DEBENHAMS. green&partners

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1 green&partners DEBENHAMS C A N T E R B U R Y 6-10A HIGH STREET, 3-9 GUILDHALL STREET, GUILDHALL STREET, GUILDHALL STREET, 5-6 SUN STREET, SUN YARD AND 1-6 MERCERY LANE, CT1 2JG WITH SECURE LONG-DATED INCOME & FIXED UPLIFTS

2 INVESTMENT SUMMARY The popular and internationally renowned cathedral city of Canterbury is a dominant regional shopping centre offering an attractive and historic retailing environment and serving a primary catchment of 480,000 people. The city is a major tourist destination with circa 7.22 million tourists visiting every year, contributing some 454 million per annum to the local economy and supporting an estimated 9,400 tourism related jobs. Major national multiple occupiers represented in the city centre include Marks & Spencer, Topshop/Topman, H&M, Fenwick, Next, Zara, Primark, River Island, Tesco, Superdrug, Jack Wills, White Stuff, Hobbs, Crew Clothing, French Connection, Cote Brasserie, Carluccio s and Gourmet Burger Kitchen. A prominent, part listed department store, held within three separate freehold titles and comprising circa 116,494 sq ft (10,822 sq m) of retail accommodation over four floors. Occupying three substantial prime core city centre sites totalling circa 1 acre (0.4 hectares) with extensive frontages onto High Street, Guildhall Street, Sun Street and Mercery Lane/Buttermarket and opposite the main entrance to Canterbury Cathedral. Let to Debenhams Retail Plc until 24th March 2034 (circa 16.5 years unexpired). Current rental of 1,433,718 pax with future fixed minimum uplifts the next being March Offers in excess of 24,400,000 (Twenty Four Million, Four Hundred Thousand Pounds), Subject to Contract and Exclusive of VAT, reflecting a net initial yield of 5.50% allowing for graduated purchasers costs of 6.76% at this level. Net Initial Yield 5.50% Minimum Running Yield March % Minimum Running Yield March % Minimum Running Yield March % Minimum Running Yield March % 2

3 LOCATION Canterbury is an attractive and historic cathedral city in the north-east of Kent. It is situated on the River Great Stour about 62 miles (100km) south east of London, 17 miles (27km) north west of Dover and 29 miles (47km) east of Maidstone. Faversham, the major travel hub of Ashford, the historic town of Sandwich and the popular coastal towns of Herne Bay and Whitstable are all located nearby A41 Hertford A23 11 M25 A406 CITY LONDON 7 10 A10 25 A205 A232 6 M23 GATWICK A23 Croydon A22 A27 A22 A M East Grinstead Haywards Heath Brighton Hove A20 7 A13 A12 Dartford A M25 4 M20 M M26 M25 Sevenoaks A22 A26 A27 A21 A26 A22 Chelmsford A22 A2 A26 A414 A12 Brentwood 3 A127 A21 A13 4 A Tonbridge Tunbridge Wells Crowborough A A21 Eastbourne A130 7 A229 Maldon A249 A127 Basildon Southend-on-Sea Canvey Island 8 Maidstone Gillingham M2 M20 A259 Hastings Sheerness Ashford Faversham A A2 A28 M20 A A299 A28 A2 13 A253 A256 A20 Margate A2 A28 CANTERBURY Folkestone Dover Ramsgate Canterbury is an attractive and historic cathedral city in the north-east of Kent ROAD The city is easily accessible by road with the A2 (dual carriageway) affording direct access to the M2 motorway some 8 miles (13km) to the west connecting to London and the Channel Tunnel Rail Terminal, the latter a 30 minute drive to the south east. Whilst there are several car parks in the city centre a park and ride scheme operates with frequent buses running at 7-8 minute intervals from designated areas on the outskirts of the city. RAIL Canterbury benefits from two railway stations. The high speed rail service from Canterbury West to London provides frequent, direct trains to London (St Pancras) with a fastest journey time of 56 minutes, as well as regular stopping services to London (Charing Cross) and trains to Ramsgate and Margate. Canterbury East station offers a service into London (Victoria) and mainland Europe via Ashford and Folkestone. BUS The hourly National Express coach service (Route 007) to Victoria Coach Station operates 16 services per day and is typically scheduled to take two hours. Eurolines UK coaches also run services to London and Paris. There is a wide range of local bus routes serving the universities and surrounding towns and villages. AIR The closest major airport to Canterbury is London Gatwick 67 miles (107km) to the south west 1 hour 10 minutes drive although the area is also served by local airports, Lydd and Biggin Hill. 3

4 CATHEDRAL FENWICK WHITEFRIARS SUBJECT PROPERTY CENTRE BUS STATION SUBJECT PROPERTY ST GEORGES STREET M&S Buttermarket BOOTS PARADE PRIMARK TESCO METRO NASONS DEPT STORE MARLOWE ARCADE Royal SUBJECT Museum/Library PROPERTY HIGH STREET MARLOWE SUBJECT PROPERTY THEATRE 4

5 DEMOGRAPHICS Canterbury has the largest district population in Kent at 149,100 persons (ONS). The city is the dominant retailing centre in the county and serves a primary catchment population of 480,000 with a shopping population of 217,000. The catchment has recently experienced above average population growth, with this trend set to continue over the next five years. The city is home to three universities, with a total student population of circa 40,000 spread over University of Kent, Canterbury Christ Church University, Canterbury College and Kent Business School. As a consequence, young adults aged are particularly over-represented. Canterbury with its Cathedral and UNESCO World Heritage Site status, medieval streets, museums, restaurants and cafés, festivals and cultural amenities, river and countryside is a major tourist destination. Visit Kent (2015) estimates that up to 7.22 million tourists visit the city every year, contributing circa 454 million per annum to the local economy supporting 9,400 tourism related jobs. POPULATION GROWTH TOURISM SPEND RETAIL VACANCY STUDENT POPULATION Canterbury is projected to see population growth over the period Visit Kent estimate tourism accounts for 454m of spending with 7.22m visits per annum Retail vacancy rate stands at 4.5%, well below the PROMIS average Large student population of circa 40,000 with three major universities in the area 5

6 QUEENS AVE RHEIMS WAY RHEIMS WAY ST DUNSTANS ST A290 Canterbury West STATION RD ST PETER S PLACE A28 NIORTH LANE ST PETER S GROVE CASTLE STREET POUND LANE STOUR STREET CASTLE ROW ST RADIGUNDS STREET HIGH STREET PARADE ST GEORGE S ST MARLOWE AVE PIN HILL ST PETER S LANE THE FRIARS HAWKS LANE BEER CART LANE KING STREET GUILDHALL ST ST MARGARET S ST MERCERY LN ROSE LN WATLING STREET Whitefriars Shopping Centre BURGATE Canterbury Cathedral UPPER BRIDGE ST OLD DOVER ROAD NORTHGFATE BROAD STREET subject property WHITEFRIARS ST ST GEORGE S LANE CANTERBURY DOVER STREET LOWER BRIDGE STREET NEW DOVER ROAD BROAD STREET HAVELOCK STREET MONASTERY STREET A257 RETAILING IN CANTERBURY Canterbury has a compact retail core with an estimated floor space provision of 1.01 million sq ft ranking 19th in the UK on the PMA Anchor Score. The prime retailing pitch within Canterbury has traditionally been St. George s Street, the Parade and High Street although this has been extended and now includes Whitefriars Shopping Centre. Whitefriars Shopping Centre, jointly owned by TIA Henderson and Canterbury City Council is a 600,000 sq ft open air scheme anchored by Fenwick department store. Re-developed in 2005/6, the shopping centre hosts national fashion retailers including H&M, Topshop, Zara, Next, M&S and River Island. The Marlowe Arcade, is incorporated in the Whitefriars Shopping Centre and is located between St Margaret s Street and Rose Lane providing access to both The Parade and St George s Street. Anchored by Primark the scheme also contains a number of upmarket retailers such as Hobbs, Phase Eight, Ecco, Karen Millen and Swarovski. In addition, Canterbury has an extensive F&B offer such as Byron Burgers, Zizzi s, Carluccio s, Gourmet Burger Kitchen, Nandos, Cote Brasserie, Wildwood, Ask and Prezzo. There are also a high number of high quality independent caterers which significantly enhance the city s food offer. Canterbury has a compact retail core and is ranked 19th in the UK on the PMA Anchor Score 6

7 The property is prominently situated at the core of the city s main retailing pitch THE PROPERTY The property is prominently situated at the core of the city s main retailing pitch (High Street, Parade and Whitefriars Shopping Centre) and opposite the main entrance to Canterbury Cathedral. As a result, the location benefits from a significant volume of footfall. The property comprises three distinct buildings, which themselves are made up of an amalgamation of properties from several periods, the oldest of which dates back to the 1700 s with more modern extensions being added subsequently. Parts of the property are listed (more information available on request). The asset is let in its entirety to Debenhams Retail Plc who occupy two of the buildings and have underlet the smallest unit, 15/16 Guildhall Street & 5/6 Sun Street, to Cotswold Outdoor. The property is currently used for A1 retail purposes as well as ancillary storage. 7

8 DEBENHAMS CANTERBURY 8

9 ACCOMMODATION The asset provides the following GIA floor areas as follows: Address Area (sq ft) Area (sq m) Guildhall Street, 5-6 Sun Street, Sun Yard Ground 3, First 3, Second 2, Third Total 10, Guildhall Street, 6-10a High Street, 1-6 Mercery Lane Ground 25,179 2,339.2 First 22,666 2,105.7 Second 17,492 1,625.1 Third 3, Total 79,871 7, Guildhall Street Basement 2, Ground 11,945 1,109.7 First 10, Second 1, Third Total 26,528 2,464.5 TOTAL 116,494 10,822 The individual properties have been measured by Plowman Craven. We understand that their survey is warranted and is assignable to a purchaser. 9

10 TENURE Freehold. TENANCY DEBENHAMS RETAIL PLC The property is let in its entirety on a 30 year FR&I lease commencing 25th March 2004 and expiring on 24th March 2034 providing an unexpired term of circa 16.5 years. Debenhams has an option to renew the lease by giving not more than 2 months and not less than 12 months written notice prior to the term end. The new lease will be for 25 years at an open market rent agreed at the commencement of the new term. Rent reviews will be 5 yearly to OMRV. MINIMUM RENT REVIEW PROVISIONS 1,433,718 pax The table below highlights the rent review provisions and minimum uplifts for the remainder of the term: Rent Review Date Minimum Annual Rent 25/03/2018 1,469,561 25/03/2019 1,506,300 25/03/2024 1,671,389 25/03/2029 1,891,023 Rent Review Comments From and including 25th March 2014 to and including 24th March 2019, each year on 25th March the rent is increased by 2.5% for the following year Reviewed to the higher of (i) The yearly rent payable immediately prior to the rent review date (ii) The open market rent (iii) 1,477,264 pax Reviewed to the higher of (i) previous rent increased by 2.5%. (ii) The open market rent (iii) 1,671,389 pax Reviewed to the higher of (i) previous rent increased by 2.5%. (ii) The open market rent (iii) 1,891,023 pax SUB-LEASE CURRENT RENT PAX & Guildhall Street, 5-6 Sun Street and Sun Yard has been sublet by Debenhams to Outdoor & Cycle Concepts Ltd (t/a Cotswolds Outdoor) for 15 years from 13th October 2014 at a rental of 120,000 pax. Cotswold Outdoor benefit from a tenant option to break in year 10. They received 10 months rent free. The property occupies three substantial prime core city centre sites totalling circa 1 acre (0.4 hectare). 10

11 Debenhams is steeped in British retailing heritage founded over 200 years ago, originally becoming a Plc in 1928 and re-listing on the LSE in 2006 following its de-merger from the then Burton Group (Arcadia). The company is now a leading international, multi-channel brand which trades from over 240 department stores across 27 countries. The company s primary focus is on developing and delivering a mix of own brands, international brands and concessions including Jeff Banks, Jasper Conran, Julien MacDonald, Betty Jackson, Ben de Lisi, and John Rocha while the likes of Franco Manca, Nandos, Patisserie Valerie and Costa Coffee also frequently take concessions in the store. Tenant Company No Financial Year Ending D&B Rating Sales Turnover Profit Before Tax Tangible Net Worth Debenhams Retail Plc /09/2016 5A 1 2,105,400, ,400,000 1,010,600,000 Debenhams PLC has released the following preliminary results for the 52 weeks to 2nd September 2017: Group gross transaction value grew 2% to 2,954,100,000 Underlying profit of 95,200,000 in line with expectations, before exceptional charges as guided in relation to Debenhams Redesign strategy of 36.2m Net debt reduced by 1.1% Beauty sales grew by 5%; Food by 8%, whilst clothing declined by 0.5%, broadly in-line with the UK market. Digital sales grew 12.7%, driven by mobile orders up 57% in the UK The PLC have invested in blow LTD, the UK s leading digital beauty services provider and are soon announcing a partnership with Sweat! to trial gyms, initially in three stores Outdoor and Cycle Concepts Ltd have 69 stores throughout the United Kingdom and are an outdoor recreation retailer owned by PAI Partners. The company has a Dun & Bradstreet rating of N1, representing a minimum risk of business failure. For the financial year ending 31/12/2015 the company reported a turnover of 135,530,000, pre-tax profits of 14,888,000 and a net worth of ( 37,764,000). In May 2015 Outdoor and Cycle Concepts Ltd acquired the major brand of Snow + Rock and all of its trading subsidiaries via a 40m loan facility to enhance its offer in the outdoor sector. This was fully drawn down in 2015 and explains the company s negative net worth for the year. However, despite having a negative net worth, D&B have continued to apply a minimal risk of business failure, which can be justified by the company s performance for

12 VAT The property has been elected for VAT and any disposal will be by way of a Transfer of a Going Concern (TOGC). EPC A copy of the EPC s are available on request. INVESTMENT COMPARABLES Property Date Tenant Initial Yield Price Purchaser Comment MANCHESTER The Ryland Buildings, Market Street SOUTHAMPTON Queensway NOTTINGHAM 48/52 Long Row Current Debenhams 5.07% 84.5m Under Offer 466,000 sq ft. Rent 4.416m pax. Same RR pattern as subject property years unexpired. Current Debenhams 5.95% 29m Under Offer 295,000 sq ft yrs unexp. Same RR pattern as subject property. Rent 1.869m Jul 2017 Debenhams 5.35% 25.15m Altum Capital 190,993 sq ft over four floors yrs unexpired. Option for 25yr extension. 1,479,983 pax ( 7.31psf). Fixed rental increases 3% pa until 2020 and then 5 yr. upward only OMRR. EASTBOURNE 158/170 Terminus Road WINCHESTER 12/15 High Street Apr 2017 Debenhams 5.88% 14.1m Private Overseas Investor Apr 2017 Debenhams 4.16% m Surrey CC PF (CBRE) 102,946 sq ft 2.5% uplifts until 2018 then fixed uplifts. 17 yrs unexpired. 50,612 sq ft in a prime location. 17 years unexpired with fixed uplifts. CHICHESTER 12/18 West Street & 51/55 Tower Street Apr 2017 House of Fraser 5.25% 13.4m Charities PF (Savills IM) 69,313 sq ft. 22 yrs unexpired psf 752,584 pax. OMRR CAMBERLEY Park Street Dec 2016 House of Fraser/ NatWest 5.90% 17.6m Surrey Heath Council 113,000 sq ft. 1,013,000 pax Expiry yrly RR. Nat West expires ,000 pax 12

13 PROPOSAL We have been instructed to seek offers in excess of 24,400,000 (Twenty Four Million, Four Hundred Thousand Pounds), Subject to Contract & Exclusive of VAT, which reflects a net initial yield of 5.50% allowing for graduated purchaser s costs of 6.76% at this level. Net Initial Yield 5.50% Minimum Running Yield March % Minimum Running Yield March % Minimum Running Yield March % Minimum Running Yield March % CONTACT For further information, access to the data room or to arrange an inspection please contact David Freeman +44(0) david.freeman@greenpartners.co.uk Patrick Over +44(0) patrick.over@greenpartners.co.uk Ed Smith +44(0) ed.smith@greenpartners.co.uk Simona Malinova +44(0) simona.malinova@greenpartners.co.uk green&partners MISREPRESENTATION ACT 1967: The agents for themselves and for the vendors or lessors of the property whose agents they are give notice that: (i) these particulars are given without responsibility of The agents or the vendors or lessors as a general outline only for the guidance of prospective purchasers or tenants, and do not constitute the whole or any part of an offer or contract; (ii) The agents cannot guarantee the accuracy of any descriptions, dimensions, references to condition, necessary permissions for use and occupation and other details contained herein and any prospective purchaser or tenant should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy of each of them; (iii) no employee of The agents (and their joint agents where applicable) has any authority to make or give any representation or warranty or enter into any contract whatsoever in relation to the property; (iv) VAT may be payable on purchase price and/or rent, all figures are quoted exclusive of VAT, intending purchasers or lessees must satisfy themselves as to the applicable VAT position, if necessary by takingnappropriate professional advice; (v) except in respect of death or personal injury caused by the negligence of The agents, its employees or servants, The agents will not be liable, whether in negligence or otherwise howsoever, for any loss arising from the use of these particulars save to the extent that any statement made in these particulars has been made fraudulently. November Designed and produced by Creativeworld Tel: