The below interview with Director, Jesal Patel was published in the Summer Edition of The Estates Gazette's Property Auction Buyers' Guide and is about what and where one should invest in at varying budgets. He runs through a number of deals done in the first half of 2017. To view the original article, click here. To get a copy of the magazine, please follow the instructions at the bottom of this article.
This budget is really the entry level for commercial property investment, and you have to look nationwide if it’s a solid covenant you want. Examples of investments we have helped private buyers acquire (with finance) in 2017 include a small town-centre McColl’s on an unbroken 16 year lease in Lincolnshire (ca. 6.5%), a Pizza Hut franchisee in a new housing development near Gloucester with 8 years remaining (ca. 7%) and a new Costa Coffee franchisee on Devon high street with a 10 year lease (ca. 6.5%).
With a slightly higher budget one can begin to home in on Greater London. Two nice buys in auction this year include a high street Card Factory on a 10 year lease in Pinner, north-west London for £590,000 (5.9%) and a Banana Moon Nursery franchisee within a residential building in Greenwich, south-east London on a 9 year lease for £520,000 (7.2%). Looking further afield, we sold a Spar on a 10 year lease in a small village in north-east England in Allsop’s February auction for a solid £377,500 (6.6%).
Blue-chip, lock-up investments with min. 10 year leases or whole buildings with mixed use or asset management potential would fit this bill. We just acquired an off-market, lock-up unit in a new Southampton residential development let to Tesco Express for 10 years for a first-time buyer for just over £1m (nearly 7%!). A more interesting buy was a Co-op Food near Birmingham let for 10 years but already vacated by Co-op. We acquired this for a yield hungry buyer for under £1m and ca. 10%; on expiry he will collect a good dilapidations cheque and then review his options. Finally we sold a mixed use asset in Harrow, north-west London, in the Barnett Ross February auction for £705,000 (4.8%). The property comprised 4 shops let to independents with a flat above and potential for another flat. The competitive bidding for it demonstrates the appetite for mixed properties where the residential buy-to-let tax changes do not apply.
At this level, you aren’t really competing with either former buy-to-let investors or institutions, so this is a key focus area for Prideview. What we want are solid, clean investments not priced at crazy yields or properties with some short or medium-term development or value-add potential. In January we acquired a Caffe Nero & Wenzels in Rickmansworth High Street, north-west London, both with 10 years remaining on the lease, for ca. £1.5M (ca. 6%). We also have a nice pub on a large plot in Ipswich let to Spirit Pubs for 7 more years currently available for around £1.5M (ca. 7%). Speaking of pubs, we recently acquired a vacant pub in Muswell Hill, north London, for under £2m which can be re-let, changed use or redeveloped – watch this space!
Unbroken parades, offices with development potential or institutional grade investments are all possible if you possess these riches! We recently acquired a Wilko in the Barrow-in-Furness town centre, north-west England in Acuitus’s March auction. It’s a substantial purpose-built, 35,000 sq.ft. building let for 13 years, good value for a ca. £3m lot size and 8% yield. An investment with medium term value-add potential is a Petrol Station in the West Midlands, which we acquired for ca. £3.5M (ca. 6.5%) with 12 years remaining to a major Petrol Station operator. The property includes a large swathe of disused land which could be redeveloped in future. Finally we recently acquired a vacant office building with planning for residential conversion in Harrow, north-west London, for a developer who will immediately begin a luxury scheme there.
To get your FREE copy of the Estates Gazette Property Auction Buyers' Guide, worth £5.99, please email Nilesh for an online download or come in to our office to pick up a hard copy. The 70 page Summer '17 issue is for Private Investors aiming to grow their wealth through auctions. Hear from experts as they share their top tips to boost your income, including self-taught property developer Sarah Beeny on how she got started and whether you should join the new army of investors switching from residential to commercial property. To view this article as published, click here.