P&S Shop Stop Flashcards
What was your clients objectives?
Acquire a prime shopping centre in London
Targeting roughly 5% equivalent yield
What was the process?
We were advising what a reasonable amount for the client to bid was, bearing in mind their return aspirations
Looked at comps
Established what rent they could get based on the current income
Targetting 5% equivalent yield
- Advised on occupational elements making up a potential bid
- Collaborated with the joint agent to appraise the investment
- Particulars were in the market with a guide price
How do you establish equivalent yield?
Based on comparable evidence in the market
Why did the client want to target regeari g?
By increasing the WAULT from 5 to 10 years this would improve the investment value.
Undertook market research. Spoke to landlords tenants and lease renewal surveys to establish market rent and market incentives
I then modelled the value of the cost of the overly generous incentive vs higher investment value
How would regearing improve the investment value
DD of shopping centre transactions from across the country
Looked at yield profile and considered location and specification and WAULT
Properties with longer WAULT have much lower yield
I then improved my yield as a result
Why would the tenant agree to a regear?
Extremely generous lease incentives
12 months rent free
Did you factor in voids?
No
What went in to your clients offer letter?
x
When HoTs were agreed, what happened on the day of exchage?
Solicitors confirm with each other they hold all the legal documents required for the transaction to complete.
When they ‘exchange’ contracts (usually over the telephone) the transaction becomes legally binding
What are the rules around dual agency?
Where an agent has a contractual relationship with both the seller and buyer at the same time.
As of Jan 2018 this should not happen
How do you calculate WAULT?
All contracted rent until break / Contracted annual Rent
OR
Compute the percentage of rent each tenant accounts for: A = 51.02%, B=36.73% and C=12.24%. Then multiple the percentages by lease term and sum together: A (2.55 years) + B(1.10 years) + C (0.86 years) = 4.51 years.
What other asset management opportunities might there have been?
- Regear leases
- Split some units
- Redevelopment of north-west corner
Did retail CVA’s influence your advice?
Nature of asset in a train station and levels of footfall meant that this was a safe investment.
However
A CVA is a consensual agreement between a company and its creditors. The aim of a CVA is to offer some or all creditors a compromise which allows the company to avoid administration or liquidation and, in doing so, producing a better outcome for all creditors
Explain the process of a regear?
- Completion of a Deed of Variation or a surrender of the existing lease
- Re-grant of a new one
- The tenant will be liable to pay Stamp Duty Land Tax on the re-granted lease which will be dependent on the rent paid and the length of lease taken.
As both parties are being released from their obligations under the existing lease, any particular clauses in the lease that are important to either party should be transferred into the new lease.
