Teesdale House

Modern Office Investment Opportunity in a Strategic Location with Secure Government Income

Stockton TS17 6BL

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL

Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL

Executive Summary

• Modern, purpose-built office extending to 15,964 sq ft with generous parking provision • Strategically located on Teesdale Business Park, the prime office location on Teesside • Fully let to NHS Property Services Limited at a low, re-based rent of £9.99 per sq ft with fixed uplift of 38% in June 2018 • Significant tenant’s improvements undertaken throughout 2014, providing a strong indication of the tenant’s commitment to the unit • Excellent asset management and rental growth potential • Offers in excess of £1.6M are sought for the freehold interest reflecting a net initial yield of 9.42%, and a reversionary yield of 13.00% after deduction of standard purchaser’s costs of 5.8%. A68 A1

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A696 A68 Dumfries Newcastle A75Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information A74(M) A7 Airport

Teesdale House Westpoint Road, TeesdaleA75 Business Park, Stockton TS17 6BL A69 A69 A69 A1 Newcastle Upon Tyne

A75 A68 A692 Carlisle 43 64 42 63 Sunderland A69 Location A69 A596 M6 A68 Durham 62

41 61 Stockton-on-Tees is situatedA595 approximately 250 urban conurbation and the wider region of the miles north of London, 58 miles north of Leeds North East of England. It has an urban area Penrith A688 A19 and 35 miles south of Newcastle upon Tyne. The population 40of circa 85,000 people and a wider town is an important sub-regional centre and is district population ofA66 approximately 190,000 A1(M) A66 a major focusA596 for retail and leisure activity in the people, with an estimated 350,000 people living A68 59 area. The Teesdale Business ParkK iseswick positioned to within 6 miles ofM6 the town centre. A688 the east of the town centre, within the curve of Immediate access to the National Rail Network 58 Stockton- Middlesbrough the River Tees. on-Tees is provided by Thornaby Station, which is 39 Stockton is positioned at the intersection of the approximately two to three minutes’ walk from A66 57 Darlington A19 and A66 Trunk Road, which provide easy the subject property. Thornaby Station connects The Property access to the A1 (M), approximately 15 miles to to Darlington and the East Coast Main Line. In A6 38 A685 the west. Travelling via the A19, it is possible to turn this provides direct services to London’s Kings 56 connect to Leeds, York, Durham and Newcastle Cross (2½ hours travel time) and Edinburgh (2 A19 within one hour’s drive time. hours travel time). Stockton-on-Tees is an astutely located 37 Kendal N commercial centre within both the immediate 1046 Sh A ore A1(M) Rd

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18 Chester M6 Congleton Crewe Wrexham Stoke on-Trent Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL Situation

Teesdale Business Park is situated to the south of Stockton town centre on the River Tees and extends to over 700,000 sq ft of office, education, leisure and residential space. It is estimated that 4,500 people are employed on the park and it is widely recognised as the commercial heart of Teesside in addition to being one of the major business centres in the north east. Major occupiers on the park include Inland Revenue, Santander, DVLA, Swift Insurance, Barclaycard, Siemens, Atkins, the Royal Bank of Scotland, First Choice Holidays plc, Cummins Ltd, Halcrow Group, Serco, Allied Bank and Bond Dickinson solicitors. Durham University’s Queens Campus and Woolfson Research Institute are located on the estate, alongside Stockton Riverside College, creating demand for retail and leisure use alongside residential accommodation, the conversion potential for which underpins capital values across Teesdale Park. There are proposals from Muse, the development arm of AMEC, to build a mixed use scheme including residential on North Bank, situated immediately on the opposite side of the River Tees. GVA are involved in advising Muse and we are aware that the scheme is targeting rents of £17 - £18 per sq ft for Grade A space on a pre-let basis. The first office building extending to an area of 43,000 sq ft, has been pre-sold to Thirteen Group Housing Association with completion due in Spring 2015, for a price exceeding £165 per sq ft. Over 50 new homes have already been completed and sold at Northshore as part of the award-winning Vivo residential scheme. A further 76 new homes will be built this year. Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL

Description

The property comprises a modern, purpose built office building over three storeys, with brick / block walls and a pitched, hipped roof with tile covering and dormer windows. The uppermost floor is situated in the roof void. The internal accommodation is set out to provide cellular and open plan offices, meeting rooms, stores, kitchen areas and WCs, alongside a well-appointed reception. Vertical access is via a passenger lift and stair to all floors. The building benefits from suspended ceilings and recessed lighting to the office areas, alongside a combination of perimeter radiator heating and air conditioning cassette units. Externally, there is a large block paved car park providing 60 marked parking bays with a generous ratio of 1:266 sq ft. The property occupies a site 0.89 acres (0.36 ha) with a low site coverage ratio of 20%. Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL Accommodation Tenancy

The property provides the following accommodation. The property is fully let to NHS Property Services Limited on fully repairing and insuring terms from 29 January 2013 until 25 June 2023. The rent passing is £159,440 per annum (£9.99 per sq ft), with a Floor Areas (NIA) fixed uplift on 24th June 2018 to £220,000 per annum (£13.78 per sq ft), an increase of 38%.

Sq m Sq ft The tenant has an option to break on 24th June 2018, subject to 9 months’ notice.

Ground 596.9 6,425 The current lease is a renewal and alongside substantial recent improvement works, reflects the tenant’s continued commitment to the unit. The property is the NHS’s regional headquarters and as First 601.6 6,476 such is occupied by Hartlepool & Stockton Clinical Commission Group (HSCCG). HSCCG represents over 30 GP practices across the Hartlepool and Stockton area and are responsible for planning and Second 284.6 3,063 paying for a range of health services covering everything from routine operations, emergency and Total 1,483.1 15,964 urgent care, learning disabilities, long term conditions, end of life and mental health care. HSCCG is directly funded by the NHS with an annual budget of £370 million. Please note that the above areas do not include tenant’s improvements. Tenure Covenant

NHS Property Services (NHSPS) is a limited company wholly owned by the Secretary of State for Health, Freehold. with a remit to provide estate and facilities management for NHS facilities across the UK, from GP practices to administrative buildings. NHSPS maintains, manages and improves over 4,000 properties, working in partnership with NHS organisations and taking over the former Primary Care Trust and Strategic Health Authority portfolio. As the Secretary of State is the sole shareholder in NHS Property Services, the covenant provided by the tenant can be considered as undoubted. Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL Occupier Markets/ Asset Management

The North East occupational market has witnessed a return to strength, with prime headline office build space of up to 5,000 sq ft with £14.50 per sq ft generally accepted as the rental tone at the rents regaining their pre-recession peaks and year on year take up starting to increase significantly, time. We are aware that some modern stock on the estate is currently let at rents of £18.30 per sq ft, exceeding recorded levels for the preceding four years. Added to this, a lack of development during rising to £20.00 per sq ft. Asking rents on the park for equivalent accommodation are between £11 the economic downturn has led to a shortage of good quality office space across the region, with and £18 per sq ft. supply shortages appearing in key locations. The rebased rent within Teesdale House of £9.99 per sq ft therefore provides an excellent platform The Teesside Occupier Market covers the areas of Middlesbrough, Stockton, Billingham and for growth moving forward and allows flexibility to emplace value-add asset management initiatives. Hartlepool, together with surrounding smaller settlements, with an approximate population of 650,000 Notably, removing the rental uplift in 2018 in return for non-activation of the break option or agreeing people. a term extension presents an obvious method of enhancing value, particularly against a backdrop of improving occupier demand. Teesdale Business Park is the prime office location on Teesside, located adjacent to Stockton town centre. It is the largest park on Teesside and attracts the region’s major occupational requirements. The quoting price reflects a capital rate of £110 per sq ft, which appears favourable compared to Rents on the park peaked in 2007, when they reached rates of £17.50 per sq ft for the smaller new the most recent sale at Northshore due to complete in Spring 2015. Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL Investment Market Investment

The North East investment market has mirrored a recovery in other provincial centres, with strong demand for both single and Considerations multi-let offices in key locations supported by improved economic conditions and prospects for rental growth. Details of a number of recently completed single and multi-let investment sales are provided in the table below.

We consider the following points are of particular relevance when Address Description Lease terms Price Date Comments assessing the investment. & NIY Yield • Prominent office building in a prime commercial location, Unit 2 Staithes, Detached office Let to WHP Partnership £695,000 Rent passing providing 15,964 sq ft of modern, high specification accommodation The Watermark, unit located on an at a rent of £70,500 per September 2014 equates to £18.31 Gateshead established estate within annum (£18.31 per sq ft) per sq ft 9.59% • Excellent transport links and in close proximity to a well-educated Ω mile of the A1(M). Unit with 3 years unexpired at workforce pool extends to 3,850 sq ft the time of sale • Let to an undoubted government tenant who fully utilise the Dunedin House, 98,268 sq ft multi-let 62% let to tenants £4.75M Significant capex space Teesdale Business Park office on the same including Secretary of August 2014 required throughout estate as the subject, State for the Environment, common parts and • Passing rent has been rebased to below the market tone and the 8.54% Triple Net constructed 1991. Atkins and RBS office suites. income profile benefits from a fixed increase of 38% in 2018 • Excellent value-add opportunities through removing the tenant’s Tyneside House Mid 1990’s office building 25 years to Environment £4.135M Located on eastern break option with leverage available in the form of fixed uplifts. Skinnerburn Road, on established business Agency from June 1995 June 2014 (city centre) edge Newcastle Business Park park extending to 26,580 at £350,000 pax (£12/ of rate 1980’s early • The tenant has recently undertaken significant improvement works 8% sq ft with garage store sq ft) FR & I terms with 5 1990’s business park. and the lease was renewed in January 2013, demonstrating their of 6,553 and 195 CPS. yearly OM reviews (6.25 Government tenant. commitment to the building. Freehold years UT) Asking price was £3.675M

Q8, 100,353 sq ft Grade Fully Let to Tesco Bank £17.725M Anchor tenant on an Quorum Business Park, A office building, PLC with 10.6 years June 2014 out of town estate Longbenton, completed 2010 unexpired. Passing rent with high vacancy 8% Newcastle Upon Tyne £1.5M (£14.95 per sq ft) rates. Executive Summary Location Situation Description Accommodation Tenure Tenancy Covenant Market Information Further Information

Teesdale House Westpoint Road, Teesdale Business Park, Stockton TS17 6BL Further Information

EPC Proposal Luke Symonds 0191 269 0095 The property has an EPC rating of 66 - Band C. Our client is seeking offers in excess of £1.6M (One Million, Six Hundred Thousand pounds) subject to contract and exclusive [email protected] of VAT. A purchase at this level reflects a net initial yield of 9.42%, and a reversionary yield of 13.00% after deduction of VAT standard purchaser’s costs of 5.8%. Simon Beanland The property has been elected for VAT and it is envisaged that 0191 269 0512 the transaction will be treated as a TOGC. [email protected]

gva.co.uk/8615

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Subject to Contract February 2015

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GVA is the trading name of GVA Grimley Limited, conditions under which Particulars are issued GVA Grimley Limited for themselves, for any joint agents and for the vendors or lessors of this property whose agents they are, give notice that: i.) The particulars are set out as a general outline only for the guidance of intending purchases or lessors and do not constitute, nor constitute part of, an offer or contract. ii.) All descriptions, dimensions, references to condition and necessary permission for use and occupation, and other details, are given in good faith and are believed to be correct but any intending purchasers or tenants should not rely on them as statements or representations of fact but satisfy themselves by inspection or otherwise as to the correctness of each of them. iii.) No person in the employment of GVA Grimley Limited or any joint agents has any authority to make or give any representation or warranty whatever in relation to this property. iv.) All rentals and prices are quoted exclusive of VAT. 08449 02 03 04

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