BOURNEMOUTH - KLM Retail

The Arcade, Old Christchurch Road, Bournemouth
BOURNEMOUTH
A PRIME RETAIL INVESTMENT OPPORTUNITY
2 | THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH
Investment
Considerations
•Iconic Victorian Retail Arcade
•The primary aspirational retailing destination
in Bournemouth
•Freehold
• Prominent location fronting Old Christchurch Road
• Affluent catchment
• Excellent retail growth prospects
• Let to a number of national retailers on affordable rents
• Low service charge and rates liability
•Significant asset management initiatives
•Offers in excess of £12,510,000 reflecting an attractive
net initial yield of 7.00%, a reversionary yield of 7.15%
and an equivalent yield of 7.04%.
A PRIME RETAIL INVESTMENT OPPORTUNITY
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH
Location
Demographics
The coastal town of Bournemouth is a major commercial and tourist destination located 100
miles south west of London, 22 miles west of Southampton and 6 miles to the east of Poole.
Lying close to the M27. The town benefits from excellent transport links including the A31
and direct train services to London with a journey time of 1hr 45 minutes.
Bournemouth has a total population of 403,000 within the primary catchment
area and an estimated shopping population of 156,000 ranking the town 60th
out of the PROMIS Centres. Bournemouth town centre faces below average
competition from competing retail centres (PROMIS).
Bournemouth International Airport is located circa 4 miles north of the city centre, offering
a range of domestic and international flight options. In addition, the port of Poole offers
scheduled passenger services to Cherbourg and the Channel Islands as well as freight services.
M4
Heathrow
LONDON
A34
Basingstoke
A3
Winchester
A338
Ringwood
A348
A35
POOLE
Guildford
Gatwick
A31
A303
A354
M25
M3
M27
Southampton
A31
A338
A27
A35
BOURNEMOUTH
Portsmouth
M23
Bournemouth is an affluent sub-regional centre with high levels of employment, car
and home ownership. The population includes an above average representation of the
more affluent A, B & C1 social groups. Representation of the least affluent DE Social
group is significantly below average. The town’s comparison retail expenditure is
currently the 52nd largest of the PROMIS Centres and is forecast to grow an impressive
2.7% pa in real terms, over the period 2010-2015.
In March 2011, tourism was reported to be worth an estimated £600 million to the
town, providing circa 20,000 jobs across the wider Bournemouth and Poole area.
The catchment is strong, as in March 2013 the local claimant count was 3.3% of the
population aged 16-64, compared with the national claimant count of 3.8% (PROMIS).
Office-based, private sector employment is also particularly significant with a plethora
of multinational companies having operations based in the town. Significant employers
include JP Morgan Chase, Liverpool Victoria, PruHealth, Lloyds TSB Insurance and
Proctor & Gamble.
Bournemouth also benefits from a substantial and growing student population with
in excess of 17,000 students at the University.
4 | THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
The Arcade is the primary high end fashion
and jewellery quarter within Bournemouth town centre
Retailing in
Bournemouth
Situation
The town centre retail floor space in Bournemouth is estimated at 1.1 million sq ft.
Prime retailing in Bournemouth is divided into two sub-sections either side of
The Square, namely Old Christchurch Road to the east and Commercial Road
to the west.
The Arcade is a busy pedestrianised thoroughfare linking the prime section of
Old Christchurch Road to Gervis Place. The Arcade has entrances on both Old
Christchurch Road and Gervis Place and is well positioned between House of Fraser
and Beales Department Stores.
The prime stretch boasts a particularly strong number of leading national retailers
including Topshop/Topman, Superdry, Monsoon, Marks & Spencer, H&M, Boots,
Republic, Primark & House of Fraser.
The western section of Old Christchurch Road benefits from strong pedestrian flow
with key retailers including House of Fraser, WHSmith, Dorothy Perkins, Oasis,
Monsoon, McDonalds, River Island and Waterstones.
There are two other arcades within Bournemouth town centre, Richmond Gardens
and Burlington Arcade which are both also located on Old Chirstchurch Road. These
contain tenants targeted towards the lower end of the market whereas the subject
property is viewed as the up market quarter in the town centre.
A number of high quality retailers are situated on Gervis Place including Austin Reed,
Russell & Bromley and Viyella.
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The section of the town where the subject property is situated has traditionally been
more popular with the more aspirational type retailer.
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There are 3 managed shopping centres within Bournemouth but they only account
for around 8% of the total retail floor space (PROMIS). Bournemouth is therefore
dominated by the two main stretches of High Street.
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A UNIQUE RETAIL INVESTMENT OPPORTUNITY
Description
The subject property is a Grade II listed Victorian Arcade of approximately 37,000 sq
ft (3,437 sq m), constructed in 1866 by Henry Joy originally as two rows of shops. The
glazed domed arcade roof was added in 1872 and includes coloured glass end panels
and an original 19th century clock at the eastern end. The Arcade contains a glazed
Victorian tiled floor with a number of coloured glass panels at either end of The Arcade.
Additionally, the property contains an original 19th century clock at the eastern end.
The property was built as 19 retail units including two on Gervis Place and is currently
arranged as 13 units. Units 12 & 13 and House of Fraser complete the retail frontage
within The Arcade and are in separate ownerships.
The property provides a good range of well-proportioned units which are ideally suited
to the high end jewellery and fashion retailers. The ancillary areas include basement and
sub-basement levels as well as on first and second floors, some of which may suit a change
of use subject to the usual consents. There is one residential flat let on a assured short hold
tenancy which is situated above the Space NK unit and accessed via Gervis Place.
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The property has prime frontages to both pedestrianised Old Christchurch Road and
Gervis Place with servicing to the rear of several of the units. The Arcade has recently
undergone an extensive refurbishment and redecoration plan.
Tenure
Freehold
N
6 | THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH
Unit
1
2
3-4
5-6
7
14-16
Tenant
Space NK Limited
Vacant
K Retail Propco Limited
Cath Kidston Limited
Gembox Jewellers Limited
Waterstones
Booksellers Ltd
Trading As
Space NK
Lease Start
29/10/2007
Lease Expiry
28/10/2022
Next Rent
Review
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
Break
29/10/2017
Vacant
Karen Millen
Cath Kidston
Gembox
Jewellers
Limited
Waterstones
14/09/2005
13/03/2012
29/09/2009
21/05/2014
28/09/2015
12/03/2022
28/09/2019
20/05/2024
13/03/2017
25/12/2014
21/05/2019
20/05/2019
Floor Areas
(Sq m)
(Sq ft)
Current Rent per
annum (Zone A)
ERV per
annum
(Zone A)
Ground Floor
68.4
736
£85,000.00
£80,600.00
ITZA
64.6
695
(£116)
(£110)
First Floor Anc.
63.9
688
Total
132.3
1424
Ground Floor
57.0
614
£58,700.00
£58,700.00
ITZA
41.4
446
(£110)
(£110)
First Floor Anc.
50.9
548
Second Floor Anc.
38.3
412
Basement Anc.
51.1
550
Sub-basement Anc.
47.8
515
Total
245.2
2639
Ground Floor
84.0
904
£102,000.00
£99,600.00
ITZA
68.4
736
(£113)
(£110)
Basement Sales
86.5
931
First Floor Anc.
87.2
939
Second Floor Anc.
76.1
819
Basement Anc.
13.4
144
Total
347.2
3737
Ground Floor
86.8
934
£85,000.00
£87,400.00
ITZA
62.2
669
(£106)
(£110)
First Floor Sales
76.2
820
Ground Floor Anc.
8.7
94
First Floor Anc.
1.5
16
Second Floor Anc.
58.7
632
Basement Anc.
97.3
1047
Total
320.4
3449
Ground Floor
41.9
451
£55,000.00
£40,400.00
ITZA
30.6
329
(£154)
(£110)
First Floor Anc.
32.1
346
Second Floor Anc.
34.1
367
Basement Anc.
16.9
182
Sub-basement Anc.
32.9
354
Total
157.9
1700
Ground Floor
184.7
1988
£150,000.00
£187,300.00
ITZA
120.3
1295
(£87)
(£110)
First Floor Sales
156.6
1686
Basement Sales
154.4
1662
Second Floor Anc.
164.5
1771
Basement Anc.
70.0
754
Sub-basement Anc.
119.9
1291
Total
850.2
9152
Accommodation & Tenancy
Current Landlord Non-Recoverables
Service
Charge
Insurance
Comments
Total
- Lease is within the 1954 Act security of tenure provisions.
2308.18
569.20
£2,877.38
- Vendor to provide a 2 year top up on vacant unit from completion.
- Lease is within the 1954 Act security of tenure provisions.
- Rent agreement in place for monthly rent payment (ceases on
02/09/2015).
- Lease is within the 1954 Act security of tenure provisions.
- Lease is within the 1954 Act security of tenure provisions.
- We have made an allowance of -10% on the whole to reflect
quantum. Part of Waterstones unit to the rear is not included
within the sale. Agreed floor areas in accordance with
lease renewal.
- Lease is within the 1954 Act security of tenure provisions.
THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH | 7
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
Unit
17
18-19
20
21-22a
23
23a
Storage Units A (basement unit),
B and C (both sub-basement units)
(under separate leases)
Tenant
Ms Clare Andrew
White Stuff Limited
Roberta Ltd
Charles Fox
(Jewellers) Ltd
Holland & Barrett Ltd
Westover Jewellers
Trading As
Essential Jewellers
White Stuff
Roberta
Charles Fox
(Jewellers) Ltd
Holland &
Barrett
Westover Jewel
House of Fraser (Stores)
Ltd
House of Fraser
Part-Basement
and Sub-Basement
The Prudential Assurance
Co Ltd
Prudential
Electricity Substation, Unit 1
1a
Lease Start
04/08/2014
08/10/2010
25/03/2011
21/08/1969
28/06/2006
10/04/2006
28/01/2005
Lease Expiry
04/08/2024
07/10/2020
Next Rent
Review
Break
04/08/2019
04/08/2019
08/10/2015
24/03/2016
20/08/2068
27/06/2016
09/04/2021
08/10/2016
25/03/2014
21/08/2025
24/06/2016
10/04/2016
Floor Areas
(Sq m)
(Sq ft)
Current Rent per
annum (Zone A)
ERV per
annum
(Zone A)
Current Landlord Non-Recoverables
Service
Charge
Ground Floor
56.8
611
£54,000.00
£54,000.00
ITZA
35.4
381
(£128)
(£128)
First Floor Anc.
44.2
476
Second Floor Anc.
40.1
432
Basement Anc.
52.9
569
Total
194.0
2088
Ground Floor
121.7
1,310
£120,000.00
£123,200.00
ITZA
75.9
817
(£106)
(£110)
Insurance
Comments
Total
- Terms of Agreement for Lease agreed with Essential and engrossment in
circulation for signing. Landlord required to complete works prior to the
3 month rent free period. The landlord will top up to the contractual rent
commencement date.
684.03
684.03
- Insurance for sub-basement not included within service charge schedule
and sub-basement unit is excluded from the demise.
- Lease is within the 1954 Act security of tenure provisions.
First Floor Sales
65.7
707
Basement Sales
202.3
2,178
Second Floor Anc.
75.5
813
Total
465.2
5,008
Ground Floor
43.5
468
£46,250.00
£38,600.00
ITZA
27.2
293
(£136)
(£110)
First Floor Sales
36.5
393
First Floor Anc.
4.1
44
Second Floor Anc.
38.4
413
£111,106.00
£116,000.00
(£105)
(£110)
- Tenant's service charge obligations are capped (£5,500 p.a. subject to
RPI increases).
- Lease is within the 1954 Act security of tenure provisions.
Total
122.4
1318
Ground Floor
118.0
1270
ITZA
78.1
841
First Floor Sales
85.1
916
Basement Sales
75.5
813
First Floor Anc.
2.4
26
- We have made an allowance of +5% to reflect the 14 year rent review
pattern and a reduction of 13.95% to reflect the assumed term (being
the unexpired residue of the lease). The tenant occupies the unit under
two leases.
Second Floor Anc.
49.9
537
- Lease is within the 1954 Act security of tenure provisions.
Basement Anc.
30.3
326
Sub-basement Anc.
43.0
463
- Imelda’s Wardrobe Shoes are in occupation of the rear premises (being
unit 22a) on a sub-lease at a rent of £13,000 p.a.
- The Unit is on two seperate co-terminous leases. Unit 21 is paying
£51,421.20 p.a. and Unit 22-22a is paying £59,684.80 p.a.
Kiosk to Gervis Place
10.6
114
Total
404.2
4351
Ground Floor
35.6
383
£41,000.00
£39,800.00
ITZA
31.7
341
(£114)
(£110)
- Lease is within the 1954 Act security of tenure provisions.
First Floor Anc.
42.6
459
- Lease is within the 1954 Act security of tenure provisions.
Second Floor Anc.
42.4
456
Total Floor Area
120.6
1298
Ground Floor
15.1
163
£13,500.00
£13,500.00
ITZA
15.1
163
(£76)
(£76)
Basement Anc.
33.4
360
Total
48.6
523
£-
£-
24/03/2040
- 5% deduction for shape
- Peppercorn rent.
- No service charge obligations (save for insurance contribution).
- Leases are within the 1954 Act security of tenure provisions.
01/12/2005
30/11/3004
£-
£-
Southern Electric Power
Distribution Plc
01/02/1964
01/02/2060
£0.05
£0.05
Mr Tom Hampson & Miss
Lola Rowe - Residential AST
16/07/2013
15/07/2014
£7,200.00
£7,200.00
- Not included within service charge schedule.
- Peppercorn rent.
1271.51
136.02
£1,407.53
- Two bedroom flat
- £800 deposit held under TDS.
Total
3,408.22
36,687
£928,756.05
£946,300.05
£4,968.94
8 | THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
Accommodation
& Tenancy
The Arcade is predominantly let to national multiple retailers, approximately 68%
by income in accordance with the tenancy schedule. The principle tenants within
The Arcade include Cath Kidston, White Stuff, Karen Millen, Space NK, Holland &
Barrett, Charles Fox and Waterstones. Charles Fox was established in 1876 and has
been in occupation for over 130 years.
32%
% Income Against
Covenant Status
The tenancies are on institutional leases and are either on full repairing and
insuring basis or full service charge recovery, apart from a small service charge
and insurance shortfall on the residential unit.
68%
National retailers Local Retailer
The weighted average unexpired lease term by income is approximately 10.1 years.
The current net rental (inclusive of the 2 year top up guarantee on the vacant unit 2
from completion) is £926,664.49 per annum.
6%
% Occupied Floor Space
Occupied area
94%
Vacant Area
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH | 9
Service Charge
Estimated Rental Value
Goadsby and Harding currently manage The Arcade. The service charge runs on a
calendar year basis and is demanded quarterly on account based on a service charge
budget. The service charge for the year ending December 2013 was £52,704 which
reflects circa £1.40 per sq ft and the principle costs are administration, cleaning, fire
alarm maintenance, general repairs, security and insurance. The service charge and
rates liability continue to remain very affordable.
We have analysed the passing rents devaluing to Zone A rates of between £87 psf
and £154 psf.
Prime rents in Bournemouth have historically been recorded on Old Christchurch
Road. These rents reached a peak of circa £190 per sq ft Zone A in 2006 and they are
currently in the region of £160 per sq ft.
Arcade Owners
The rents peaked in The Arcade at a rent of £154 psf Zone A with the Gem
Box Jewellers letting in 2009. The Arcade has largely maintained its rental tone
throughout the downturn and has continued to attract considerable interest from
retailers. The most recent open market letting was to Cath Kidston at £106 psf in
March 2012.
There are currently three property owners within The Arcade with units 12 and 13 in
separate ownerships. In addition to this the House of Fraser has an entrance on to The
Arcade which is in a separate ownership.
We believe there is further rental growth to come through in the near future
as a result of continued strong interest from the high end jewellery and fashion
retailers. Some of which include Jack Wills, Sole Trader, L’Occitane, Gerry Weber
and Jojo Maman Bebe.
A deed of covenant dated 1922 sets out a number of provisions in respect of the The
Arcade (more information available in the data room).
10 | THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH
Asset Management
Initiatives
There are a number of initiatives that could be explored to further increase value
in the future:
•Continue to build on the only high end fashion pitch within Bournemouth
town centre
•An opportunity to purchase other ownerships within The Arcade
•Residential conversion of the upper parts
•Sustainable rents with excellent prospects for future rental growth
•Improve the signage within The Arcade
•Regear a number of the existing leases
•Let the vacant unit
•Opportunities to amalgamate shop units to create further anchor stores
Surveys
An environmental audit together with a measured and building survey have
recently been carried out and may be assignable to a purchaser.
Energy Performance Certificates are available.
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
A UNIQUE RETAIL INVESTMENT OPPORTUNITY
THE ARCADE OLD CHRISTCHURCH ROAD | BOURNEMOUTH | 11
VAT
Proposal
The property is opted for tax but the seller expects the sale to be treated as a
Transfer of a Going Concern.
We are seeking offers for our client’s freehold interest in excess of £12,510,000 (twelve
million five hundred and ten thousand pounds) reflecting an initial yield of 7.00%,
a reversionary yield of 7.15% and an equivalent yield of 7.04% subject to contract after
allowing purchaser’s costs and exclusive of VAT.
Data Room
There is a data room for the property with key tenancy information, EPC’s and legal
documentation. Access can be arranged upon request.
Contacts
Mark Bennett
020 7317 3711
[email protected]
Simon Harvey
020 7317 3719
[email protected]
MISREPRESENTATION CLAUSE
Kitchen Le Frenais Morgan gives notice that these particulars are set out as a general outline only for the guidance of intending
Purchasers or Lessees and do not constitute any part of an offer or contract. Details are given without any responsibility and any
intending Purchasers, Lessees or Third Party should not rely on them as statements or representations of fact, but must satisfy
themselves by inspection or otherwise as to the correctness of each of them. No person in the employment of Kitchen Le Frenais
Morgan has any authority to make any representation or warranty whatsoever in relation to this property. June 2014.
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