Property Review

Richard Starr
Executive Director

This year we have continued to build our property portfolio through five acquisitions totalling £66.0 million. At the same time we have sold some of our smaller holdings above book value. We now have a property portfolio valued at £174.5 million which is a meteoric rise since the significant purchase in October 2013 of the Signal portfolio.


• 54 properties comprising 1.85 million sq ft of space.

• Over 140 tenants providing a contractual rent roll of £13.5 million per annum at 31 March 2016 (2015: £8.9 million).

• 34 new lettings and lease renewals completed during the year representing 10% of the total floor area.

• Diversity of sectors within the portfolio including offices, industrial and retail, which is complemented by our new acquisitions in the leisure sector.

• WAULT increased to 6.3 years (2015: 4.5 years) - a reflection of our active asset management initiatives.


These are referred to in the Chief Executive’s Review and are set out in more detail below.

Bank House, Leeds

In April 2015 we completed the purchase of Bank House, Leeds for £10 million reflecting a net initial yield of 8.6%. A Grade II listed city centre office property, built in 1970, comprising 88,000 sq. ft. around a large central atrium. The property is home to The Bank of England, who have occupied it since it was built, as well as Walker Morris who are the largest independent firm of solicitors in Leeds.

Since the purchase we have extended the Bank of England lease until July 2023 with a minimum increase in the annual rent from £115,000 per annum to £232,000 per annum at the March 2020 rent review. The first floor, as anticipated, became vacant recently and we are in the process of starting a refurbishment programme following the settlement of dilapidations. When completed, this will provide a single floor plate of 17,000 sq. ft. which will be one of the largest second-hand office floors available.

We will be seeking to attract occupiers looking for a discount to the prime rents.

Sol Central, Northampton

In May 2015, we acquired the holding company of a prominent city centre leisure scheme, Sol Central in Northampton for £20.7m reflecting a net initial yield of 8.86%. Comprising a 10 screen cinema, casino, 151 room hotel, gym and 375 space car park, this 200,000 sq ft development has not been trading at its optimum level for a number of years. Significantly, the scheme lacks restaurants.

We intend to transform the scheme to create a dominant city centre offering to take advantage of the number of Council led initiatives within the city centre. A specialist architect and technical team have been instructed to ensure our vision can be achieved. To facilitate this we have taken a surrender of the lease to Gala Casino, who vacated in 2011 in return for £4 million to account for loss of rent, dilapidations  and a rates rebate in August 2015.


46-54 High Street, Sutton

In August 2015, we completed the purchase of 46 – 54 High Street Sutton for £3.95 million reflecting a net initial yield of 8%. Comprising three retail units and 15,000 sq ft of offices, the building is held on a lease with 120 years unexpired from The London Borough of Sutton, with ground rent of 12.5% of rents receivable.  Located moments from the railway station, the offices are let to Sutton Housing Partnership at £13.50 per sq. ft. which we consider modest  and offers excellent rental growth potential in December 2017 when the next rent review is due.  One of the retail units was recently let to Foxtons on a new 15 year lease.

Since the start of 2016 we have acquired two further investments, taken advantage of the new £30million Revolving Credit Facility with NatWest Bank and the capital created from our historic ownership.

249 Midsummer Boulevard, Milton Keynes

In February we completed the purchase of 249 Midsummer Boulevard, Milton Keynes for £7.225m reflecting a net initial yield of 7.25%. The property comprises 49,000 sq. ft. and is multi let to seven tenants including DHL & Crawford’s. The majority of tenants are paying an average of £12 per sq. ft. which is a discount to a recently let suite at £13.50 per sq. ft. Milton Keynes is one of the fastest growing towns in the UK and so we consider there is excellent potential for these rents to continue to rise in line with those being currently achieved. The building is situated on a large site and has the potential for significant development in the medium term.

Broad Street Plaza, Halifax

Our final purchase of the financial year was completed in March. A significant leisure scheme known as Broad Street Plaza, Halifax was acquired for £24.18m providing a net initial yield of 7.25%. Significantly 40% of the leases benefit from minimum uplifts which will increase this yield to over 8% by August 2017. The scheme provides an excellent WAULT of 14 years to break. Whilst the scheme is trading well, we consider that this could be improved and we are undertaking various marketing initiatives to ensure the scheme reaches its full potential.

We set out below the highlights of our existing holdings:


This was the initial portfolio acquired in 2011. Comprising nine individual properties, the portfolio remains fundamentally unchanged during the year although we have renewed two leases.


The significant portfolio purchase in October 2013 has performed exceptionally well. We regularly visit the properties and meet our tenants which gives us immediate knowledge of occupational requirements so that we can ensure maximum occupation where possible.

In 2013 the Government introduced Legislation known as Permitted Development Rights PDR which grants permission in certain circumstances to allow the conversion of office space to residential use. We have taken advantage of this in Dartford and York. There is continual demand for residential properties in good locations which is being supported by institutional investors who now consider the private rented sector a sustainable investment. It is our opinion that there is long-term rental growth in this sector and will be looking to retain these units.

Hudson House, York

We have worked with our technical team to take this property into its next phase. The property comprises a 1960’s 103,000 sq. ft. office building directly opposite York Railway Station. Transport links are excellent with a direct fast service to London and Edinburgh.

In September 2014 an application was made to convert the property into 82 residential units as well as create 37,000 sq. ft. of grade A office.  A resolution to grant consent was approved in April 2016, subject to a section 106 agreement, as stated in our Portfolio Update in May 2016. An alternative consent had also been granted to convert the building into 139 residential units through PDR in February of this year. We are currently evaluating all our options to maximise value and will update our shareholders in due course.

Copperfields, Dartford

This is a mixed-use retail and office property in a commuter town, South East of London. Situated directly opposite the Priory Shopping Centre and within walking distance of the train station, the scheme provides nine retail units below vacant offices. PDR was granted for the conversion of the offices to 14 residential units in October 2015. The conversion is due to complete in August 2016 and our intention is to rent them. Once completed we will have transformed a tertiary shopping scheme into a vibrant mixed use investment. 

Point Four Industrial Estate, Avonmouth

This 10 unit scheme is fully let to seven different tenants. Significantly we have completed the letting of a vacant unit to an existing tenant, who also extended their current leases so they are all co-terminus after 10 years. Refurbishment works were carried out to ensure the unit was let in an improved condition.  In addition, minimum uplifts at the rent review in year 5 were agreed based on 2% per annum compound. We have negotiated to remove break clauses and settled rent reviews on other units at marginally higher than the passing rents.

Cater Road, Bristol

Following extensive negotiations, the lease with Computershare was surrendered and a new lease for 15 years to Wincanton Holdings Ltd was completed. The tenant has an option to determine after 10 years whilst the rent is subject to a minimum increase at rent review after five years, based on a minimum of 2.5% per annum compound.

Marsh Barton Trading Estate, Exeter

Following the year end the tenant company appointed Administrators. The Administrator is seeking to grant a licence to a newly formed company for 12 months, providing continuity of income.  We are undertaking a strategic review to assess the long-term prospects for this well positioned site, as there is potential for a significant redevelopment.

Kiln Farm, Milton Keynes

The tenant at unit 2 has exercised their option to determine the lease from March 2016. We are progressing the dilapidation negotiations on this 14,500 sq ft office building and will evaluate all the options before deciding the best way forward.

Allen House, Stockport

Following the surrender of the lease in September 2015, we have been seeking to sell this 68,000 sq ft property. Demand has been limited but there are reasonably regular inspections so we are hopeful for an early sale.

Victoria Road, Stoke On Trent

The lease expired in September 2015 and a schedule of dilapidations with the outgoing tenant was settled at £250,000. We are seeking a buyer for this 45,000 sq ft building as the costs of refurbishment are not in the best interests of the Company.

Argent Court, Tolworth

This property has performed extremely well. Having purchased the property for £750,000 in October 2013, separate parts were sold in November and December 2013 for £1,070,000. We are now proposing to sell the remainder due to imminent lease expiries and strong demand from owner-occupiers.


Ovest House, Brighton

This is excellently located, equidistant between the Railway Station and the sea, within the city centre. We have undertaken a refurbishment of the 4th floor and reception area following a successful dilapidations settlement with the previous tenant. This attracted Quarto Publishing Plc to the property who have agreed to occupy all the offices being let at a 40% increase in rent. We have negotiated surrenders of the other leases to facilitate this and the remaining floors a similar specification.

Clayton Industrial Estate, Burgess Hill

We completed the letting to Polar Audio following a minor refurbishment using the dilapidation settlement from the former tenant. A new lease for 10 years incorporating an option to determine at year 5 was completed in August 2015. The tenant has an option to purchase at £1,450,000 no later than 28 July 2016.

Albert Road North, Reigate

We have sold No. 54 in April 2015 for £445,000 and Unit F at No. 61 in January 2016 for £310,000, both of which were in excess of book value.


There have been changes in legislation which affect the portfolio and we highlight these below:


As of April 2018, it will be unlawful for commercial and residential landlords of properties with an Energy Performance Certificate (EPC) rating of less than “E” to grant new leases or renew tenant leases (except for some exemptions). Landlords will need to carry out works to improve the energy performance of their buildings to a rating of “E” or above or face civil penalties.

We have instructed a specialist to undertake a full review of our holdings to ensure that none of our holdings are affected.


In March 2016, the Chancellor of the Exchequer introduced reforms to Stamp Duty Land Tax on commercial property which increased the top rate payable from 4% to 5% above £250,000. This has been factored into the latest independent valuations carried out as at 31 March 2016. Despite this impact, our portfolio valuations have continued to grow  over the year.


We remain committed to our active brand of asset management and are confident there are still plenty of opportunities for us to continue to grow the income to support our progressive dividend policy, whilst we grow capital value through our expenditure and refurbishment programmes.