FOR SALE High Yielding Single Let Office Investment INVESTMENT OPPORTUNITY Tyne River House The Watermark, Gateshead, NE11 9SZ
FOR SALE
High Yielding Single Let Office Investment
INVESTMENT OPPORTUNITY
Tyne River HouseThe Watermark, Gateshead, NE11 9SZ
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INVESTMENT SUMMARY
• Located on The Watermark Business Park, Gateshead’s premier out of town office location.
• Tyne River House comprises a modern 2,786 sq m (29,999 sq ft) purpose built stand-alone office building with extensive parking provision (1:269 sq ft).
• Excellent transport connections sitting adjacent to the bus and rail interchange and a two minute drive to A1 junction 71, providing rapid access to the wider region.
• Fully let to Teleperformance Limited on a new 10 year FRI lease from 15 November 2016 with approximately 9.76 years remaining (4.76 to break).
• Freehold
• Tenant has committed circa £2.35 million to the building through an extensive refurbishment and fit out, comprising a new VRF heating and cooling system, lighting, suspended ceilings and speedgate turnstiles.
• Annual rent of £423,080 (£14.10 psf).
• We have been instructed to seek offers in excess of £3,610,000 for our clients’ freehold interest. A purchase at this level reflects an attractive NIY of 11.00% and a low capital value of £120 psf assuming purchasers costs of 6.509%.
A66
A68
A688
A690
A684
A689
A689
A696
A181
A68
A68
A171
A69
A167
A19
GATESHEAD
MORPETH
CHESTER-LE-STREET
ALNWICK
ASHINGTON
SOUTH SHIELDS
TYNEMOUTH
SCOTCHCORNER
A1
59
60
61
62
65
58
57
56
MIDDLESBROUGH
DURHAM
DARLINGTON
NewcastleAirport
Port of Seaham
Port of Tyne
Durham Tees Valley Airport
63
A1(M)
SUNDERLAND
HARTLEPOOL
IntuMetrocentre
Team ValleyTrading Estate
A69
A688
A66 A66
A688
Port of Sunderland
Port of Hartlepool
NEWCASTLEUPON TYNE
A1(M)
A1(M)
A19
A19
A19
A19
GATESHEAD
LOCATION
Tyne River House is located on the Watermark Business Park which lies within the Metropolitan Borough of Gateshead. Gateshead has a population of 200,500 people extending to 1,075,000 people in the wider Tyneside conurbation. The town is situated immediately south of Newcastle upon Tyne, 98 miles north of Leeds and 106 miles south of Edinburgh.
The Watermark Business Park is located to the north of Gateshead between the south bank of the River Tyne and the Intu Metrocentre. Tyne River House benefits from excellent transport links to the regional road network as a result of its proximity to Newcastle City centre and the Metrocentre. The A1 Western bypass bounds the Metrocentre to the west, whilst the Blaydon Bridge to the west of The Watermark directly connects Gateshead to Newcastle.
The area of Gateshead is well served by public transport with Newcastle Central, a main station on the East Coast Mainline connecting the city to London in 2 hours and 50 minutes, and Edinburgh in 1 hour 30 minutes. Tyne & Wear benefits from excellent transport connections via its Metro system, which comprises 60 stations throughout Newcastle, Gateshead, Sunderland, North and South Tyneside. The system is the second largest in the UK behind the London Underground. Newcastle International Airport, provides daily scheduled flights to both domestic and international locations.
A1
A1(M)
M6
M1
A69
A19 A66
A1(M)
A1(M) M1
M4
M40 M11
M1
M1
M6
YORK
ABERDEEN
CARLISLE NEWCASTLENEWCASTLE
MANCHESTER
LIVERPOOL SHEFFIELD
BIRMINGHAM
BRISTOL LONDON
EDINBURGH
LEEDS
GLASGOW
GATESHEADGATESHEAD
MIDDLESBROUGH
Tyne River House
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4
DUNSTO
N R
OA
D
H
OLLIN
GSI
DE RD
ST.MICHAEL’S WAY
RIVERSIDE WAY
FRONT ST
DEWEN
TW
ATER R
OAD
LO
NG
RIGG
SCOTSW
OOD VIEW
THE WATERMARK
MA
ND
ALE
WA
Y
MARCONI WAY
MARKET LANE
MARKET LANE
PINETREE WAY
A184
A694
SCOTSWOOD ROAD
WESTGATE ROAD
DE
NT
ON
RO
AD
HEX
HA
M R
D
WELLINGTON ROAD
ASDA
IKEA
MetroRetailPark
MetroPark West
MarriottHotel
ASDA
IKEA
MetroRetailPark
MetroPark West
MarriottHotel
A1 NORTH
A1 SOUTH
River Tyne
Riv
er D
erw
ent
A1114 RIVERSIDE WAY
CLOCK
MIL
L R
OA
D
COLLIERY ROAD
HANDY DRIVE
ELLISON ROAD
IntuMetrocentre
GIB
SID
E W
AY
A1
NEWCASTLECITY CENTRE
(1.3 miles)
A1
A1
A694
IntuMetrocentre
Tyne River House
SITUATION
The property is located on the Watermark Business Park in Gateshead on the south bank of the River Tyne. The Watermark scheme, developed in 2002 by City and Northern, comprises 220,000 sq ft of modern, out of town office accommodation. The park was built in three phases of which the subject property forms the larger footprint buildings. The two other phases comprise smaller, self-contained office buildings at Bankside, Keel Row and Staithes, offering accommodation ranging from 750 sq ft – 4,000 sq ft.
The Watermark is prominently situated close to the Intu Metrocentre, the largest shopping centre in Europe. The centre features over 300 shops, 60 restaurants, an extensive neighbouring retail warehouse offering and IMAX cinema.
Due to the scale of the Metrocentre development, connectivity to the local area is unrivalled and has seen extensive investment in recent years. The A1, which bounds the Metrocentre to the west, has recently undergone an extensive £61 m upgrade, whilst both Bus and Rail services run every 8 – 12 minutes to Newcastle and the wider area.
A1 North
A1 South
Tyne River House
River Tyne
A1
A1
J71
A1114 Riverside Way
A1114 Riverside Way
The Watermark
Team Valley Trading Estate
Unrivaled amenities and transport connections
Bus and Rail interchange
Intu Metrocentre
5
6
Breakout Area
Co
mm
sRo
om
Void
WC's
Cle
ane
rsSt
ore
6 PersonMeeting
Room
WC'sCommsRoom
CommsRoom
6 PersonMeeting
Room
DESCRIPTION
Tyne River House comprises a self-contained purpose built Grade A office building extending to 2,786 sq m (29,999 sq ft) over ground, first and second floors. The building benefits from an impressive specification following a £2.35m refurbishment.
The refurbishment comprised £1.6m of landlord’s Category A works carried out by the tenant in lieu of a rent free period along with £750,000 of Category B works. In addition to the refurbishment, the tenant has committed £340,000 on new furnishings throughout the entire building.
Following the works, the specification of Tyne River House now includes:
- Impressive full height glazed atrium and reception
- New high specification VRF heating and cooling system
- 2 x 8 person passenger lifts
- WCs and shower facilities on each floor
- Suspended ceiling and recessed lighting
- Fully accessible raised floors with 219 additional floor boxes installed
- Frosted Privacy glass
- Flexible L shaped configuration allowing for future subdivision
- Butterfly speed gate turnstile entry systems
- Dedicated training and meeting facilities
- New canteen and amenity space
Externally the building occupies a generous site extending to 1.64 acres with 120 car parking spaces equating to a parking ratio of 1 : 269 sq ft.
Typical Floor Plan
ACCOMMODATION
Floor sq m sq ft
Ground 947.8 10,202
First 929.8 10,009
Second 909.3 9,788
Total 2,786.90 29,999
We understand the property provides the following net internal floor areas:
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TENANCY
TENURE
Tyne River House is let entirely to Teleperformance Limited on a new 10 year lease commencing 15th November 2016, at an annual rent of £423,080, reflecting £14.10 per sq ft. The tenant has an option to determine the lease on 15th November 2021 subject to no less than 90 days prior written notice. The lease is subject to an upward only rent review on the 15th November 2021.
Upon commencement of the lease, the tenant was granted a rent free period of 43 months, in return for a comprehensive refurbishment of the entire building. The tenants works are defined in the Licence to Alter dated 15th November 2016. This rent free is to be ‘topped up’ by the vendor.
The property is held freehold, a copy of the Registered Title and associated Title plans are available upon request.
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The tenant has committed circa £2.35m to the building through a comprehensive refurbishment
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TENANT’S COVENANT
Teleperformance Limited Teleperformance Limited forms part of the global Teleperformance brand established in 1978. Worldwide, the company employs 190,000 people across 65 countries from 311 sites. In the UK, Teleperformance employs 8,000 people from 11 offices. They are the international frontrunner in outsourced omnichannel client liaison management, providing a wide range of business solutions for clients in multiple industries including retail, telecommunications, utilities and healthcare. Services provided encompass customer care, customer acquisition, social media, technical support, accounts receivable and back office.
From Tyne River House, Teleperformance operate the UK customer contact center for a leading global technology company.
31/12/2015 31/12/2014 31/12/2013
Turnover £181,183,000 £174,523,000 £154,962,000
Pre Tax Profit £8,742,000 £9,301,000 £7,350,000
Shareholder’s Fund £43,555,000 £35,549,000 £28,396,000
OCCUPATIONAL MARKET
Supply and Availability
The North East region provides a diverse range of accommodation ranging in size and quality to appeal to numerous occupiers, attracted by the relatively low occupational costs, accessibility of skilled workforce and high quality working environment. While Newcastle city centre comprises the principal in town office accommodation in the region, the out of town office market is made up of a handful of business parks throughout Tyne & Wear which continue to satisfy the demand further bolstered by severely constrained city centre supply.
Due to the high demand for accommodation, the shortage of supply historically noted in Newcastle city centre has moved outward, with prime locations such as Cobalt Business Park now at 78% capacity (1,194,328 sq ft occupied) with only 337,148 sq ft remaining.
Despite the widespread shortage of supply in the North East out of town market, there are no speculative developments anticipated to be on site within the next 12 – 24 months, increasing the demand for refurbished grade A accommodation.
Take Up
Take up is dominated by the out of town sector which has accounted for circa 75% of take up since 2010. Despite a fall in total sq ft take up numbers throughout 2016, there was a notable rise in the volume of transactions completed during the same period. This demonstrates the depth and varied nature of demand despite market uncertainty surrounding the European Referendum, whilst also reflecting the general shortage in supply of accommodation suited to larger requirements.
Rents
Whilst headline rents in Newcastle city centre are expected to step up to £25.00 psf in 2017, the out of town office market remains at a significant discount. Rental levels now range from £10 per sq ft for secondary buildings up to £16.50 per sq ft for prime space, depending on quality, specification and location.
2013 2014 2015 2016
800,000
600,000
400,000
200,000
0
140
105
70
35
0
Sq ft Transactions
Nu
mb
er
of
Tra
nsa
cti
on
s
Off
ice
Sp
ace
Take
-up
(S
q f
t)
Out of town office take upOverall sq ft transacted v Number of deals
11
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INVESTMENT MARKET
The out of town investment sector has increased in popularity in recent years as investors have been attracted by comparatively high yields on offer than would be achieved in other regional locations and the South East. We set out below a schedule of recent comparable transactions in the North East;
Address Tenant Date Price Yield Comments
Onyx House, Portrack Interchange Business Park, Stockton on Tees
Onyx Group May 16 £1.3M 10.60%Fully let to Onyx Group from 2009 on a 10 year lease.
Royal Mail, Doxford, Sunderland
Royal Mail Jan 16 £4.15M 8.88%
10 years expiring 2022 with break at year 5. (22 months term certain at point of sale). Passing rent of £390,000 per annum.
Ashmore and Progress House, Teesdale Business Park, Stockton on Tees
Siemens Plc & Johnson Matthey Plc
Oct 15 £3.25M 10.70%
Two modern pavilions offices let to Siemens Plc and Johnson Matthey Plc. WAULT of 6.4 years to expiry.
Teesdale House, Teesdale Business Park Stockton on Tees
NHS June 15 £1.55M 9.27%10 year lease with break at 5. 3 years term certain at point of sale.
Q16 Quorum Business Park, Newcastle upon Tyne
Fabricom Offshore Services
LimitedNov 14 £5M 9.40%
10 year lease expiring December 2021. Tenant only break option in 2019 subject to 6 months notice.
Service ChargeThere is an estate service charge payable for the upkeep of the estate which is proportioned on a floor area basis and is fully recoverable under the lease. Further information is available on request.
VATThe property has been elected for VAT and therefore it is anticipated the sale will be treated as a transfer of a going concern (TOCG).
EPCThe property has an Energy Performance Rating of D(79). Copies of both certificate and recommendation report are available upon request.
PURCHASE RATIONALE
We have been instructed to seek offers in excess of Three Million, Six Hundred and Ten Thousand Pounds (£3,610,000) subject to contract and exclusive of VAT. A purchase at this level would reflect a net initial yield of 11% and low capital value of £120 per sq ft assuming purchaser’s costs of 6.509%.
PROPOSAL
- Fully refurbished building with minimal capital expenditure required moving forward.
- Embedded tenant who have invested heavily in the building. This is Teleperformance Limited’s second consecutive lease, having been a tenant in the building since 2002 under previous names.
- Asset management opportunities through removal of the tenant’s break clause, or lease regear.
- The property comprises one of only two buildings occupied by Teleperformance in the North East, of which Tyne River House offers better accessibility, a considerably superior car parking ratio and a lower occupational cost psf.
- Highly restricted development pipeline and huge shortage of large floorplate accommodation south of the River Tyne.
- Attractive income return and a low capital value psf reflecting a substantial discount to build cost.
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On the instruction of Rob Croxen acting as Fixed Charge Receiver
Peter AtkinsonTel: 0191 223 5715Email: [email protected]
Katy PaxtonTel: 0191 223 5752Email: [email protected]
Richard WadhamTel: 020 7152 5923Email: [email protected]
CONTACT
DTZ Debenham Tie Leung Limited (the “Agents”) give notice to anyone who may read these particulars as follows:
(1) These particulars are prepared for the guidance only of prospective purchasers. They are intended to give a fair overall description of the property only and do not constitute any part of an offer or contract. (2) Any information contained in these particulars (whether in the text, plans or photographs) is given in good faith but should not be relied upon as being a statement or representation of fact or that the property is in good condition or otherwise nor that any services or facilities are in good working order. (3) The photographs appearing in these particulars show only certain parts and aspects of the property at the time when the photographs were taken. Certain aspects may have changed since the photographs were taken and it should not be assumed that the property remains precisely as displayed in the photographs. Furthermore no assumptions should be made in respect of parts of the property which are not shown in the photographs. Any areas, measurements or distances referred to herein are approximate only. (4) Where there is reference in these particulars to the fact that alterations have been carried out or that a particular use is made of any part of the property this is not intended to be a statement that any necessary planning, building regulations or other consents have been obtained and these matters must be verified by any intending purchaser. (5) No person in the employment of the Agents has any authority to make or give any representation or warranty whatsoever in relation to this property. (6) This property is offered subject to contract and unless otherwise stated all rents are quoted exclusive of VAT. (7) Unless otherwise stated, no investigations have been made by or on behalf of the Agents regarding pollution, or potential land, air or water contamination. Interested parties are advised to carry out their own investigations as required. March 2017
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