PRIME OFFICE INVESTMENT OPPORTUNITY

Transcription

1 PRIME OFFICE INVESTMENT OPPORTUNITY

2 OUT OF TOWN INVESTMENT OPPORTUNITY AT EH12 9JQ 3 4

3 INVESTMENT HIGHLIGHTS Edinburgh is a vibrant capital city with a strong and diverse economy. As well as being a major financial, administrative and cultural centre, the city has a rapidly expanding technology sector. Broadway Park is located in a prime out of town business location, which has undergone a structural change with now three train stations and the tram. 147,400 sq ft of office accommodation with 391 car parking spaces (1:373 sq ft). Let to Standard Life Investments Limited and Scottish and Newcastle Limited, both of which are 5A1 covenants. Passing rent of 2,375,761 per annum, reflecting a low average rent of only per sq ft. Reversionary to ERV of 2,479,424 reflecting per sq ft Attractive weighted average unexpired lease term to expiries of 8.71 years and 6.27 years to break. 48% of the annual rent will benefit from annual fixed uplifts. Asset management opportunities. Offers are sought in excess of 31,925,000 exclusive of VAT for our client s heritable interest, reflecting a net initial yield of 7% assuming purchasers costs of 6.27%. This represents a low capital rate of only 217 per sq ft. The property is held in a Jersey Company, which could form part of the transaction. Further information is available upon request. 5 6

4 BROADWAY PARK EDINBURGH EDINBURGH ECONOMY THURSO The Capital of Scotland, Edinburgh is the UK s leading city economy outside London. With a population of c500,000, Edinburgh is one of the fastest growing and most productive cities in the UK. THE STRONGEST UK CITY ECONOMY OUTSIDE LONDON Edinburgh is the most prosperous city outside London but offers significantly lower labour and property costs. The city has the second highest Gross Value Added (GVA) per resident of major UK cities at 37,000 per resident, well ahead of the UK average and outstripping that of similar sized cities such as Leeds ( 27,500), Birmingham ( 22,300) and Sheffield ( 19,800). Unemployment rates in the city have been lower than other major UK cities in each of the last ten calender years. Nearly 50% of the city region s workforce is employed in knowledge intensive jobs including computing, communications, scientific research and also across the creative industries. A relatively dense population and sophisticated transport network mean short commuter times and a wide recruitment pool for employers. Within one and a half hours travel of Edinburgh, the population rises to over 1.6 million. TALENTED WORKFORCE Edinburgh is home to one of the UK s most productive and qualified workforces and is internationally renowned for the quality of its talent base - with 55% of the population holding a degree level qualification or equivalent. This talent base, the area s quality of life and its environment are key attractions for employers and their employees. Edinburgh retains a high proportion of its 58,000 strong student population, attracted by the city s quality of life and economic opportunities. Edinburgh has four universities: The University of Edinburgh, Edinburgh Napier University, Heriot- Watt University and Queen Margaret University. OBAN INVERNESS A82 FORT WILLIAM AVIEMORE A9 A9 A96 PERTH A85 A95 DUNDEE ABERDEEN A90 CAPITAL OF CULTURE Edinburgh is one of the UK s largest tourist destinations and acts as a gateway to the rest of Scotland. The city sells 1.46 billion of services to staying visitors which supports around 30,000 Jobs per annum. Edinburgh is widely recognised for its historical and cultural influences, named as the cultural capital of the UK in Edinburgh hosts the largest annual international arts festival in the world, the Edinburgh Festival Fringe. FIRTH OF CLYDE AYR M73 GLASGOW M77 STIRLING M80 M80 A76 M8 M74 M9 M90 FIRTH OF FORTH EDINBURGH A7 A68 DUMFRIES A75 7 8

5 THE CAPITAL OF SCOTLAND, EDINBURGH IS THE STRONGEST UK CITY ECONOMY OUTSIDE LONDON. 9 10

6 BROADWAY PARK EDINBURGH COMMUNICATIONS The area benefits from excellent communication links: 1.2M PEOPLE OF WORKING AGE WITHIN A 45 MINUTE COMMUTE AND 2M WITHIN AN HOUR EDINBURGH IS AT THE HEART OF SCOTLAND S TRANSPORT INFRASTRUCTURE WITH EXCELLENT ROAD, RAIL, SHIPPING AND AIR SERVICES. EDINBURGH HAS THE UK S LARGEST SUBURBAN RAIL NETWORK OUTSIDE LONDON DUNFERMLINE M90 PLANE TRAIN CAR TRAM BUS Edinburgh is Scotland s busiest airport, located just 5 minutes from the subject property. 11 million passengers per year 120+ destinations 6th largest in the UK 26 million forecast passengers by 2030 Within a 10 minute walk of the building there are two railway stations, South Gyle and Edinburgh Park, providing access to Edinburgh s Waverley and Haymarket staions, the Fife Circle line and West Lothian, all of which link the location to the rest of the UK. Glasgow 50 mins London 4hrs 30 mins (20 trains a day) Newcastle 1hr 26 mins Aberdeen 2hrs 20 mins 20 million passengers per year Lying adjacent to the city bypass and close to its junction with the M8 motorway, providing access to the main motorway network. Glasgow 45 mins Newcastle 2hrs Aberdeen 2hrs Edinburgh Trams launched in 2014 and provide a fast, integrated, state of the art transport service from the city centre to the airport. In close proximity to the subject property there are three tram halts that service both Edinburgh Park and South Gyle, which provide direct route to the airport or alternatively the city centre. 14km route from the Airport to City Centre Airport 13 mins Princess Street 23 mins There are three bus stops providing regular buses connecting to both the airport and city centre. City Centre 25 mins M9 M8 LIVINGSTON A71 J1A A90 A8000 J2 FORTH BRIDGES SOUTH QUEENSFERRY EDINBURGH AIRPORT A90 A8 J1 A90 A8 A71 A70 A902 A702 A702 FIRTH OF FORTH EDINBURGH CITY CENTRE A720 A701 A199 A772 A1 A68 A

7 BROADWAY PARK EDINBURGH SITUATION Broadway Park is situated within the South Gyle Business District, recognised as Edinburgh s leading out of-town business location with excellent amenities. The Park has excellent transport links, located just off the Edinburgh Bypass (A720), giving direct access to the city of Edinburgh and surrounding area as well as the major motorways; the M8 linking to Glasgow and the Central belt of Scotland and the M9 to Stirling. The Park benefits from strong public transport links with the new Edinburgh tram just a 10 minute walk from the property at Bankhead, as well as further tram and train links at nearby South Gyle (0.5 miles) and Edinburgh Park (1 mile). The South Gyle Business District offers both out of town office and industrial space to a mix of leading corporate occupiers including JP Morgan, Aegon, Kames Capital, Tesco Bank, Sainsbury s Bank, Royal Mail and Royal Bank of Scotland. There is a new housing development immediately adjacent to Broadway Park. The Park benefits from its close proximity to the retail and leisure offer in the district. The Gyle Shopping Centre is anchored by M&S and Morrisons, and Hermiston Gait Retail Park offers a Tesco Superstore, B&Q, TK Maxx and Decathlon. EDINBURGH INTERNATIONAL AIRPORT A902 WEST EDINBURGH IS HOME TO A RANGE OF GLOBAL BUSINESSES INCLUDING JP MORGAN, DIAGEO, BT, RBS AND HSBC. ST JOHN S ROAD A8 TO EDINBURGH AIRPORT TERMINAL INGLISTON PARK & RIDE EDINBURGH GATEWAY GLASGOW ROAD TO GLASGOW QUEEN STREET A8 RBS WORLD HQ A720 CITY BYPASS SOUTH GYLE BROADWAY SOUTH GYLE RAILWAY STATION 8 SOUTH GYLE BUSINESS DISTRICT 9 10 M8 TO GLASGOW, M9, PERTH ABD CENTRAL BELT EDINBURGH PARK STATION BANKHEAD M8 SIGHTHILL INDUSTRIAL ESTATE A71 M8 1 IBIS HOTEL 2 JP MORGAN 3 BT 4 SAINSBURYS 5 GYLE SHOPPING CENTRE 6 AEGON 7 KAMES 8 HSBC 9 DIAGEO 10 LLOYDS TO CITY CENTRE BY BUS AND CAR TO HAYMARKET AND WAVERLEY STATIONS TO CITY CENTRE AND LEITH BY TRAM 13 14

8 BROADWAY PARK, EH12 9JQ FUTURE DEVELOPMENT LAND EDINBURGH CENTRE <20MINS 15 16

9 BROADWAY PARK EDINBURGH THE PROPERTY ACCOMMODATION & FLOOR AREAS The property comprises four buildings developed as part of a campus for Scottish & Newcastle around The four buildings are each arranged over ground and two upper floors extending to a total area of 147,400 sq ft (13,693.8 sq m). Two of the buildings are detached whilst Buildings 3 and 4 are connected by a single storey link block that serves as a reception, the Welcome Zone. There are approximately 391 surface car parking spaces, providing a good car parking ratio of 1:373 sq ft. THE OFFICE SPECIFICATION The buildings benefit from the following specification: Air conditioning Full access raised floors Suspended ceilings with integrated lighting 2x8 person passenger lifts in each building The property has been measured in accordance with the RICS Code of Measuring Practice (6th) Edition and provides the following approximate floor areas: BUILDING SQ M SQ FT Building 1 Second ,466 First ,255 Ground ,614 Sub-Total 2, ,335 Building 2 Second 1, ,505 First 1, ,494 Ground 1, ,560 Sub-Total 3, ,559 Building 3 Second ,144 First ,056 Ground ,056 Sub-Total 2, ,917 Welcome Zone Reception ,103 Building 4 Second 1, ,068 First 1, ,766 Ground 1, ,652 Sub-Total 4, ,486 Total 13, ,

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11 5 2 3 BROADWAY PARK EDINBURGH TENURE ASSET MANAGEMENT The property is held under a heritable interest (Scottish equivalent of English freehold) under title numbers MID and MID The site extends to approximately 6.47 acres. The red line on the site plan is for indicative purposes only to to to 12 AY Shelter When our client acquired the property, Scottish and Newcastle had a lease over all four buildings, however it did not occupy Buildings 1 and 2. Our client agreed a surrender with Scottish and Newcastle over Building 1, which allowed it to let the building in its entirety to Standard Life, and for the building to be fully refurbished. Building 2 remains leased, but with both the recent closure of Scottish and Newcastle s call centre in Livingston and the acquisition of an additional 1,900 pubs from Punch Taverns, the tenant may reoccupy this building. If not, there may be an opportunity to surrender to potentially increase the rental tone and term certain. In addition, discussions are ongoing with Scottish and Newcastle to remove the break options on Buildings 3 and 4, as this remains the headquarters for Scottish and Newcastle / Heineken UK. ESS 43 1 to 12 Further information is available upon request to HAYSTACK PARK 1 2 BURNE CRUICK 3 1 to to 8 1 Shelter Shelter SOUTH GYLE CRAW YARD DRIVE to 8 BARNYARD PARK LOAN 1 El Sub Sta 13 Broadway Park El Sub Sta El Sub Sta South Gyle Industrial Estate El Sub Sta El Sub Sta 21 22

12 BROADWAY PARK EDINBURGH TENANCY As at 1st February 2018, the property has a WAULT (Weighted Average Unexpired Lease Term) of 8.71 years to lease expiries and 6.27 years to earliest breaks. TENANT DEMISE FLOOR AREA (SQ M) FLOOR AREA (SQ FT) LEASE START LEASE EXPIRY Standard Life Investments Ltd Building 1 2, , Nov Nov Nov , , NEXT REVIEW BREAK RENT (P.A.) RENT ( PSF) ERV (P.A.) ERV ( PSF) COMMENTS Reviewed to the open market rent. 36 months rent free granted which will be topped up by the vendor Scottish & Newcastle Ltd Building 2 3, , May May May , , Reviewed to the open market rent Scottish & Newcastle Ltd Building 3 2, , Feb Feb Feb Feb , ,964 Welcome , Zone Scottish & Newcastle Ltd Building 4 4, , Feb Feb Feb Feb , , There is an additional break on 7th May Initial rent was 15 per sq ft with Welcome Zone at half rent Fixed rent increases: 08/02/19-440,470, 08/02/20-450,380, 08/02/21-460,514, 08/02/22-470,876, 08/02/23-481,470, 08/02/24-492,303, 08/02/25-503,380 There is an additional break on 7th May Fixed rent increases: 08/02/19-745,424, 08/02/20-762,196, 08/02/21-779,345, 08/02/22-796,881, 08/02/23-814,811, 08/02/24-833,144, 08/02/25-851,890 TOTAL 13, ,400 2,375, ,479,

13 BROADWAY PARK EDINBURGH TENANT COVENANTS The property is occupied by internationally recognised brands providing excellent tenant covenants. SCOTTISH & NEWCASTLE LIMITED D&B rating 5A1 with an overall business risk of low-moderate 31/12/ /12/ /12/2014 Turnover Pre-tax Profit 56,000,000 74,000,000 69,900,000 Tangible Net Worth 2,773,000,000 2,927,000,000 3,188,600,000 Heineken acquired Scottish and Newcastle in 2008 and incorporated it into its UK business, Heineken UK. It has subsequently expanded its market share of the pub market across the UK, having recently completed the acquisition of approximately 1,900 Punch Tavern pubs. Heineken considers pubs an integral part of British culture, and believes that high-quality, well invested pubs run by skilled and motivated operators, will continue to prosper and can thrive in their role at the heart of communities. Heineken UK will fully integrate the pubs into its existing Star Pubs & Bars estate, creating the country s third largest pub business in what remains a highly fragmented pub market. Heineken UK plans to work closely with the incoming licensees, to help them realise the increased potential from the pubs that they operate. STANDARD LIFE INVESTMENTS LIMITED D&B rating 5A1 with an overall business risk of low-moderate 31/12/ /12/ /12/2014 Turnover 814,492, ,031, ,815,000 Pre-tax Profit 273,049, ,363, ,694,000 Tangible Net Worth 169,611, ,108, ,412,000 On 14 August 2017, Aberdeen Asset Management PLC merged with Standard Life plc to form Standard Life Aberdeen plc. In connection with the merger, Standard Life Investments and Aberdeen Asset Management are coming together under Aberdeen Standard Investments. As at 30 September 2017, the company s investment arm had 569.7bn assets under management creating the largest active investment manager in the UK and one of the largest investment houses globally

14 BROADWAY PARK EDINBURGH OCCUPATIONAL MARKET COMMENTARY The West Edinburgh office market is the fourth largest office location in Scotland after Glasgow, Edinburgh city centre and Aberdeen. Unlike most other regional cities, Edinburgh city centre and its main out of town market are geographically closely linked and well served by public transport. The tram system is now up and running and provides direct access to / from Edinburgh airport within circa 10 minutes and the city centre within 25 minutes. Tram services run every 10 minutes throughout the day and has been a key factor in drawing tenants back to the location was a very strong year for office take up levels across Edinburgh with 1,138,500 sq ft of space being leased. Although the take up was underpinned by some major pre-lets: GPU at New Waverley (181,000 sq ft), State Street Bank at Quartermile 3 (65,628 sq ft) and Standard Life Aberdeen at 10 George Street (69,000 sq ft), it was still over 300,000 sq ft ahead of the 5 year average. While Edinburgh has historically been reliant on the financial services sector, it is encouraging that the occupational market is no longer reliant on one sector for takeup with the TMT, Public Administration & Professional Services sectors all making a material contributions in recent years. BUILDING SIZE TENANT RENT PSF DATE Lochside Place 40,000 Diagio Under offer 6 Lochside Avenue (3) 8,966 HSBC plc Jul-16 2 Lochside View 10,971 Origo Services Ltd Mar-16 7 Lochside View / 3 Lochside View 53,704 JP Morgan Owner occupation Nov-15 6 Lochside Avenue (G,1 and 2) HSBC plc Oct-15 Cornerstone, South Gyle Business Park 11,844 Blyth & Blyth Aug-15 EDINBURGH PRIME OFFICE RENTS PER SQ FT PRIME RENTS 34 PER SQ FT TOTAL SUPPLY 22,000,000 SQ FT AVERAGE TAKE UP 869,000 (5YR), 758,100 (10YR) 2017 TAKE UP 1,138,500 SQ FT OFFICE TAKE-UP BREAKDOWN % 6% 1% % 3% 1% 14% 15% 22% 6% Banking & finance Business services Creative industries Consumer services & leisure Source: CBRE 20% Insurance 19% 21% 25% 16% Manufacturing industries & energy Professional Public sector & regulatory body 13% Despite the strengthening demand in take-up, supply remains at a critically low level, with only one development scheme across the city due to complete in Semple Street. This shortage of supply is expected to continue with a lack of suitable available sites and strict planning regulations meaning there is rarely an oversupply of space in the city. Rental growth is therefore forecast by CBRE to rise annually over the next 5 years by an average of 1.7% per annum. Availability in West Edinburgh currently stands at circa 365,000 sq ft, representing a vacancy rate of around 9.15%. However this statistic does not take into account the fact that the majority of this space is un-refurbished and over 70,000 sq ft is under offer for lease. In real terms therefore, supply is low and with the city centre market having a vacancy rate of approximately 2.27% for Grade A and B stock combined, rents in West Edinburgh are forecast to rise. The high take up, limited development pipeline and the conversion of over 1.2m sq ft of office accommodation to alternative uses have seen city centre headline rents rise to per sq ft, while headline rents in West Edinburgh have stayed at per sq ft. In the early 2000s there was a similar situation, when limited availability pushed city centre headline rents to per sq ft and West Edinburgh headline rents followed suit moving up to per sq ft. The current lack of available space combined with the improved infrastructure in West Edinburgh will continue to create upward pressure on the current headline rent of per sq ft, reducing the gap between city centre and West Edinburgh rents. Current headline rents in West Edinburgh are at a 35% discount to city centre headline rents, while in the early 2000s, this discount was only 13.5%. WITH CURRENT RENTS IN THE CITY CENTRE NOW 34 PER SQ FT, WEST EDINBURGH IS WELL POSITIONED FOR RENTAL GROWTH. 27 Source: CBRE 28

15 BROADWAY PARK EDINBURGH INVESTMENT MARKET COMMENTARY Edinburgh is a major European office centre attracting a wide range of domestic and global capital. The past few years have witnessed significant investment activity with a record volume of 455 million recorded in 2016 followed by 362m in The investment market has recently been characterised by a lack of openly marketed stock. The table below highlights a number of out of town office investment deals from Edinburgh and the wider UK Regional Network. ADDRESS CITY DATE PRICE NIY WAULT TENANTS COMMENTS Prime Four Business Park Arup Campus, Blythe Valley Aberdeen Jan-18 18,700, Statoil Solihull Dec-17 23,540, ARUP Group Fixed annual rental uplifts received 5 yearly OMV Rent review 5 yearly Sonova House Warrington Oct-17 11,425, Sonova UK Fixed 5 yearly rental kickers Multi-let. Dell, Webhelp, Citypark Glasgow Sep-17 41,000, Aggreko, Glasgow City Council Soapworks Salford Sep-17 60,000, Multi let. Talk Talk & Secretary of State 24 Wester Shawfair 3 Lochside Avenue Edinburgh Nov-16 14,200, Scottish Ministers Edinburgh Dec-15 19,000, Sainsbury s Bank OMV Rent Review 5 yearly OMV Rent review 5 yearly EDINBURGH PRIME & NET EFFECTIVE RENTS MONTHS RENT FREE RENT FREE (RHS) PRIME RENT (LHS) NET EFFECTIVE RENT (LHS) 29 Source: CBRE 30

16 BROADWAY PARK EDINBURGH PROPOSAL AND FURTHER INFORMATION EPC EPCs are available upon request. VAT The asset is elected for VAT which will therefore be payable on this transaction, however it is anticipated that the sale will be treated as a Transfer of a Going Concern (TOGC). DATA ROOM Further information is available in the data room. Access details are available upon request. CORPORATE The property is held in a Jersey Company. This could form part of the transaction. Further details available on request. PRICING Offers are sought in excess of 31,925,000 exclusive of VAT for our client s heritable interest, which assuming purchaser s costs of 6.27%, reflects a Net Initial Yield of 7% and a cap val of 217 psf. VIEWING AND FURTHER INFORMATION Viewing strictly by prior appointment with sole agents: WILL PREWER T +44 (0) will.prewer@cbre.com FRANCO SIDOLI T +44 (0) franco.sidoli@cbre.com ALISTAIR WRIGHT T +44 (0) alistair.wright@cbre.com STEVEN NEWLANDS T +44 (0) steven.newlands@cbre.com TOM PATON-SMITH T +44 (0) tom.paton-smith@montagu-evans.co.uk ELLIOT CASSELS T +44 (0) elliot.cassels@montagu-evans.co.uk SUBJECT TO CONTRACT & EXCLUSIVE OF VAT 2018 DISCLAIMER: CBRE LIMITED & MONTAGU EVANS LLP CBRE Limited & Montagu Evans LLP on its behalf and for the Vendors or Lessors of this property whose Agents they are, give notice that: 1. These particulars are set out as a general outline only for guidance to intending Purchasers or Lessees, and do not constitute any part of an offer or contract. 2. Whilst CBRE Limited uses reasonable. endeavours to ensure that the information in these particulars is materially correct, any intending Purchasers, Lessees or Third Parties should not rely on them as statements or representations of fact, but must satisfy themselves by inspection, searches, enquiries, surveys or otherwise as to their accuracy. CBRE Limited. as such cannot be held responsible for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss of profits resulting from direct or indirect actions based upon the content of these particulars. 3. No person in the employment of CBRE Limited has any authority to make any representation or warranty whatsoever in relation to this property. 4. Unless otherwise stated, all purchase prices and rents are correct at the date of publication and, unless otherwise stated, are quoted exclusive of VAT. Lease details and service ground rent (where applicable) 31 are given as a guide only and should be checked and confirmed by your solicitor prior to exchange of contracts. February

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