HAMMERSMITH, LONDON W6 3 NEWLY REFURBISHED HQ OFFICE INVESTMENT SUMMARY BUILDING WITH 19.5 YEARS −− Landmark trophy headquarters office building SECURE INCOME −− Located in the heart of Hammersmith opposite Hammersmith Underground Station
−− Hammersmith is West London’s best-connected office sub-market
−− Virtual Freehold
−− Lying within the wider ‘King’s Quarter’, an area undergoing a multi-million pound repositioning project, making it the epicentre of Hammersmith’s retail, restaurant and leisure provisions
−− Exceptional Stiff + Trevillion designed refurbishment at a cost of £42 million
−− 103,374 sq ft NIA (9,603.6 sq m) arranged over ground and thirteen upper floors
−− Let in its entirety to The Office Group (majority owned by Blackstone) with 19.5 years unexpired without break
−− Highly secure institutional grade covenant with a Dun & Bradstreet rating of 5 A1
−− Total passing rent of £5,355,579.62 p.a (£51.80 per sq ft)
−− Rare opportunity to acquire secure long dated income
−− Attractive debt terms available providing strong geared cash- on-cash returns
−− Extremely valuable capital allowances of approximately £14.1 million available to a purchaser
−− Offers in excess of£105,500,000
−− Net initial yield - 4.75% (assuming purchaser’s costs of 6.8%).
−− Capital value - £1,021 per sq ft
−− The property is held in a ‘Luxco’ which can be made available by separate negotiation, thus creating a potential SDLT saving of c.£5m for a purchaser 5 WESTFIELD OLYMPIA
A LANDMARK TOWER DIRECTLY OPPOSITE HAMMERSMITH UNDERGROUND STATION HAMMERSMITH ROAD
LYRIC THEATRE HAMMERSMITH BROADWAY
KING’S MALL SHOPPING CENTRE
KINGS QUARTER KING STREET EVENTIM APOLLO A4 HOUSEHOLD INCOME THE LOCATION 64% SUBSTANSTIAL ABOVE GREATER LONDON AVERAGE REGENERATION
HAMMERSMITH IS WEST LOW OFFICE BLUE CHIP VACANCY RATE LONDON’S BEST-CONNECTED OCCUPIERS CATCHMENT OFFICE MARKET SPEND IS 10.6BN
Located on an attractive public square opposite the EXCELLENT Underground Station, Hammersmith acts as the western gateway to the core West End. Hammersmith boasts CONNECTIVITY LINKS exceptional connectivity with direct access to the A4 10 MILES FROM which links Heathrow Airport (just 10 miles west) to Central London and is further complemented by four London Underground lines. HEATHROW
The rate of business growth in the area between 2011- 2018 was 28% higher than the London average with new occupiers including blue-chip corporates, high-end restauranteurs, international retailers and independent start-up companies. Occupiers remain attracted to Hammersmith by its exceptional connectivity, relatively low occupational costs and rich amenity provision including 4.5 miles of river frontage and excellent retail / restaurant / OUTSTANDING theatre offerings. LOCAL AMENITIES 9
OCCUPIERS / MAJOR BUILDING OWNERS
OCCUPIERS (SQ FT) FITNESS
1 L’Oreal – 110,000 10 Deutsche Telekom – 26,000 1 BOOM Cycle
2 Dunnhumby – 150,000 11 A+E Networks – 20,000 2 Virgin Active 2 3 Betfair – 51,000 12 Walt Disney – 142,000 3 Fitness First 4
4 Winton Capital – 60,000 13 Neptune Fund Management – 16,000 4 Pure Gym 16 8 4 5 Philip Morris – 34,000 14 Immediate Media – 54,000 5 Frame Gym 3 9 6 Fox International Channels – 22,800 15 GE Capital – 155,000 d a
Accor Hotels – 25,000 o R
16 Deltek – 13,000 6 h
UKTV – 29,000 s
1 u
5 4 s B 17 d 7 Western Union – 15,000 Virgin Media – 90,000 Glenthorne Road r e
1 h p e
8 Shazam Entertainment – 31,000 18 Harrods – 120,000 h 2 3 S 9 Chivas – 30,000 5 5 12 10 1 8 7 14 18 5 3 7 4 6 Hammersmith Road AMENITIES HOTELS King Street 1 2 17 13 1 Lyric Square 7 Wasabi 1 Luma Hotel 11 2 2 Bill’s Cafe 8 La Petite Bretagne 2 Novotel West 12 3 Byron Burger 9 The Dartmouth Castle 3 Best Western A4 (TO M4) A4 4 Pret A Manger 10 Wagamama 4 Brook Green Hotel 11 15 5 Amoret Specialty Coffee 11 Apollo Theatre 5 Holiday Inn
6 Tortilla 12 Lyric Theatre
MAJOR BUILDING OWNERS SQ FT
e Aberdeen Asset Management – Rockspring – 110,000 Royal London Asset g d ri B 10 170,000 Managment – 66,000 h Land Securites – 250,000 it m rs 9 Legal and General/Mitsubish – National Bank of Kuwait – 90,000 e m Hermes Asset Management – m a 247,000 H 204,500 EPF (Malaysian Sovereign Tai United – 110,000 Wealth Fund) – 68,000 Aviva – 165,000 AXA – 220,000 Alduwaliya – 166,000 Schroders – 340,000 Kier/Investec – 59,500 Tilad – 83,000 Standard Life – 15,000 Westbrook – 78,000
3 11
KINGS QUARTER KING STREET FOOTFALL THE MULTI-MILLION POUND REGENERATION OF KING’S c.20M MALL LIES AT THE HEART OF THE NEW KINGS QUARTER ANNUALLY
Kings Quarter is at the epicentre of BEADON ROAD the new movement reinvigorating traditional retail. It has become home to some of the biggest and latest AFFLUENT SHOPPERS brands who are pushing themselves to KINGS MALL SHOPPING CENTRE become more original in the ways they PROPORTIONS OF ACORN engage with shoppers and service LYRIC RISING PROSPERITY ARE their needs. LEAMORE STREET SQUARE 80% ABOVE Kings Quarter is shaking up THE GREATER LONDON AVERAGE West London’s retail landscape transforming the shopping centre into a home for retail incubators, innovative outlets and experimental pop-ups. KING STREET RECENT SUCCESSES INCLUDE:
Frame gym brings a fun and unique H&M has invested £5 million in a approach to fitness and wellbeing. colourful concept store to combat The first of its kind in west London, its usual look of long lines and Frame offers class-based exercise cluttered clothing by capitalising with 4 studios, supported by an on retail tech and click and on-site café and fitness-wear store. collect services.
KINGS QUARTER WILL BE THE EPICENTER OF THE LATEST INNOVATIONS IN RETAIL 13
Baker Street 17 King’s Cross St. Pancras
UNRIVALLED CONNECTIVITY 24 TO CENTRAL LONDON AND 12 Paddington 16 HEATHROW AIRPORT M25 Junction 14 Green Piccadilly 13 Park Circus White City 11 14
M4 Junction 1 (Via A4) 2
Hammersmith is one of only eight National and International rail Hammersmith Broadway bus underground stations that is services are available from station is one of the largest and served by four or more lines. Kensington Olympia, and King’s busiest interchanges in London, Cross St Pancras (24 minutes), with 20 bus routes passing Convenient access to Heathrow Paddington (12 minutes) and through it - seven of which run HAMMERSMITH Airport (30 minutes), Mayfair (14 Victoria (14 minutes) via the 24 hours a day. Piccadilly Line minutes), the City (28 minutes) Hammersmith & City lines. and Eurostar links at King’s Cross District Line St Pancras (24 minutes). Hammersmith & City Line
Circle Line
Victoria Line Heathrow Terminal 1-5 10 Immediate proximity to the Heathrow Airport, which caters 4 Earls Court Hammersmith Ring Road and for approximately 72 million A4 / M4, one of London’s main passengers per year, is located 30 arterial routes which in turn 11 miles to the west and can provide access to the wider be easily accessed via London national motorway network. Underground (Piccadilly line) or the adjacent A4 / M4 motorway.
Victoria 17 Wimbledon 26 Journey time 17 in minutes 15
THE BUILDING
−− Stiff + Trevillion designed scheme comprehensively refurbished and completed in Summer 2018
−− Total landlord refurbishment costs of £35 million with an additional £7 million spent by The Office Group on the internal fit out
−− 103,374 sq ft (9,603.6 sq m) NIA of striking, modern Grade A office accommodation
−− Originally constructed in the mid 1970’s of reinforced concrete frame, the façade has been extensively refurbished and re-clad
−− An imposing architectural presence in Hammersmith occupying a virtual island site with excellent levels of natural light and large fenestration to all elevations.
−− Arranged over ground and thirteen upper floors with regular, rectangular floorplates of c.7,800 sq ft
−− Top floor has been remodelled providing 4m ceiling heights, full height glazing and spectacular views over London 17 AN EXCEPTIONAL NEWLY REFURBISHED GRADE A OFFICE BUILDING WITH EXCELLENT AMENITIES AND PANORAMIC VIEWS OVER LONDON 19
SPECIFICATION
−− Newly remodelled top floor with 4m ceiling height and full height glazing
−− Fully accessible metal tiled raised floors with void ranges from 75mm to 100 mm
−− New double-glazed fenestration
−− Typical cleared floor to ceiling heights of 2.6m
−− VRV air conditioning with fan coil units
−− Fully refurbished feature double height reception with feature central atrium and roof light
−− Four 16-person passenger lifts with full disabled access operating a ‘Destination Hall Call System’
−− Dedicated male and female WCs on each floor
−− 93 secure bike stores at basement level
−− 10 showers plus further DDA shower & WC with changing facilities providing 93 lockers
−− Building management system
−− Dedicated service entrance and bike storage from Beadon Road
−− BREEAM ‘Very Good’ 21
STRIKING REMODELLED RECEPTION 23 ‘£35 MILLION HAS BEEN SPENT BY SCHRODERS AND A FURTHER £7 MILLION SPENT BY THE OFFICE GROUP TRANSFORMING ONE LYRIC SQUARE’ 25
GROUND ACCOMMODATION BEADON ROAD
FLOOR NIA SQ FT NIA SQ M KING’S MALL (NOT PART OF DEMISE) 13 8,725 810.6 13
12 7,833 727.7 12
11 7,846 728.9 11
10 7,848 729.1 10 KING STREET 9 7,845 728.8 9 FIRST 8 7,854 729.7 8
7 7,846 728.9 7
6 7,836 728.0 6
5 7,838 728.2 5
4 7,829 727.3 4 TERRACE
3 7,818 726.3 3
2 7,830 727.4 2
1 6,671 619.7 1 TYPICAL UPPER FLOOR
Ground Reception 1,755 163.0 G
TOTAL 103,374 9,603.6
Not to scale and for indicative purposes only 27 29
TENURE
Virtual Freehold – 991 years and 10 months remaining at a fixed peppercorn rent.
GLENTHORNE ROAD
BEADON ROAD
KING STREET
Not to scale. For identification purposes only. This plan is based upon the Ordnance Survey Map with the sanction of the controller of H.M. Stationery Office. Crown Copyright reserved. 31
TENANCY TOG FINANCIAL INFORMATION
LET IN ITS ENTIRETY TO THE OFFICE GROUP PROPERTIES LIMITED (GUARANTOR THE OFFICE GROUP MIDCO LIMITED) ON 5 SEPARATE 20 YEAR FRI LEASES, WITHOUT BREAK, AT A RENT THE OFFICE GROUP PROPERTIES LIMITED (THE TENANT) OF £5,355,579.62 PER ANNUM. Founded in 2003, The Office Group (TOG) is one of the most creative, exciting and forward-thinking All rent free periods will be topped-up by the vendor. working communities in the UK. The flexible office space market continues to grow and is now an established investment sector in its own right. This was further evidenced by Blackstone’s 2017 acquisition of a majority interest in TOG valuing the company at c.£500m. FLOOR AREA AREA TENANT LEASE RENT RENT RENT COMMENTS SQ FT SQ M TERM £PA £PSF REVIEW TOG currently has over 15,000 members working across 34 buildings with 5 more set to open this
13 8,725 810.6 £545,312.50 £62.50 year. What sets TOG apart from their competitors is their strong balance sheet and existing assets which include freehold & long leasehold properties as well as occupational leases and management 12 7,833 727.7 £430,815.00 £55.00 • Guarantor: The Office Group agreements. The Office Midco Limited Group 18/9/2018 - 11 7,846 728.9 £431,530.00 £55.00 18/09/2023 Properties 17/9/2038 • 36 month rent free period For the year ending 31st December 2017, revenue grew by 34% (£19m). Limited - Rent commencement 10 7,848 729.1 £431,640.00 £55.00 18/09/2021 The Office Group Properties Limited has a Dun & Bradstreet rating of 5 A1 indicating a minimum risk of 9 7,845 728.8 £431,475.00 £55.00 business failure. Further information can be found at: www.theofficegroup.co.uk/office/one-lyric-square
8 7,854 729.7 Summary financial information is provided below: • Guarantor: The Office Group The Office 7 7,846 728.9 Midco Limited Group 06/06/2018 - £1,568,700 £50.00 06/06/2023 Properties 05/06/2038 • 22.5 month rent free period 6 7,836 728.0 31-DEC-17 31-DEC-16 31-DEC-15 Limited - Rent commencement date 20/04/2020 5 7,838 728.2 Sales Turnover £75,288,000 £56,256,000 £31,889,000
4 7,829 727.3 Pre Tax Profit £36,130,000 £3,108,000 £13,911,000 • Guarantor: The Office Group The Office 3 7,818 726.3 Midco Limited Net Assets £65,096,000 £33,576,000 £30,756,000 Group 06/06/2018 - £1,244,800 £50.00 06/06/2023 Properties 05/06/2038 • 22.5 month rent free period 2 7,830 727.4 Limited - Rent commencement date 20/04/2020 Part 1 1,420 131.9 • Guarantor: The Office Group THE OFFICE GROUP MIDCO LIMITED (THE GUARANTOR) The Office Midco Limited Group 06/06/2018 - Part 1 5,251 487.8 £262,550 £50.00 06/06/2023 Properties 05/06/2038 • 22.5 month rent free period The Office Group Midco Limited acts as guarantor for The Office Group Properties Limited across all Limited - Rent commencement date leases at One Lyric Square. 20/04/2020 The Office The Office Group Midco Limited has a Dun & Bradstreet rating of 5 A1 indicating a minimum risk of • Structural lease - building Ground Group 18/09/2018 - 1,755 163.0 Peppercorn - - structure and common parts. business failure. reception Properties 17/09/2038 Please see the dataroom Limited Summary financial information is provided below: • Licence to Occupy part of the roof space for the installation Arqiva 31-DEC-17 31-DEC-16 31-DEC-15 Part 29/9/2006 - of a TV Broadcast antenna. N/A N/A Services £8,757.12 - - rooftop 28/09/2020 The licenced area is outside of Limited Sales Turnover £90,091,000 £69,924,000 £43,160,000 the lease of the building and common parts Pre Tax Profit £32,271,000 £3,444,000 £20,959,000
TOTAL 103,374 9,603.6 £5,355,579.62 £51.80 Net Assets £92,898,000 £60,627,000 £57,183,000 FITZROVIA 33 MARYLEBONE £90
PADDINGTON £90 COVENT SOHO £70 GARDEN HAMMERSMITH CONTINUES £90 MAYFAIR £85 £130 TO ATTRACT OCCUPIERS ST JAMES’S SEEKING A DISCOUNT FROM £150 THE CORE WEST END KENSINGTON £70 KNIGHTSBRIDGE HAMMERSMITH £70 VICTORIA £60 £85
HEADLINE RENT PER SQ FT OCCUPATIONAL MARKET INVESTMENT MARKET January 2019 saw space under offer in the West in central West End submarkets attracting 2018 saw UK investment volumes hit £54.4bn, Hammersmith is still widely classed as one of the End at 1.2m sq ft, a figure well above the long- footloose occupiers keen to exploit its exceptional £6.2bn above the 10 year average, with London still most affordable Central London sub-markets with term average despite Brexit insecurities. Pre-lets connectivity, comparatively low total occupational the primary target for domestic and international quality transport infrastructure, multi-million pound accounted for 42% of the total with vacancy rates costs and ever-improving amenity provisions. capital driven by low inflation, weak sterling, low regeneration and strong occupational conditions remaining at 3.9%. Strong occupational fundamentals have seen interest rates and increased credit availability. drawing investors. Global uncertainty and a large scale regeneration and development in Far Eastern investors continued to dominate growing shift towards shorter, more flexible leases Occupying a strategic location between the West Hammersmith with the recent arrival of exceptional foreign investment accounting for c.£9bn of has driven increased appetite and seen yields End and Heathrow Airport, Hammersmith has mixed-use schemes from Aberdeen Asset total investment in 2018. contract for secure, long dated income streams directly benefited from severe supply constraints Management, U&I, AXA, Kier and Investec. which remain extremely scarce
Below we set out details of some recent local leasing transactions. Below we set out details of some recent local investment transactions. AREA RENT WAULT (YEARS DATE ADDRESS FLOORS (SQ FT) TENANT £ PSF DATE PROPERTY TENURE TENANCY TO BREAK) PRICE NIY CV (PSF) House of Q4, 2018 77 Fulham Palace Road, W6 Multiple 46,077 Spaces £54.50 Q4, 2018 14 Tothill Street, SW1 FH 12 £87.0m 3.7% £1,453 Commons Victoria Q4, 2018 202 Hammersmith Grove, W6 FH 9.25 £16.85m 4.42% £1,143 Q4, 2018 Metro Building, 1 Butterwick, W6 9th 5,523 Tarsus Group £56.00 Beckham Ltd Q4, 2018 125 Shaftesbury Avenue, WC2 FH WeWork 20 £226.7m 4.5% £1,502 Q3, 2018 174 Hammersmith Road, W6 6th 3,257 Sail GP £55.00 Cooper & Southwark Building, Q3, 2018 FH CBRE 15 £107.10m 4.4% £1,439 61 Southwark Street, SE1 Q1, 2018 Metro Building, 1 Butterwick, W6 P 3rd 5,800 ASALA Energy £56.00 Q1, 2018 151 Wardour Street, W1 FH WeWork 20 £49.0m 4.00% £1,785 North West House, 119-127 Q1, 2018 12 Hammersmith Grove, W6 Pt 4th 6,479 All Nippon Airways Ltd £55.00 Q1, 2018 FH WeWork 20 £58.5m 4.40% £1,258 Marylebone Road, NW1
*The above information has been provided by 3rd parties and cannot be relied on *The above information has been provided by 3rd parties and cannot be relied on 35
INVESTMENT RATIONALE
−− Extremely rare unbroken income of c.20 years
−− Hammersmith is a growth location currently experiencing exceptional occupier demand
−− Hammersmith has attracted numerous blue-chip occupiers making it West London’s most established sub-market
−− Large scale regeneration and investment into King’s Mall continues to improve the locality and amenity provision
−− Comprehensively refurbished building requiring no capital expenditure
−− Approximately £14.1 million of capital allowances available to a purchaser
−− Attractive yield for secure long dated income
−− Strong cash on cash return opportunities
DEBT ANALYSIS
Indicative debt terms from a variety of lenders suggest a 5 year debt package would be available for up to 60% LTV on an interest only basis at an all-in rate of 2.75% (275 bps) - 3.00% (300 bps) per annum. 37
FURTHER INFORMATION
VAT EPC VAT elected - It is anticipated that One Lyric Square has an EPC the transaction will be conducted rating of B (44). as a Transfer of Going Concern (TOGC)
CAPITAL ALLOWANCES DATAROOM Capital allowances to the sum of Further information is available approximately £14.1 million can be on request made available to a purchaser
LUXCO PROPOSAL The property is held in a ‘Luxco’ Offers in excess of£105,500,000 (One which can be made available Hundred and Five Million Five Hundred by separate negotiation, thus Thousand Pounds), reflecting a net initial yield creating a potential SDLT saving of 4.75% (assuming purchaser’s costs of 6.8%) of c.£5m for a purchaser and a capital value of £1,021 per sq ft.
CONTACT TOBY LARMAN SCOTT LISTER 020 7529 5715 020 7529 5704 [email protected] [email protected]
HARRY COX PETER NG 020 7529 5703 +65 6733 3212 [email protected] [email protected]
Declaration: Michael Elliott for themselves and for the vendors of this property whose agents they are, give notice that: a) the particulars are set out as general outline only for the guidance of intending purchasers and do not constitute, nor constitute part of, an offer or contract; b) all descriptions, dimensions, references to condition and necessary permissions for use and occupation and other details are given in good faith and are believed to be correct, but any intending purchaser should not rely on them as statements or representations of fact but should satisfy themselves by inspection or otherwise as to the correctness of each of them; c) no person in the employment of Michael Elliott has any authority to make or give any representations or warranty whatever in relation to this property. March 2019 www.cube-design.co.uk (Q4264)