Britannia House, Cartsdyke Avenue

Greenock PA15 1ED

Overview

Well secured 19.50 year income with annual RPI rent reviews capped at 3%
  • Exceptionally secure long income office investment opportunity.
  • Greenock is located approximately 24 miles west of Glasgow with direct access provided via the M8/A8.
  • Absolute Ownership (Scottish equivalent of English freehold).
  • Britannia House provides modern office accommodation constructed in 1991 arranged over ground, first and second floors, extending to 67,616 sq ft.
  • Excellent parking ratio of 1:135 sq ft.
  • Wholly let to The Royal Bank of Scotland Plc with an unexpired lease term in excess of 19 years.
  • Passing rent of £1,041,429.12 per annum, reflecting £15.40 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 £15,680,000 (Fifteen Million, Six Hundred and Eighty Thousand Pounds) for our client's interest, subject to contract and exclusive of VAT.

A purchase at this level would reflect an attractive net initial yield of 6.25%, assuming purchaser's costs of 6.24%, and a low capital value of £232 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 6.44% 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.
  • Chatham Waterside Court, Chatham Maritime (office asset)
  • Newcastle-under-Lyme Brampton House, 352 Brampton Road (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

Greenock is located due west of Glasgow and Edinburgh at the western end of the A8/M8 motorway. It is the largest town forming the Inverclyde conurbation (comprising Gourock, Greenock and Port Glasgow) and continues to develop as an important commuter centre for Glasgow.

Greenock sits approximately 24 miles west of Glasgow city centre (via the M8/A8), 46 miles north of Ayr (via the A78) and 70 miles west of Edinburgh (also via the M8). The M8 is the primary route connecting Greenock with Glasgow (and Edinburgh further east) and also links with all other major road networks, thereby providing excellent access across Scotland.

The town is well served by rail communications, with both Greenock Central and Cartsdyke stations providing regular direct services to Glasgow in 30 and 40 minutes respectively. Glasgow Airport is nearby off the M8, 15 miles away by road.

Situation

Britannia House is situated on a self-contained, landscaped site and has excellent prominence to the A8, the direct route into Greenock town centre 1.1 miles to the west, and to Glasgow city centre 24 miles to the east.

A number of high profile occupiers are located in the immediate vicinity, including an office pavilion occupied by EE, Royal Mail, Cigna Web Help UK and Amazon. In addition, the area benefits from attractive surrounding amenities including Premier Inn, Holiday Inn Express, Morrisons and Tesco Extra.

Greenock Central and Cartsdyke railway stations sit within 1 mile to the west/east of the property. The wider surrounding area is comprised of mixed commercial uses. This includes Cappielow Industrial Estate, positioned one mile from the property, where key industrial tenants include Howdens Joinery and Jewsons.

Other occupiers include Enterprise Rent-A-Car.

Description

Britannia House comprises a detached office pavilion arranged over ground, first and second floors. Constructed in 1991, the property is of steel portal frame construction, with full height panel glazing and pitched roof.

The property is used as a mortgage processing centre by RBS, where up to 1,000 employees work from site on a daily basis.

The property provides high quality office accommodation and includes the following specification:

  • Full access raised floors
  • Suspended ceilings with recessed light fittings
  • VRV comfort cooling
  • Gas central heating.
The property is situated on a well landscaped site with circa 500 parking spaces, thereby providing an excellent parking ratio of 1:135 sq ft.

The property benefits from a secure site with 24/7 security in place.

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

Absolute Ownership (Scottish equivalent of English freehold).

Tenancy

The property is wholly let to The Royal Bank of Scotland 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 £1,041,429.12 pa reflects a low passing rent of £15.40 psf 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 £23,632,271, 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.

Assignation

Assignation 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

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

As part of restructuring by the bank to separate domestic retail banking from investment banking sectors, in line with the UK ringfencing requirements required to be in place by January 2019, The Royal Bank of Scotland Plc will sit inside of the ring-fencing requirements. It will hence benefit from greater protection afforded under these measures, with separation of the retail banking sector from investment and international banking activities.

The Royal Bank of Scotland Plc is rated as investment grade as follows:

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

For further information on the above, including latest reports by Standard & Poors and Fitch to support the investment grade covenant rating, please review https://investors.rbs.com/fixed-income-investors/creditratings.aspx.

The company has a Dun & Bradstreet rating of 5A 1 (June 2018), representing a minimum risk of business failure.

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-58. 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 sought in excess of £15,680,000 (Fifteen Million, Six Hundred and Eighty Thousand Pounds) for our client's interest, subject to contract and exclusive of VAT.

A purchase at this level would reflect an attractive net initial yield of 6.25%, assuming purchaser's costs of 6.24%, and a low capital value of £232 per sq ft.

Based on Oxford Economics' 5 year RPI forecast (page 7), at the quoting price this would provide the following running yield profile:

  • December 2018 - 6.44%
  • December 2019 - 6.62%
  • December 2020 - 6.82%
  • December 2021 - 7.02%
  • December 2022 - 7.23%
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.
  • Chatham Waterside Court, Chatham Maritime (office asset)
  • Newcastle-under-Lyme - Brampton House, 352 Brampton Road (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:
6.25%
PRICE:
£15,680,000
REGISTER INTEREST
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