By Jesal Patel, Director of Acquisitions & Development. Published in the Estates Gazette on 29th November 2014. To see a copy of the original article click here or to read the full magazine which is free to all this week, click here and go to page 52.
It’s 7pm on a mild weeknight in mid-November, and in a north-west London restaurant which would otherwise be half empty, it’s standing room only as 150 medical professionals from as far as Bournemouth and Birmingham have assembled to hear what The Prideview Group have to say about commercial property investment.
Word of mouth must travel fast because most of these faces are new to us. And it’s no coincidence that they like what they hear because retail commercial property sits very well with them – they come from the High Street and know it better than many of us profess to, their finance-backed budgets comfortably meet the average lot range of £500k - £1.5M and with NHS cutbacks aplenty, scope to expand their own businesses is limited. For the secure, management-unintensive income provided by blue-chip, FR&I leases above 10 years (an increasingly rare commodity), these investors are content with the current yields of around 6%.
This requirement is shared by many of the other private investors whom we represent when buying privately or in auction. But with the spectre of the recession still looming large, we also need the rents to have been re-based or have minimum uplifts and a ‘plan B’ upon lease expiry – either re-letting should be straightforward (helped by any residential uppers) or there is conversion or development potential. Locations across Southern England seem good value now that London has become so expensive. And the tenants should come from businesses our clients understand – the convenience store growth story is something they are witnessing first-hand, and we are well known in the market as extremely active buyers of this type of asset.
Key to this is our agent network. It matters that the private agents find us easy to work with – we pride ourselves on fast decision-making, deliverability and taking commercial decisions when any issues arise. The top auction houses certainly value our role; we scour their catalogues for deals matching our clients’ requirements, and by performing due diligence, obtaining pre-approved finance and then bidding on their behalf, we bring a regular flow of investors into the room who wouldn’t dare walk through those revolving doors otherwise!
Once we exchange, we will assist our buyers with finance, management and insurance (hats off to Bircroft Insurance Services), and when the time is right those properties will be up for sale on our website or perhaps in auction. To bring it all together we have had the heads of Acuitus and Barnett Ross presenting at our recent seminars, and would love to continue to introduce more characters from the industry to our buyers.
It takes one to know one they say, and our relationship with our buyers is cemented by the fact that we talk from experience - we started building our own commercial property portfolio in 1985 so we know what legal hurdles can be overcome and what properties are financeable, especially within short auction timeframes.
Our own strategy involves calculated risks rather than sleep-tight security; a few years ago it was about taking advantage of the gloom, for example we bought a portfolio of Enterprise Inns in Central London which today are for sale at around 5% yield. Currently we are looking for properties with development potential in the Greater London area – this year we have got planning to build approx. 60 flats in Elephant & Castle, Burnt Oak, Stanmore and Ruislip. Many of these acquisitions were in auction – our most recent being at Allsop’s October sale where we acquired a tenanted office in Croydon with huge potential if vacated. Inevitably our clients want a piece of this and we have taken on many of them as silent partners.
A new property cycle seems to have dawned and the mood in the auction room certainly supports this. The possibilities could be endless, as also the risks. We have our eyes on higher value deals and are already talking to some of our larger clients about putting together consortium funds, so do keep email@example.com on your mailing lists whatever it is you might be selling or call me on 0208 863 8680 for a chat. Better still we’ll be at Mipim 2015 so why not schedule in some meet and drink in Cannes..?!