for sale: prime retail investment

FOR SALE: PRIME RETAIL INVESTMENT
6-10 Frederick Street, Edinburgh
OFFERS OVER £6,600,000
• Current passing rent of £420,500 per annum
• Net initial yield of 6.02%
• Reversionary yield of 6.09% in 2014
• Property comprises two well configured retail units and upper floor office accommodation
• Retail let to Schuh Limited and Dune Group Limited (5A1 and 3A2 Dun & Bradstreet rating respectively)
• Circa 92% of income is secured to multi-national retailers
• Weighted unexpired lease term of retail income is circa 8.5 years
• Rare opportunity to acquire a prime retail investment situated in one of Edinburgh’s principal
thoroughfares between the prime retail pitches of Princes Street and George Street
Location
Edinburgh is the capital city of Scotland, located approximately 400 miles north of London and 45 miles east of
Glasgow. It is one of the six cities categorised by PMA as a major city and, consequently, benefits from a
significant catchment population.
Road communications are excellent with the M90 located to the north, the M8 and M9 to the west and
the A1 trunk road to the south which provide links to all major cities in the UK. The city is well served by
the rail network, with direct and frequent services to London (Euston and Kings Cross) and Glasgow with
fastest journey times of approximately 4 hour 50 minutes and 51 minutes respectively. Edinburgh also
benefits from one of Britain’s fastest growing airports, providing both domestic and international flights.
Edinburgh has a strong reputation as a year-round city break destination and attracts roughly 4 million
tourists each year. Visitors spend around £1 bn a year in the city (Source: Edinburgh-Inspiring Capital).
INV
Edinburgh has a population of 471,650, with a catchment population of approximately 874,000, of
which 502,000 consider the city as their main shopping destination, ranking it tenth out of the 200
Promis centres.
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Situation
The subject property occupies a 100% prime retail location on Frederick Street. Frederick Street is one of Edinburgh’s
principle retailing thoroughfares and links the prime pitches of Princes Street and George Street. The property is situated
on the west side of Frederick Street close to the corner of Princes Street. Occupiers in the near vicinity include All Saints,
Millets, Radley, Size, Argento and USC.
Description
The subject property comprises an attractive traditional sandstone building accommodating two retail units arranged over
basement, ground and one upper level (Schuh unit only) and two self contained office suites over first, second and third
floors which benefit from a separate entrance.
6-6a Frederick Street (Schuh) comprises a retail unit providing ground, basement
and first floor accommodation. The ground floor provides sales, while the basement
and first floor provide ancillary storage/staff accommodation.
10 Frederick Street (Dune) comprises a retail unit providing predominantly ground
floor sales accommodation with ancillary basement storage/staff accommodation.
The offices provide good quality traditional cellular accommodation, retaining many
original period features including fire places, ceiling cornices and sash windows.
They benefit from gas fired central heating, a mixture of fluorescent and pendant
lighting, and carpet throughout. Each floor is connected by a common stairwell and
all suites have toilets and tea preparation facilities. The offices benefit from a separate
entrance located on Frederick Street.
Retailing in Edinburgh
Edinburgh City Centre provides approx 2,090,000 sqft of retail floor space which ranks the City
13th out of the Promis centres on this measure. The core shopping area includes Princes Street,
George Street, St James Shopping Centre, Frederick St, Hanover St, Rose Street and Princes Mall.
Princes Street is Edinburgh’s principal retailing thoroughfare. The prime pitch on Princes Street
stretches from the junction with Frederick Street in the west to South St Andrew Street in the east.
A number of streets feed off Princes Street (including Frederick Street) and provide access to
Rose Street and George Street, the latter catering for more upmarket retailers. At the eastern end
of this retailing pitch is Multrees Walk which is anchored by Harvey Nichols and also home to
a number of high end retailers. The open air scheme also provides one of the main links into the
St James Shopping Centre which is anchored by John Lewis.
Henderson Global Investors recently received outline planning permission for the redevelopment
of the St James Shopping Centre which is set to replace the existing 1970s scheme and provide
a new St James Quarter from Multrees Walk to east Princes Street. The redevelopment, should
it proceed, will transform the site with a new landmark mixed use development comprising a
world class retail offer which will effectively double the amount of retail space to over 1 million
sqft, up to 126 apartments, 211 bedroom hotel, a cinema and a 55 bedroom aparthotel.
However, due to the current economic climate there is uncertainty over the timing of the
proposed redevelopment and it will be at least six years before any redevelopment will be
complete and probably longer. For this reason key retailers such as Anthropologie, White
Stuff, Urban Outfitters, Austin Reed, Joules and Pepperberry have all recently taken space on
either Princes Street or George Street. George Street has been the biggest beneficiary with the
recent high profile letting to Anthropologie (39/41 George Street) reflecting a net Zone A rate
of approximately £200/sqft. Other recent deals on George Street include the assignation of
the Viyella lease (34 George St) to Bravissimo t/a Pepperberry. Bravissimo paid a premium to
secure this lease at a closing date. Austin Reed relocated from 39/41 George Street into 102
George Street (former Pier). White Stuff acquired a new lease over the former Grays Hardware
Store at 89 George Street. White Company are under offer on the former Mappin & Webb at
88 George Street and Hollister are rumoured to be in negotiations on taking a lease over 80
George Street.
There has also been significant activity on Princes Street in recent years. Primark acquired the
former M&S at 91-93 Princes Street and plan to open a new flagship store extending to circa
75,000 sqft in Spring 2012. In addition to the Princes Street entrance there will also be an
entrance on Rose Street. The arrival of Primark will further improve the retail offer in Edinburgh
as they are a massive footfall generator.
Other key lettings on Princes Street include Urban Outfitters acquisition of the former Zavvi at
124 Princes Street, New Look have pre-let circa 27,000 sqft at 121-123 Princes Street and
plan to open in 2012.
As regards tenant demand, there are numerous active requirements for space in the city centre
from top brands such as Apple, Hollister, Mango, H&M, Disney and 02 amongst others.
Princes Street is currently undergoing significant investment thanks to a £500 million tram
system being installed, which is set to run through the heart of Edinburgh. It will also provide
a direct connection between Edinburgh Airport in the west and Newhaven in the east. The
proposed tram route passes along Princes Street, with tracks already in place. The only tram
stop currently planned on Princes Street will be located opposite the Primark and this will further
enhance footfall in the surrounding vicinity once the trams become operational. The tram system
is anticipated to be operational by 2014.
Accommodation
We have measured the subject premises in accordance with the RICS Code of Measuring Practice 2007 (Sixth Edition)
and would estimate that the subjects extend to the following Net Internal areas and dimensions:
Address
Tenant
Net
Frontage
Shop
Depth
6-6a Frederick Street
Edinburgh
Schuh Limited
33 ft 3 ins
(10.13m)
10 Frederick Street
Edinburgh
Dune Group Limited
17 ft 7 ins
(5.35m)
8 Frederick Street
Edinburgh
8 Frederick Street
Edinburgh
Total Reduced Area
(30ft Zones)
Floor
Sqft
Sqm
95 ft 2 ins
(29.01m)
Ground floor
Basement
First Floor
Total
2,595
2,988
610
6,193
241.07
277.61
56.71
575.33
1,919 sqft
(178.28 sqm)
94 ft 9 ins
(28.87m)
Ground floor
Basement
Total
1,909
914
2,823
177.35
84.91
262.26
1,022 sqft
(94.94 sqm)
854
681
1,452
2,987
79.34
63.26
134.89
277.49
n/a
902
83.79
n/a
Action on Smoking
& Health (Scotland)
n/a
n/a
First floor
Second floor Unit A
Attic
Total
Action on Smoking
& Health (Scotland)
n/a
n/a
Second Floor Unit B
Tenancy
Lease
Start
Lease
Expiry
Next Rent
Review
Schuh Limited
t/a Schuh
07-02-94
06-02-19
07-02-14
£242,500
(£126.37/sqft)
FRI Lease
Dune Group Limited
t/a Dune
30-08-05
29-08-20
30-08-15
£143,000
(£139.92/sqft)
FRI Lease
Address
Tenant
6-6a Frederick Street
Edinburgh
10 Frederick Street
Edinburgh
8 Frederick Street
Edinburgh
8 Frederick Street
Edinburgh
Total
Rent
(Zone A/sqft)
or (Rate/sqft)
Action on Smoking
& Health (Scotland)
Action on Smoking
& Health (Scotland)
01-07-05
27-01-06
30-06-20
30-06-20
n/a
n/a
Comments
£26,250
(£8.79/sqft)
Tenant has the option to terminate the
lease on 30-06-15 subject to providing
6 months notice. Fixed rental increases
as follows:
Rent - £26,250 pa to 29-06-12
Rent - £28,125 pa to 29-06-14
Rent - £30,000 pa to 30-06-15
Rent free from 01-07-10 to 31-12-10
Rent free from 01-07-15 to 31-12-15
£8,750
(£9.70/sqft)
Tenant break option on 30-06-15
subject to providing 6 months notice.
Fixed rental increases as follows:
Rent - £8,750 pa to 29-06-12
Rent - £9,375 pa to 29-06-14
Rent - £10,000 pa to 30-06-15
Rent free from 01-07-10 to 31-12-10
Rent free from 01-07-15 to 31-12-15
£420,500
Rental Analysis &
Value
The passing rents for Schuh and Dune reflect Zone A rates
of £126.37/sqft and £139.92/sqft respectively. A full
breakdown of the analysis is available upon request.
In our opinion and as both properties have recently
undergone rent reviews, the properties are rack rented.
However, with Primark soon to occupy 91-93 Princes
Street and the only tram stop on Princes Street being
located around the corner from the subject property,
footfall looks set to significantly increase. Retail demand
is likely to follow and we would anticipate excellent
prospects for future rental growth.
Tenure
The property is held on a heritable (Scottish equivalent of
English freehold) title.
Planning
We have made verbal enquiries with The City of Edinburgh
Council, who have confirmed that the property is Category
B listed and sits within the New Town Conservation Area.
turnover of £146,471,000 a net profit of £12,709,000
and a tangible net worth of £45,720,000.
Dune Group Limited
The Dune Group Limited is a global retailer of men’s and
women’s footwear and accessories in the affordable luxury
market. In 2009 The Dune Group expanded its operations by
opening shop-in-shop concessions within major department
stores in the UK, Holland and Denmark. In the same year
they acquired a portfolio of brands, which resulted in them
tripling group turnover to circa £130 million. There are now
circa 40 UK stand alone stores and 150+ concessions
throughout the UK and Europe. They are rapidly increasing
their global presence with more than 20 franchised Dune
stores in the Middle East, Russia, Czech Republic and
Poland with plans to grow to 150 stores by 2015. As well
as Dune, the brands in their portfolio include Bertie, Pied a
Terre, Sold by Dune, Chelsea Cobbler, Head over Heels,
Roland Cartier and Roberto Vianni.
The Dune Group Limited have a Dun & Bradstreet rating
of 3A2 representing a lower than average risk of business
failure. For the financial year ending 30 January 2010
they reported a turnover of £132,315,512, a net profit of
£6,929,168 and a tangible net worth of £9,031.858.
Action on Smoking & Health (Scotland)
Covenant
Action on Smoking (ASH) was established in 1971 by the
Royal College of Physicians. It is a campaigning public health
charity that works to eliminate the harm caused by tobacco.
Schuh Limited is a multinational retailer of men’s and women’s
footwear and accessories. Established in 1981, it now has
59 stores in the UK & Ireland and approximately 1,247
employees. In March 2011 Schuh Limited won the award for
Outstanding Private Company at the Scotland PLC Awards.
ASH have a Dun & Bradstreet rating of B1 representing
a minimum risk of business failure. For the financial
year ended 30 March 2010 the reported a turnover of
£1,154,847, a net profit of £61,323 and a tangible net
worth of £306,803.
Schuh Limited
Schuh Limited have a Dun & Bradstreet rating of 5A1
representing a minimum risk of business failure. For the
financial year ending 28 March 2010 they reported a sales
Investment Evidence* Property
Transaction
63-65 George Street, Edinburgh
Investment sale
55-59 Buchanan Street, Glasgow
*recent comparable evidence includes the following:
Price
Yield
Date
£10.4 million
5.71%
July 2010
Investment sale
£16.5 million
4.87%
2nd Quarter 2010
99/99A Princes Street
& 2/4 Frederick Street, Edinburgh
Investment sale
£7.074 million
6%
December 2010
44-46 Princes Street
& 1 South David Street, Edinburgh
Investment sale
£7.6 million
5.87%
January 2011
14-18 Hanover Street, Edinburgh
Investment sale
£5.5 million
5.91%
January 2011
Proposal
We are instructed to seek offers in excess of SIX MILLION
SIX HUNDRED THOUSAND POUNDS (£6,600,000)
exclusive of VAT for our client’s heritable interest subject to
and with the benefit of the existing leases.
A purchase at this level would show a net initial yield of
6.02% and a reversionary yield of 6.09% in 2014 based
on purchasers costs of 5.8%.
VAT
Our clients have elected to waive exemption for VAT and
accordingly VAT will be payable on the purchase price,
although we anticipate the property will be sold as a TOGC.
Legal Costs
Each party will be responsible for their own legal costs
incurred in connection with the transaction.
Viewing & Further
Information
Please contact the sole selling agent:
Cathal Keane/Barry Woods
Culverwell
68-70 George Street
Edinburgh EH2 2LT
Tel: 0131 226 6611
Fax: 0131 226 6622
Email: [email protected] / [email protected]
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NIS
SPA
79
81
CE
RAN
ENT
38
POS
Culverwell 21/4/2011
94
CE
P RI N
Tram
RE E
S ST
90
89
Stop
T
104
106
Tram
e
Rout
50 metres
Disclaimer
Culverwell for themselves and for the vendors or lessors of this property whose agents they are 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, dimension, references to condition and necessary permissions for use and occupation, and other details are given without
responsibility and any intending purchasers or tenants shall 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 and are advised to do so; (iii) no person in the employment of Culverwell has
any authority to give representation or warranty whatever in relation to this property; (iv) all prices, rents and premiums quoted are exclusive
of VAT at current rate.
May 2011