Hartwell House, Victoria Street

Bristol BS1 6AD

Overview

Hartwell House is located within the heart of the Central Business District, a major commercial and residential growth area for the city, and a short walk from Temple Quay, Cabot Circus and Bristol Temple Meads Station.
  • Bristol is the regional and business capital of the South West of England and one of the UK's major commercial and financial centres. It is the UK's 5th largest city with an urban zone population of 1.6m residents.
  • Hartwell House is located within the heart of the Central Business District, a major commercial and residential growth area for the city, and a short walk from Temple Quay, Cabot Circus and Bristol Temple Meads Station.
  • Major employers in the vicinity include Ernst & Young, EDF, TLT Solicitors, Barclays Bank, Simmons & Simmons, Mewburn Ellis and Thrings Solicitors.
  • Hartwell House is a highly prominent office building, arranged over ground and four upper floors, providing around 56,201 sq ft of net lettable accommodation and 34 car parking spaces.
  • Hartwell House provides high quality flexible open plan accommodation with floorplates ranging between 12,819 sq ft and 13,298 sq ft and an excellent parking ratio of 1:1,653 sq ft.
  • An excellent tenant line up including SN Systems Ltd, Barnett Waddingham LLP, Epic Bristol Ltd, RSM UK Management Ltd and Hays Specialist Recruitment Ltd.
  • The properties provide an average weighted unexpired lease term of 7.10 years to expiry and 5.72 years to lease events.
  • The current passing rental is £1,558,701 per annum, equating to a low average rent of £27.73 per sq ft, compared with the latest letting in the building at £31.50 per sq ft, offering a demonstratable platform for significant reversionary income.
  • Bristol's occupational market continues to see an imbalance between landlord and tenant and has witnessed Grade A rents increase from £28.50 per sq ft to £35.00 per sq ft since late 2017, an increase of 23%.
  • Hartwell House is an exciting opportunity to acquire a high quality building in the heart of the central business district close to all the amenities, with significant opportunities for income growth through rent reviews, refurbishment and lease renewals.
  • Freehold.
  • We are instructed to seek offers in excess of £25,390,000 (Twenty-Five Million Three Hundred and Ninety Thousand Pounds), subject to contract and exclusive of VAT for our client's freehold interest.
  • A purchase at this level would reflect a net initial yield of 5.75%, assuming standard purchaser's costs of 6.76%. This reflects a capital value of £443 per sq ft.

Location

Bristol

Bristol is the 5th largest conurbation in the UK and the capital of the South West. It has an estimated population of 456,000 and a larger urban zone with an estimated 1.6 million residents and is amongst the most attractive, successful and culturally prestigious cities in the UK, enjoying a rising profile within Europe and beyond.

Economy and Employment

Bristol's economy showed strong resilience during the recession, achieving the highest annual growth rate of all core cities (1998-2006 at 6.2% per annum) and has remained the most productive.

The city's economy is now worth £14.31bn, up from £13.67bn in 2015, and has the third highest number of business start ups in the UK (94.2 per 10,000 working age population).

According to the 2017 Survey, Bristol has 237,500 working age residents, the equivalent to an employment rate of 77.2% which is the highest of all British core cities and 2.8% above the national average. Between 2011 and 2015, the number of employee jobs in Bristol grew by 10.8%, the 3rd fastest growing of all British core cities.

Its success is based on its world class knowledge economy based in aerospace, defence, engineering, ICT & electronics, financial services, media, creative and environmental industries, along with the global reach of its two universities.

It is a popular relocation destination, supported by a flourishing TMT, professional and financial service sectors.

The city has benefited significantly from relocations and expansion around occupiers including Rolls Royce, Ministry of Defence, BBC, Airbus, Lloyds Bank, National Composite Centre and numerous large legal practices.

In 2017, Bristol was named as the only fast growing, globally significant tech cluster in the UK (McKinsey and Co) and the UK's largest digital cluster outside of London.

Education & Culture

The city benefits from two outstanding and significant universities, the University of Bristol and the University of the West of England, with the University of Bristol being the second most targeted university by employers in the UK. These contribute to Bristol's skilled labour pool, which has one of the highest retention rates in the UK. Most recently the University of Bristol incubator spin-out company Ziylo has been bought by global company Novo Nordisk for c.$800 million.

Combined, the universities have a population of 52,000 students and the University of Bristol has significant growth projections. Development has commenced on the University's new £350 million Temple Quarter Enterprise Campus adjacent to Bristol Temple Meads Station, which is due to open in 2022. The new campus will include a digital innovation hub, a business school of the future and a new student village.

Bristol has been identified by NESTA as among the UK's creative hotspots, promoting innovation and economic growth.

Bristol has a long association with the green movement and is proud of its status as the European Green Capital 2015, the only UK city to have been awarded the accolade.

Situation

Hartwell House is an attractive and highly prominent Grade A office building in the heart of central Bristol fronting the corner of Victoria Street and St Thomas Street.

Connectivity

Road
Bristol is strategically located at the junction of the M4 and M5 motorways, 118 miles west of London and only 8 miles from the M4/M5 intersection. The M4 is the east-west axis from London to Cardiff, whilst the M5 is the north-south west axis from Birmingham to Exeter.

The M48 motorway and Second Severn Crossing provide strong road links to Cardiff and South Wales and the M32 motorway spur links the M4 to Bristol city centre.

Rail
Bristol Temple Meads Station is located centrally and within a 6 minute walk of the property. The station provides regular direct intercity services to the UK's major cities. The mainline to London Paddington is currently undergoing electrification works costing more than £4.8bn, which are due to go operational in Q4 2019 and will reduce the journey times to London by around 20 minutes, as well as provide significantly more capacity.

Air
Bristol International Airport lies 8 miles south of the city centre and is serviced by a dedicated coach link. It offers direct flights to over 125 destinations throughout the UK, all of the major European economies and also the USA.

Description

Hartwell House

Hartwell House is an attractive and highly prominent Grade A office building in the heart of central Bristol fronting the corner of Victoria Street and St Thomas Street.

The five storey building was completed in September 2007, designed as a high quality multi-tenanted office building with a BREEAM rating of Very Good.

The building contains an impressive double height corner reception, which was refurbished in 2018 together with the common parts.

The elevations are of Portland stone inset with full height aluminium framed glazing to the front with sand coloured brick elevations to the remainder. The floorplate is u-shaped and provides extremely light and airy tenant space through large scale glazing and a floor to ceiling height of up to 2.8 metres.

The property is arranged over ground and four upper floors totalling 57,318 sq ft providing flexible open plan floorplates between 12,819 sq ft and 13,298 sq ft. The building, arranged around two large cores, provides a central core with central stairwell, male, female and disabled WCs and a bank of three lifts serving all floors.

The property benefits from a four pipe fan coil air conditioning system to meet the heating and cooling loads of the building. Chillers are located on the roof together with air conditioning units. The fresh air is provided by the air handling units delivered via duct work into the accommodation. Air is extracted from the office areas through dedicated extractor grills in the suspended ceiling.

A high quality LED lighting scheme has been installed to the entrance reception, atrium areas and common parts.

The building benefits from mains electricity, gas, telecoms and water services.

There is secure and external car parking at ground level totalling 34 spaces, providing an excellent ratio of 1:1,653 per sq ft.

Specification

The main design features and landlord specification includes:
  • Impressive double height reception
  • Typical upper floorplate of c.13,142 sq ft (NIA)
  • Four pipe fan coil high efficiency air conditioning
  • Full access raised floors (150 mm) to include carpet
  • Typical floor to ceiling heights up to 2.8m
  • Suspended ceilings incorporating either LG3 compliant or LED lighting
  • BREEAM rating Very Good
  • Design density 1:10 sq m
  • Sophisticated BMS control system
  • Three passenger lifts arranged in a single bank with a loading capacity of 1,000 kg (13 people)
  • Male and female WCs (2 blocks each per main floor) plus disabled WCs provided on all floors
  • Shower facilities are located on each floor, plus an additional facility on the ground floor, serving the covered cycle storage area
  • 34 external and secure car parking spaces (1:1,653 per sq ft)
  • Secure motorbike and bicycle parking

Accommodation

The property has been measured in accordance with the RICS Code of Measuring Practice (6th Edition) and provides a total net internal floor area of 57,318 sq ft (5,325.08 sq m).

The property has also been measured in accordance with the new RICS Property Measurements (1st Edition) which incorporates the new International Property Measurement Standards (IPMS).

The property on this basis has a net internal floor area of 58,612 sq ft (5,445.30 sq m).

A copy of the measured survey undertaken by PRE Chartered Surveyors is available in the data room and capable of being assigned and relied upon by the purchaser.

Further information can be found in the link below.


Tenure

The property is held freehold under title numbers BL34979 & BL95955.

Tenancy

The property is let to six tenants: SN Systems Ltd, Barnett Waddingham LLP, Epic Bristol Ltd, RSM UK Management Ltd, Armada Training Solutions Ltd and Hays Specialist Recruitment Ltd with a weighted average unexpired lease term of 7.10 years to expiry and 5.72 years to lease event.

The contracted passing rent is £1,558,701 per annum, equating to an overall rent of £27.73 per sq ft.

INVESTMENT RATIONALE

  • Prime location within the heart of the Central Business District close to Cabot Circus, Temple Quay and Bristol Temple Meads Station
  • Multi-let building with staggered lease events providing sequential opportunities to phase the refurbishment, reletting and lease regears whilst maintaining core income
  • Significant asset management opportunities including rent reviews, lease renewals and refurbishment
  • The building provides high quality flexible floorplates popular with tenant requirements
  • With average rents of £27.73 per sq ft and the most recent letting to Epic Bristol Limited in November 2018 at £31.50 per sq ft, the property is highly reversionary
  • Bristol has the lowest availability on record, currently standing at around 447,000 sq ft reflecting 3.5%
  • Bristol has witnessed the fastest recorded growth in its history with Grade A rents increasing by around 23% in 18 months
  • A feasibility study has broadly established an additional two storeys (circa 20,500 sq ft) can be added to the building, subject to planning and technical surveys
  • Bristol has one of the most diverse employment bases including some of the largest floorspace occupied by the banking, legal and TMT sectors in the UK outside London
  • Bristol has benefited significantly from relocations and expansion around occupiers including Rolls Royce, Ministry of Defence, BBC, Airbus, Lloyds Bank, Channel 4, Dyson and numerous large legal practices


Covenant Information

SN Systems Limited
SN Systems Limited is a wholly owned subsidiary of Sony Interactive Entertainment (SIE), a multinational video game and digital entertainment company which is itself owned by Sony Corporation of America. SIE was founded in Tokyo, Japan in 1993 and quickly became Sony's main resource for research and development in video games.
SN Systems Limited is a provider of Microsoft Windows based development tools for games consoles. The company was founded in 1990 and has a long association with the PlayStation line of consoles. In 1999 and again in 2005, SN Systems won a Game Developer Magazine Front Line Award in the Programming Environment category for its Nintendo 64 development product called SN64.
SN Systems Limited (Company No: 02436957) has a Dun and Bradstreet rating of 3A1 which represents a minimum risk of business failure.

Barnett Waddingham LLP
Barnett Waddingham LLP is a leading independent UK consultancy at the forefront of risk, pensions, investment and insurance. They employ over 1,000 people with offices in eight locations around the UK, acting for large and small clients in both the private and public sectors, including 15% of FTSE350 firms with a DB scheme.
Barnett Waddingham LLP (Company No: OC307678) has a Dun and Bradstreet rating of 2A1 which represents a minimum risk of business failure.

Hays Specialist Recruitment Limited
Hays Specialist Recruitment Limited is the leading global specialist recruitment group, and the market leader in places such as the UK, Germany and Australia. They are experts in recruiting qualified, professional and skilled people across a wide range of specialised industries and professions. In 2018 they placed 77,000 people into permanent jobs and 244,000 people into temporary roles worldwide.
Hays Specialist Recruitment Limited (Company No: 00975677) has a Dun and Bradstreet rating of 5A1 which represents a minimum risk of business failure.

Epic Bristol Limited
Epic Bristol Limited is a subsidiary of Epic Systems Corporation, a privately held healthcare software company founded in 1979, which helps people with medical illnesses get well, stay well and help ensure future generations are healthier. More than 250 million patients have a current electronic record in Epic. Their headquarters building is based in Verona, Wisconsin which employs over 9,500 people, as well as offices in Melbourne, Dubai, Singapore, Bristol and Denmark.
Epic Bristol Limited (Company No: 10103103) has a Dun and Bradstreet rating of A2 which represents a lower than average risk of business failure.

RSM UK Management Limited
RSM UK Management Limited (formerly Baker Tilly International) is a provider of audit, tax and consulting services to middle market leaders. It is the seventh largest business advisory firm in the UK and sixth largest globally. The firm offers audit and assurance, risk advisory, outsourcing, tax, consulting, restructuring, transactions and legal services.
RSM UK Management Limited (Company No: 03077999) has a Dun and Bradstreet rating of 1A2 which represents a minimum risk of business failure.

Armada Training Solutions Limited
Armada Training Solutions Limited is a specialist training course provider for professionals specialising in CAD design, creative video and animation training, e-learning, web development training, technical writing and Microsoft office applications. They are both an Adobe Authorised Training Centre (AATC) and an Autodesk Training Centre (ATC). These accreditations ensure a high standard of training activities.
Armada Training Solutions Limited (Company No: 03368837) has a Dun and Bradstreet rating of G3 which represents a greater than average risk of business failure.

Further information can be found within the marketing brochure.


VAT

We understand the property is elected for VAT and therefore VAT will be payable on the purchase price.

SERVICE CHARGE

The service charge budget for the year ending 31st December 2019 is £465,878 per annum reflecting £8.36 per sq ft, or if you exclude the heating and cooling costs for the tenant's demise, this would reflect around £5.38 per sq ft.

Further information on the service charge budgets and previous years accounts are available within the data room.

INVESTMENT MARKET

The UK commercial real estate investment market saw £54.4bn of transactions in 2018, slightly down from £62bn in 2017, although well above the 10 year average of £48bn.

The Bristol office investment market witnessed reduced investment activity during 2018 standing at £322m compared with £463m in 2017, however this was largely a function of vendors seeking to benefit from the strongest rental growth period in the city's history before capitalising on the additional value. Strong fundamentals have encouraged investors to target the city and acute competition for assets has seen yields shift inwards to 4.75% and capital values rise to £650 per sq ft following the sale of Aurora in Q4 2018.

This has been driven by the higher yield returns available to investors outside of the capital, a trend which is anticipated to continue this year and buoyed by positive occupational market dynamics and strong rental growth forecasts.

ENVIRONMENTAL PERFORMANCE

The property has been assessed with a BREEAM rating of Very Good.

The Energy Performance of the property has been assessed and a full suite of EPCs is available within the data room.

DATA ROOM

Data room access can be provided upon request, which contains the following information:
  • Title Documents
  • Occupational Documents
  • Surveys
  • Management Information
  • EPC
Full details can be found at www.hartwellhousebristol.com

DEVELOPMENT PROJECTS

Further information can be found within the marketing brochure.

OCCUPATIONAL MARKET

Further information can be found within the marketing brochure.

Proposal

We are instructed to seek offers in excess of £25,390,000 (Twenty-Five Million Three Hundred and Ninety Thousand Pounds), subject to contract and exclusive of VAT for our client's freehold interest.

A purchase at this level would reflect a net initial yield of 5.75%, assuming standard purchaser's costs of 6.76%. This reflects a capital value of £443 per sq ft.

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NET INITIAL YIELD:
5.75%
PRICE:
£25,390,000
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