Summary of Experience Flashcards
What are the headline details of your mixed use city centre office development?
(Valuation)
Value: between £4m and £5m (commercially sensitive)
No. Tenants: 3
No. Voids: 3
WAULT: 5.51
Office Area: 27,500 sq ft
Retail Area: 15,000 sq ft
Income: c. £300k gross passing rent (commercially sensitive)
What yields did you apply on the mixed use city centre office scheme and why?
(Valuation)
Let offices (3+ years): 12.50%
Let offices (3- years): 13% (reflect the added risk of holding costs)
Vacant Offices: 15%
Vacant Retail: 15%
NIY = 9%
Reversionary = 15.70%
Blended Equivalent Yield = 14%
What method of valuation did you use during the mixed use city centre scheme?
(Valuation)
Hardcore & Layer technique of the Investment method.
- Used for under rented properties
- Institutional investment market
- Income flow divided horizontally
- Both the hardcore (passing rent) and layer (market rent & passing rent) are valued in perpetuity. However, layer is deferred until the next lease event.
- Equivalent yield is applied to both the hardcore and layer
What voids did you apply on the mixed use city centre scheme?
(Valuation)
Offices - 18 months
Retail - 18-24 months
What was the best comparable for your mixed use city centre development scheme?
Valuation
Office:
Johnstone House, Rose Street, Aberdeen
- Sold for £5 million in April 2023
- 52,000 sq ft
- Multi let with a number of voids
- 16.43% NIY
- Secondary location
- WAULT of 4.1 years
- ERV of £18.00 per sq ft
Retail:
171 - 177 Union Street, Aberdeen
Sold for £850,000
Let to national occupiers (Santander / Paddy Power / Geek Retreat)
13.33 % NIY
What are the headline details of your brownfield site in Altens?
(Valuation)
Site Area: 8 acres (3.24 hectares)
Planning: No planning consent but zoned for economic development for use class 4/5/6 only
Previous use: Office building which was demolished in 2020
Flood Risk: No flood risk according to SEPA flood map
What were the rates you applied on the Brownfield site at altens?
(Valuation)
- Blended rate of £275,000 per acre
- Premium rate applied on the front of the site at £300,000
- £250,000 applied on the rear of the site
- Value of £2 million (after disposal 1.5% and prospective receipts of 7.50%)
What was your best comparable for the site?
(Brownfield Site Valuation)
A portion of the site had recently sold in December 2023 to a national car dealer at a rate of £275,000 (£1.62 million)
Total area of 5.9 acres (net) 6.7 (gross)
Talk me through the advice you provided the client on the industrial unit split in Dyce?
(SREC)
The unit, which had previously acted as a HQ facility for an energy firm had recently been acquired by my client through an arms length transaction.
I advised my client that currently there was a high demand and low supply of 10,000 sq ft industrial units in Aberdeen. Specifically the Dyce area. However, the current office provisions were far greater than what the market demands. As this had been a specialist HQ facility it was build purposely for the previous occupier ad was not initially built with the intention to re-let.
I initially discussed the potential for demolition of the offices with my project management and building consultancy colleagues who indicated an estimate would be in the region of £75 per square meter (c.£75,000), however, as the property had not yet been tested on the open market, I recommended to the client to avoid investing this capital expenditure initially until an initial marketing period had been undertaken.
As such, I advised my client that the fastest route to disposal would be marketing the asset with two clear options, thus avoiding the need for demolition. The first option was was to market in its current layout. This would allow for a possibility to let the asset in whole if there was an occupier who had a 50/50 office to workshop ratio.
The second option was to Market the unit with a reduced office provision of circa 20% (1,900 sq ft), which sat in line with current market demands. This would highlight flexibility to occupiers, and allow for discussions to progress. If an occupier was secured for the later option, the remaining offices would be marketed at a competitive rate of £12.00 per square foot which would equate to a rent of £96,000 per annum
A common corridor would have been created in the event of splitting the accommodation for shared WC facilities and utility cupboard.
Can you talk me through your mixed use property portfolio and what advice you gave to the client?
(SREC)
The client, who is originally from Aberdeen, but now lives in the central belt expressed their desire to exit their properties where possible and guarantee income across their portfolio as their desire is to re-invest their money in the Central Belt and St Andrews as they see it as a safer market.
Their portfolio consists a mix of secondary and tertiary retail units and secondary, traditional offices. A number of the retail units were occupied with very few voids and the same went for the office buildings.
I advised the client that in the current market, there is little to no demand for cellular, traditional office buildings at the current specification of their assets, and even with investing capital expenditure the ERV’s would not increase significantly. (talk about vacancy rates in offices of Grade A (200,000 sq ft compared to 2m of this asset class).
However, the Aberdeen market is witnessing an increase of opportunistic property developers acquiring offices with the intention to convert to residential. I advised the client, that the most efficient route to disposal would be through a sale of Heritable Interest and marketing the property as having re-development potential. I advised the client it would be useful to instruct an architect to create a potential split for how the assets could converted to residential, this would improve the marketing experience when viewing the property and speaking to potential purchasers.
What are the headline details of your Retail unit on Union Terrace?
(SREC)
1,000 sq ft unit
Passing rent of £11,000
ERV of £12,000
Requested rent free from new tenant 1 month
Likely rent free was 6 months (if represented this would likely increase)
Liekly Void period of 8 months (£7,333 equivalent)
Current tenant had requested a 5 year lease extension with no breaks
likely lease term would be a 5 with a break at 3
Total net income on current lease: £54,000
Likely income for new tenant: £54,000 (if rent free was accurate pay off) accounting for the void period £46,667
Can you talk me through your West End office Refurbishment recommendations?
(SREC)
Two early 2000’s builds of steel frame construction. Both c. 20,000 sq ft.
- Advised new lighting, M&E systems, EV charging points and washroom facilities
- Advised the introduction of “Plug & Play” suites which sat in line with current occupier demand
- Show suite was created and well received by the market. Once the show suite had let the following suite was then fitted out, and so on.
Currently there is one remaining suite across the two buildings at rents of £30.00 per sq ft (net effective £26.00) compared to West End headline rents of £24.00 within traditional buildings without plug and play.
Can you talk me through your office acquisition in the West End of Aberdeen?
Upon undertaking the required COI and AML checks, I arranged an initial meeting with the client over a teams call.
They were currently based in a traditional West End office building in Aberdeen which was now far larger than they required. As such, their main objectives were to downsize, save money, whilst allowing for flexibility and stay within the same location to avoid staff disruption.
Through this discussion, I advised the most suitable options for them would be in the form of Serviced office accommodation which would provide them with a high degree of flexibility (license vs lease).
After confirming the parameters of the requirement, I issued a requirement circular to the serviced office operator’s within Aberdeen, requesting the relevant information. Upon receipt of the information I complied a “Schedule of Options Report” which i presented and discussed with the client over Teams. Once a shortlist of preferred options had been confirmed, I arranged to view each Centre with the client and a number of their staff. After viewings, there was a clear option which worked for both the client and their employees, so i requested a proposal from the Serviced office provider.
Upon initial receipt of the proposal, the key notes were as rent of £25,000 per annum (£175 per desk) and a deposit of £6,000 (4 months rent).
I advised the client to negotiate on both points and negotiate a TBO on expiry of the 12th month to add increased flexibility. By the end of negotiations, I achieved a rental of £20,000 per annum (c. £140 per desk), a deposit of £3,160 (2 months) and a break option upon expiry of the 1st year.
I have since spoken with the client, and they have confirmed they are enjoying their new environment.
Can you talk me through out Letting of the retail unit on Union Terrace?
(leasing and Letting)
43 Union Terrace
5 year lease with a TBO on year 2
3 months rental deposit (which was pushed back on)
Break notice period of 6 months to account for a suitable marketing void
break penalty equivalent to 3 months to cover the rent free period
Can you talk me through your letting of the retail unit on Union Street?
127 Union Street
1,300 sq ft (735 ITZA)
£30,000 per annum (£40.81 per sq ft ITZA)
5 year lease with annual mutual break options
Start up company, so first 6 months rent was paid in advance
