetailPark,Sainsbury’s

and M&S superstores within the immediate location• Amodern,qualitybespokeretailstoreof86,523sqft(GIA)builtbyNext• Therentreflectsalowoverallrateof£16.81psf• UK’sfirstpurposebuiltNext“Fashion,HomeandGarden”store• 20yearsunexpiredtoNextGroupPlc(D&Bratingof5A1)• AfixedincreaseatYear5(inaccordancewithCPI,

collar&capof1.5%&3%)

Proposal

Ourclientisseekingoffersinexcessof£28,940,000 (Twenty-Eight Million, Nine Hundred and Forty Thousand Pounds),subjecttocontractandexclusiveofVAT.

Apurchaseat this level reflectsaNet Initial Yield of4.75%, assuming purchasers costs of5.8%.

AssuminganaverageCPIof2.5%overthenext5years,itwillprovideaReversionaryYieldof5.37%andaNominalEquivalentYieldof5.23%.

Theagentsforthemselvesandforthevendorsorlessorsofthepropertywhoseagentstheyaregivenoticethat:(i)theseparticularsaregivenwithoutresponsibilityofTheagentsorthevendorsorlessorsasageneraloutlineonlyfortheguidanceofprospectivepurchasersortenants,anddonotconstitutethewholeoranypartofanofferorcontract;(ii)Theagentscannotguaranteetheaccuracyofanydescriptions,dimensions,referencestocondition,necessarypermissionsforuseandoccupationandotherdetailscontainedhereinandanyprospectivepurchaserortenantshouldnotrelyonthemasstatementsorrepresentationsoffactbutmustsatisfythemselvesbyinspectionorotherwiseastotheaccuracyofeachofthem;(iii)noemployeeofTheagents(andtheirjointagentswhereapplicable)hasanyauthoritytomakeorgiveanyrepresentationorwarrantyorenterintoanycontractwhatsoeverinrelationtotheproperty;(iv)VATmaybepayableonpurchasepriceand/orrent,allfiguresarequotedexclusiveofVAT,intendingpurchasersorlesseesmustsatisfythemselvesastotheapplicableVATposition,ifnecessarybytakingappropriateprofessionaladvice;(v)exceptinrespectofdeathorpersonalinjurycausedbythenegligenceofTheagents,itsemployeesorservants,Theagentswillnotbeliable,whetherinnegligenceorotherwisehowsoever,foranylossarisingfromtheuseoftheseparticularssavetotheextentthatanystatementmadeintheseparticularshasbeenmadefraudulently.September2014.DesignedandproducedbyCreativeworldTel:01282858200.


NEXT GROUP PLC

FurtherInformation

[email protected]

David [email protected] www.greenandpartners.co.uk


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green&partners020 7659 4848

By Town Quay Developments Ltd

Capital Allowances

ThevendoristoretainthebenefitofallCapitalAllowances.

Investment Rationale

Theinvestmentofferspurchasersauniqueopportunitytoacquirealandmarkretailproperty.

http://www.greenandpartners.co.uk

mailto:[email protected]?subject=Next Group PLC Investment

mailto:[email protected]?subject=Next Group PLC Investment

Prime Retail Investment Opportunity THE FIRST PURPOSE BUILT … · 2016-05-13 · • A new 86,523...

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Transcript of Prime Retail Investment Opportunity THE FIRST PURPOSE BUILT … · 2016-05-13 · • A new 86,523...