Lerwick Shetland, Ze1 0Lq
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CHARLOTTE HOUSE, COMMERCIAL ROAD LERWICK SHETLAND, ZE1 0LQ GOVERNMENT LET OFFICE INVESTMENT FOR A FURTHER 16.6 YEARS WITH FIXED UPLIFTS LERWICK CHARLOTTE HOUSE, COMMERCIAL ROAD, SHETLAND, ZE1 0LQ INVESTMENT CONSIDERATIONS ■ Lerwick is the capital and main business centre of the Shetlands ■ Charlotte House has been let to the Government since 1977 ■ 19,953 sq ft (1,853.8 sq m) NIA of office accommodation ■ Heritable (Scottish equivalent of Freehold) A purchase at this level reflects the following yield profile: ■ Over 16.6 years unexpired to the undoubted covenant of The Secretary of State for Review Date Rent pa Running Yield Communities and Local Government 15 May 2027 £579,000 5.84% ■ 15 May 2032 £676,000 6.81% Topped up rent of £496,000 per annum ■ The Government did not exercise its break option in March 2018 ■ The lease benefits from very attractive fixed uplifts in 2027 and 2032 ■ Value of income until expiry approximately £9,540,000 as of October 2020 ■ The only Job Centre in the Shetland Islands ■ The Government uses the building for additional functions including a Health Assessment Advisory Centre and Scottish PROPOSAL YIELD PROFILE Environment Protection Agency ■ Offers sought in excess of £8,860,000 Date Rent pa Running Yield Cash on Cash* ■ Historic low UK Gilts making real estate (Eight Million, Eight Hundred and Sixty October 2020 £496,000** 5.25% 9.5% investments secured against Thousand Pounds), reflecting a net initial yield 15 May 2027 £579,000 6.13% 11.84% UK Government covenants highly 15 May 2032 £676,000 7.15% 14.57% attractive (5 year UK Government Gilt of 5.25% assuming standard Scottish purchaser’s costs. * Based on 60% LTV, 3% all in interest rate -0.06% 1 October 2020) ** The vendor is topping up to the May 2022 Fixed Uplift GOVERNMENT LET OFFICE INVESTMENT FOR A FURTHER 16.6 YEARS WITH FIXED UPLIFTS HAROLDSWICK LERWICK BALTASOUND CHARLOTTE HOUSE, COMMERCIAL ROAD, SHETLAND, ZE1 0LQ BELMONT GUTCHER FUNZIE SHETLAND NORTH ROE The Shetland Islands are a subarctic archipelago in the Northern Isles of Scotland situated in the ULSTA BURRAVOE Northern Atlantic between Great Britain, The Faroe Islands and Norway. The Islands lie 50 miles HILLSWICK north east of Orkney, 110 miles from the Scottish mainland and 190 miles west of Norway. The Shetland Islands have a population of 23,200 across 16 islands and are a popular tourist BURRAVOE destination. The Islands’ two airports carry over 479,000 passengers in and out of Shetland per annum. VOE A970 LERWICK SANDNESS AITH Lerwick is the Capital of the Shetland Islands and operates as the main business centre of the Islands. The town is located 123 miles off the north coast of the Scottish mainland and is the WALLS most northerly and most easterly town in Great Britain. LERWICK Lerwick Harbour is described as the “Port of Shetland” and is a busy fishing and ferry port. The HAM SCALLOWAY A970 harbour also services vessels supporting the offshore oil industry. EASTER QUARFF The A970 links to Shetland, Northlink Ferries operate a daily overnight ferry 17 miles to the north and service between Lerwick and Aberdeen, regularly SANDWICK Sumburgh, 24 miles to the south. calling in to Kirkwall in the Orkney Islands. Lerwick is served by the Tingwall Airport located a few miles SUMBURGH away and Sumburgh Airport which offer direct flights from Edinburgh, Aberdeen, Inverness and Glasgow. DEMOGRAPHICS Lerwick is home to the Shetland Islands Council, NHS Shetland Board Headquarters, Gilbert Bain hospital, Lerwick’s harbour has become one of the first ports to the only hospital on the island and various other Government agencies handle major oil and gas decommissioning projects 133,000 passengers travelling directly Lerwick’s harbour sees up to 94 tourist cruise Two thirds of the Shetland Islands’ population to Lerwick by ferry per annum ships and 60,000 passengers in one season lives within 10 miles of Lerwick GOVERNMENT LET OFFICE INVESTMENT FOR A FURTHER 16.6 YEARS WITH FIXED UPLIFTS A565 LERWICK CAMBRIDGE ROAD CHARLOTTE HOUSE, COMMERCIAL ROAD, SHETLAND, ZE1 0LQ N O A R 9 T 7 H 0 R O A SITUATION D The property is situated on SHETLAND Commercial Road at the northern MUSEUM 0 7 CO A969 9 MMERCIAL ROAD end of Commercial Street, the town’s A E S P L A N main shopping thoroughfare. FORT A D E CHARLOTTE ANDERSON A RD 9 G 6 ILBE 9 0 BUR 7 R 9 TSO Gilbertson G The property is positioned adjacent A Park H ROAD LERWICK E N D TOWN HALL I S RO H to the main bus station and a large A C D O L SHETLAND H LIBRARY public car park is to the rear, which T U O S C is free to use. A IR N F IE L D 9 R GILBERT BAIN 96 Clickimin O A A HOSPITAL Commercial Street is the heart of Loch D D ROA TH U the town centre just across from the SO main harbour and is home to a mix of K The Knab NAB Golf Club R 70 OA national and local occupiers. A9 D AD RO H UT O S Lerwick Neighbouring occupiers include the D Cemetery A K O A R N A T E Royal Bank of Scotland and Lerwick’s E S R S T E D main Post Office. R O A D DESCRIPTION The property was constructed in the 1970’s and comprises a purpose built detached office building. The property is arranged over ground and three upper floors and totals approximately 19,953 sq ft (1,853.8 sq m). Internally the property features a mix of open plan and partitioned office accommodation. The staff entrance is at ground floor level to the north end of the building, the public entrance is to the rear elevation at first floor level. SPECIFICATION • High proportion of internal meeting rooms serving the tenant’s operational demand well due to the sensitive nature of its business at the property • Suspended ceilings with inset fluorescent lighting • Double glazing throughout • 8 person passenger lift serving all floors • WC’s on each floor • Employee kitchen and break out area • There is a public car park located adjacent to the subject property. GOVERNMENT LET OFFICE INVESTMENT FOR A FURTHER 16.6 YEARS WITH FIXED UPLIFTS Healthcraft, 12 Commercial Road, Lerwick, Shetland, ZE1 0LX LERWICK CHARLOTTE HOUSE, COMMERCIAL ROAD, SHETLAND, ZE1 0LQ ACCOMMODATION SCHEDULE The property has been measured by Hollis in accordance with the RICS Code of Measuring Practice. The report is assignable and a copy is available in the Dataroom. Floor NIA (sq ft) NIA (sq m) Ground 5,441 505.5 First 4,815 447.3 Second 4,842 449.9 Third 4,855 451.1 Total 19,953 1,853.8 SITE AREA 0.233 acres (0.094 ha). For identification purposes only. TENANCY TENURE created on Plotted Scale - 1:617 The property is let in its entirety to The Secretary of State for CommunitiesMisrepresentation Act: 1. andAllsop LLP Local on their own Government behalf and on behalf of the instructing party, whose agents Allsop are, givesHeritable notice that: (a) these – particulars Scottish do not equivalent to constitute in whole or in part an offer or contract for sale or lease; (b) none of the statements contained in these particulars as to the property are to be relied on as statements or representations of fact; and (c) the instructing party does not make or give, and neither Allsop nor any of their members nor any person in their employment on a Full Repairing and Insuring lease. The tenant took occupationhas onany authority 17 toMay make or 1977give, any representation for a orterm warranty whatsoeverof in relation to the property. The only representatiEnglishons, warranties, Freehold. undertakings and contractual obligations to be given or undertaken by the instructing party are those contained and expressly referred to in the written contract for sale or agreement for lease between the instructing party and a purchaser or tenant. 2. Prospective purchasers or tenants are strongly advised to: (a) satisfy themselves as to the correctness of 60 years expiring on 24th May 2037 providing an unexpired term eachof statement 16.6 contained years. in these particulars; (b) inspect the property and the neighbouring area; (c) ensure that any items expressed to be included are available and in working order; (d) arrange a full structural (and where appropriate environmental) survey of the property; and (e) carry out all necessary searches and enquiries. Allsop is the trading name of Allsop LLP. The vendor is topping up the rent to the May 2022 fixed uplift providing a passing rent of COVENANT £496,000 per annum. The Secretary of State for Communities and Local The lease benefits from the following fixed uplifts:- Government have been in occupation since 1977. The Jobcentre in Lerwick is the only Jobcentre in the Shetland Review Date Reviewed Rent per annum Islands and is of strategic importance. 15 May 2027 £579,000 15 May 2032 £676,000 GOVERNMENT LET OFFICE INVESTMENT FOR A FURTHER 16.6 YEARS WITH FIXED UPLIFTS LERWICK CHARLOTTE HOUSE, COMMERCIAL ROAD, SHETLAND, ZE1 0LQ INVESTMENT RATIONALE • Over 16.6 years secured to the UK Government • Value of income until expiry approximately £9,540,000 as of October 2020 • Charlotte House is the only Job Centre in the Shetland Islands and is of strategic importance • Significantly superior income return in comparison to UK Government GILTs • The tenant did not exercise its break option in March 2018 • The Government uses the building for additional functions including a Health Assessment Advisory Centre and Scottish Environment Protection Agency COMPARISON WITH GOVERNMENT GILTS AND FTSE RETURNS Return UK 5 year GILT -0.06% (1 October 2020, Bloomberg) UK 10 year GILT 0.23% (1 October 2020, Bloomberg) UK 30 year GILT 0.78% (1 October 2020, Bloomberg) FTSE 250 Index Dividend yield 2.72% (10 year average, Siblis) FTSE 100 Index Dividend yield 3.80% (10 year average, Siblis) CASH ON CASH RETURNS Cash on Cash* October 2020 £496,000 9.5% May-27 £579,000 11.84% May-32 £676,000 14.57% * Based on 60% LTV, 3% all in interest rate.