Brampton House

Newcastle-under-Lyme, Staffordshire ST5 0UJ

Overview

Well secured 19.50 year income with annual RPI rent reviews capped at 3%
  • Exceptionally secure long income office investment opportunity.
  • Newcastle-under-Lyme is located 2 miles west of Stoke-on-Trent between Junctions 15 and 16 of the M6 motorway, with easy access to Birmingham and Manchester.
  • Freehold.
  • Brampton House provides modern office accommodation constructed in the 1990s arranged over ground and first floor, extending to 14,370 sq ft.
  • Excellent parking ratio of 1:150 sq ft.
  • Wholly let to National Westminster Bank Plc with an unexpired lease term in excess of 19 years.
  • Passing rent of £179,770.50 per annum, reflecting £12.51 per sq ft overall.
  • Lease subject to annual rent reviews on 25 December each year, based upon the Retail Price Index (RPI), subject to an annual cap at 3.00%.
  • The lease offers excellent income protection through controls on lease assignment.
Offers sought in excess of £3,070,000 (Three Million and Seventy Thousand Pounds) for our client's freehold interest, subject to contract and exclusive of VAT.

A purchase at this level would reflect an attractive net initial yield of 5.50%, assuming purchaser's costs of 6.46%, and a low capital value of £214 per sq ft.

Based on Oxford Economics' 2018 forecast, RPI is expected to perform in excess of the 3.00% cap. At the quoting price this would provide a running yield of 5.67% in December 2018.

This asset forms part of a wider programme of sales ("Project Helios") being marketed in conjunction with this opportunity, all of which are let on the same lease structure:
  • Greenock Britannia House, Main Street (office asset)
  • Chatham Waterside Court, Chatham Maritime (office asset)
  • High Street Retail Portfolio Southend-on-Sea, Preston, Loughborough (3 high street retail assets)
  • Aberdeen 78 Union Street (high street retail asset)

Location

Newcastle-under-Lyme is located in north Staffordshire, 2.5 miles west of Stoke-on-Trent and midway between the major commercial centres of Birmingham and Manchester (circa 40 miles from both). The town forms a single urban area with Stoke-on-Trent, the North Staffordshire conurbation, which has a population of approximately 372,000 people and is the major centre for the area.

Newcastle-under-Lyme benefits from excellent road links, being located adjacent to the M6 motorway, between Junctions 15 and 16, which are accessed via the A500. The A34 provides an alternate north-south route to the M6, giving access to Birmingham to the south and to Manchester to the north. The A50 (M1-M6 link road), is the main east-west route, giving access to the M1 (Junction 24A) circa 55 miles to the east.

Stoke-on-Trent Railway Station provides regular direct rail services to London Euston (1 hour 45 minutes), Manchester Piccadilly (40 minutes) and Birmingham New Street (50 minutes).

The town is easily accessible from Manchester Airport (circa 30 miles to the north), Birmingham Airport (circa 50 miles to the south) and East Midlands Airport (circa 40 miles to the east).

Situation

Brampton House is situated 0.5 miles to the north of Newcastle-under-Lyme town centre, immediately off the A527 Brampton Road. The A527 gives access to the A500 Queenway to the north, which is the major north-south arterial route through the North Staffordshire conurbation. To the south, the A527 provides access to Newcastle-under-Lyme town centre and the A34, which in turn also links with the A500 and provides direct access to the M6 at Junction 15. The A500 also links with the A50 (M1-M6 link road) to the east, providing access to Nottingham.

Stoke-on-Trent railway station sits approximately 2.5 miles east of the property via the A52 or the A500 Queensway, providing direct services to London Euston, Manchester and Birmingham.

The immediate surrounding area is characterised by a mix of office and residential use classes. Office occupiers are predominantly local to the town and include Aspire Housing, B&C Solicitors, Knights Professional Services Limited, as well as Newcastle-under-Lyme Borough Council's office to the south. A number of residential buildings are also located in the immediate vicinity. Brampton Park sits directly to the south of the property.

Description

Brampton House provides a modern detached office building constructed in the 1990s, arranged over ground and first floor totalling approximately 14,370 sq ft.

Internally, the specification includes carpeted floors, suspended ceilings, double glazed windows, air conditioning, two passenger lifts and two central staircases. The accommodation is predominantly arranged as open plan.

The property was subject to extensive internal refurbishment in 2007 to modernise the office accommodation and is used as a European operation call centre for Natwest/RBS. Approximately 100 employees work from the building on a daily basis and we understand that a number of employees are being recruited to this site in the short term.

The property sits in a secure site with 24/7 surveillance and offers generous parking provision with 96 parking spaces, providing an excellent ratio of 1:150 sq ft.

ACCOMMODATION

The property has been measured by Plowman Craven in accordance with RICS Property Measurement (1st Edition, 2015), which incorporates the RICS Code of Measuring Practice (6th Edition) and the International Property Measurement Standards (IMPS). Please see the accommodation schedule below for areas.


Tenure

Freehold.

Tenancy

The property is wholly let to National Westminster Bank Plc until 17 December 2037, therefore providing in excess of 19 years unexpired.

The rent is reviewed on an annual basis on 25 December each year, linked to the UK's Retail Price Index (RPI) in the preceding October, subject to a cap of 3%.

The current passing rent of £179,770.50pa reflects a low passing rent of £12.51 per sq ft overall.

TENANCY AND KEY LEASE CONSIDERATIONS

Tenant Break Option and Flexibility Premium

Under the terms of the lease, the tenant has an option to determine the lease, except during the last five years of the term. If the break is exercised, the tenant is required to pay a "flexibility premium".

The amount payable depends on when the break is exercised and is set out in a schedule to the lease. The current "flexibility premium" is £5,054,512, which is significantly in excess of the quoting price and this makes the exercise of the option uneconomic.

The premium is structured to ensure the landlord does not suffer a loss as a result of the operation of the break and in addition to the value of the "flexibility premium", the landlord also has security in the benefit of the vacant reversionary interest.

Under certain circumstances the tenant may become entitled to a partial rebate of the "flexibility premium" if the property is sold or re-let on certain specified terms and within certain timescales where the landlord has made a profit as a result.

Assignment

Assignment of the whole is permitted with landlord's consent (not to be unreasonably withheld) subject to certain conditions, which include a requirement that the proposed assignee must have a credit rating of A or better from Standard & Poors (or equivalent). This clause provides excellent income security and value protection for the purchaser.

Option to Renew

The tenant has an option to renew the lease for a further term of 5, 10, 15, 20 or 25 years. This option is exercisable at any time after the expiry of the tenth year of the term (except during the last 12 months of the term).

Any new lease is to be on substantially the same terms as the existing lease at a starting rent benchmarked to open market rental value on the penultimate day, but does not include the contractual option to renew, the right of first refusal, the right to acquire the landlord's interest or the flexibility provisions.

There is also an option for the original tenant or a Group company to purchase the landlord's interest in the Property at the end of the term for the higher of Market Value or Special Value (as defined by the lease) subject to a minimum purchase price, and the right for RBS to have first refusal in respect of a sale.

Further information on all of the above is available upon request.

Covenant Information

National Westminster Bank Plc is the retail and business banking arm of The Royal Bank of Scotland Group Plc. In February 2018, the Group reported significant results with an annual profit of £752m for 2017 and its financial strength is a reflection of the UK Government's majority ownership and control of the business, which stands at 62% (June 2018).

National Westminster Bank Plc reported a sales turnover of £7.975bn in its 2016 accounts and is rated as investment grade as follows:

Standard & Poors: Long Term Debt - A-, Outlook - Positive
Fitch: - Long Term Debt - A-, Outlook - Positive

National Westminster Bank Plc has a Dun & Bradstreet rating of 5A 1 (June 2018), representing a net worth of £15.096 billion and a minimum risk of business failure.

As part of the restructuring process by the Group to split its various subsidiaries into ring-fenced and nonring-fenced activities (a legal requirement by 1 January 2019), National Westminster Bank Plc will sit inside the ring-fencing requirements. For further information please review https://investors.rbs.com/fixed-incomeinvestors/credit-ratings.aspx.

VAT

We understand that the property has not been elected for VAT.

EPC

An Energy Performance Certificate has been undertaken and provides a rating of D-83. A copy is available on request.

DATAROOM

A copy of the lease and Plowman Craven measured survey are available in the online data room. Please contact Cushman & Wakefield for further information.

Occupational Marketing Commentary

Please see the marketing brochure.

Investment Marketing Commentary

Please see the marketing brochure.

Proposal

Offers are sought in excess of £3,070,000 (Three Million and Seventy Thousand Pounds) for our client's freehold interest, subject to contract and exclusive of VAT.

A purchase at this level would reflect an attractive net initial yield of 5.50%, assuming purchaser's costs of 6.46%, and a low capital value of £214 per sq ft.

Based on Oxford Economics' 5 year RPI forecast, at the quoting price this would provide the following running yield profile:

  • December 2018 - 5.67%
  • December 2019 - 5.83%
  • December 2020 - 6.00%
  • December 2021 - 6.18%
  • December 2022 - 6.37%
This asset forms part of a wider programme of sales ("Project Helios") being marketed in conjunction with this opportunity, all of which are let on the same lease structure:
  • Greenock Britannia House, Main Street (office asset)
  • Chatham Waterside Court, Chatham Maritime (office asset)
  • High Street Retail Portfolio Southend-on-Sea, Preston, Loughborough (3 high street retail assets)
  • Aberdeen 78 Union Street (high street retail asset)

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NET INITIAL YIELD:
5.5%
PRICE:
£3,070,000
REGISTER INTEREST
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