A private client of Hartnell Taylor Cook owned a prime retail property located in Southampton’s Above Bar Street, with an imminent lease expiry threatening the value of their investment, until a lease regear was agreed.
63-65 Above Bar Street was let entirely to Bank of Scotland plc, trading as Halifax, and totalled 7,559 sq ft, arranged over five floors. The unit is prominently located, occupying a corner position on the pedestrianised section of Above Bar Street, Southampton’s principal retailing street, a short distance north of the entrance to West Quay shopping centre.
The lease was due to expire on 23rd June 2018 and the tenant had served the owners with a section 26 notice, requesting a renewal of their lease for a term of eight years, with a tenant only break option in the fourth year at a substantially reduced rent to that currently passing (£292,300 p.a.). If granted, this would have a negative impact on the investment value of the property.
Our Retail Agency and Lease Advisory teams were invited to provide advice, and through their knowledge of the Southampton market and the subject property, the Agency team strongly recommended negotiations were opened with the tenant to try to agree a re-gear of the lease as opposed to a renewal for the mutual benefit of both parties.
Terms were subsequently agreed for the grant of a new ten year lease, without any break options at a rental of £260,330 p.a. which was lower than the current rent (reflecting the current retail market) but above the rental figure originally offered by the tenant.
Following the successful lease re-gear, HTC’s Retail Investment team provided pre-marketing advice to our client and was subsequently instructed to offer the freehold interest to the market, seeking offers in excess of £4,000,000 subject to contract and exclusive of VAT. Our marketing campaign generated a good level of investor interest and the sale completed on 25th July 2018 at a price of £4,015,000, reflecting a net initial yield of 6.1%.
Our client secured an excellent covenant for a term certain of ten years, creating an attractive and more valuable retail investment, at a re-based market rental level. The decision was taken to sell due to the strong level of demand for this type of secure investment, resulting in a successful disposal.
HTC’s Property Management team had managed this building for the landlord as part of a UK wide property portfolio management contract.
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Hartnell Taylor Cook
5th November 2020