A Few of Our Current Projects

Over the past three years, Craigard has successfully used Druce’s Trust For Sale Syndication structure to make selective, opportunist property acquisitions, using High Net Worth investor cash with bank debt (when available). Co-investment to date has come solely through recommendation and word of mouth. All of this achieved coming out of one of the toughest financial climates in recent times.

Here is an outline of a few current projects which illustrate our mode of operation and the style of project we undertake.

Bordage House - Purchased October 2017

Bordage House, Guernsey

The building comprises 12,207 sq ft of good quality office accommodation with a small boutique retail unit on the ground floor. The price paid was £3.7million, representing a 7.5% initial yield.

The property has been acquired under the Craigard Select model and is multi-let to four tenants including ABN Amro Bank, all on long leases. The weighted average unexpired lease term is over nine years – a very attractive off er given that there are also three-yearly RPI rent reviews.

The building was completely rebuilt behind the original façade in the late 1990’s and the various tenants have invested further money in the last year or two undertaking various improvements and refurbishments.

The quality of the tenants and the long leases combined with the quality of the building represented a very solid offer. The pricing is also very favourable compared to a similar building in say Southampton where the investment yield would be probably around 6% - about 25% more expensive in value terms. All round a good investment for the medium term.

Since purchase, we have added £30,000 or so to the income stream by securing a one year letting of the small ground floor suite. This will be refurbished when the space is vacant again next year.

Watts & Co acted for the seller.

Sherwood Park - Purchased April 2016

This investment comprises two, two-storey detached office buildings constructed on the 1990’s of steel frame construction with pitched roofs comprising 52,161 sq ft.

Fountain House is a single let to the Highways Agency for 10 years, with a break after five years, the tenant took occupation prior to its purchase as were undertaking complete refurbishment of the building.

Waterfront House was multi-let to three tenants, E-on and The Secretary of State have since vacated, dilapidations claims have been successfully instigated as a result of which the suites have been refurbished. There is good interest in the vacant space which is now “Best on the Park”.

The purchase price was £5,050,000. The property was purchased on behalf of a syndicate of investors at a net initial yield of circa 10% with a capital value of £100 per sq ft. Debt was secured with Santander.

The buildings are located on Sherwood Park, a prime out of town office park for Nottingham comprising 600,000 sq ft of office accommodation, providing excellent road links.

The business plan is slightly different to the normal “value add” Craigard syndicates – seen as a longer term “cash cow” due to the limited growth expectations for the asset but a multi-let nature giving a 10% per annum return.

Eskan Court, Milton Keynes. Purchased January 2014 - Refinanced Summer 2017

Eskan Court

Eskan Court is a multi-let office building.

The total rent receivable is £360,237 per annum against a purchase price of £3.025million representing a current yield of just over 12%. Capital cost per sq ft on the 24,762 sq ft building amounted to just under £130.00 per sq ft.

Debt was secured from Santander, with just over £1.5million of equity raised.

The original pricing discount reflected the short-term leases at the property with about 40% of the space having a lease expiry in 2015. Conversations were concluded with tenants Isotrak, and a five year lease renewal secured. Negotiations took place with tenants Konica Minolta to remove its break clause therefore extending its term to 2022. The former Paribas Law suite was let to Alliance Automotive Ltd for a term of ten years with a break after five years, increasing the building’s rental level.

On conclusion of lease negotiations, the reinforced income stream plus positive yield shift in the market gave rise to a value uplift of circa 25% to £4.2million over 18 months.

After careful analysis, investors decided to hold the property for a further five to six years, because it is known that the supply side in the Milton Keynes office market is thinning rapidly so rental growth prospects are good. The refi nance has allowed investors to release part of their original equity whilst still retaining an 8% distribution on the remaining stakes.

Rental growth is now coming through with £16 psf secured.

Prism - Purchased September 2016

Prism

Prism was purchased in September 2016, the fi rst acquisition for the portfolio post-Brexit. It adjoins Spectrum – one of Craigard’s other investments.

The purchase price was £3.2million with circa 10% net initial yield at £110 capital value per sq ft.

The property comprises detached brick built office premises constructed in 1991 totalling 29,591 sq ft.

The building is multi-let to six tenants over ground and first floors with one suite of circa 4,500 sq ft vacant on the ground floor.

The current annual rent is £330,799 per annum.

Following the purchase of the property, Craigard undertook immediate refurbishment of the vacant ground floor suite and the common areas to improve the image of the building. The vacant suite now has highly efficient LED lighting and a state-of-the-art heating and cooling system, subsequently reducing a potential tenant’s overall occupational running costs.

The asset is a medium to long-term hold as it is felt that there is growth in the current rental levels and yield shift once full occupancy is achieved.

Above Bar - Purchased September 2013

11-13 Above Bar

17 Above Bar

The property was acquired at an initial yield of 13.4% due to the fact that the tenant was not a major covenant and had a break in 2016 – which in practice they did not exercise.

The top floor fl at was also derelict which has now been refurbished and re-let along with the first floor on a new 15-year lease. The ground floor lease renewal is due in 2020 and the plan is to hold the asset for income and capital growth until that point.

11-13 Above Bar

Consolidating holdings in this locality and acquired as a separate syndicate, this property is split into two separate retail units constructed in the 1960s. Purchased for £1.9million, the price reflected an initial yield of 11.9%.

Santander has vacated the property as a tenant and its lease expires in 2019. The unit is now in the market. Terms are close to agreement with Yorkshire Building Society for its lease renewal.

Current rental income is £238,725 pa.

 

Bridgwater - Purchased April 2015

Bridgwater

A modern warehouse extending to c. 36,000 sq.ft. constructed in the early 80’s and let to Trelleborg Sealing Solutions UK Limited. Trelleborg manufactures nylon seals for use in the aviation, marine, oil and Formula One industries. The company has been in existence for over 50 years and delivers over 40,000 sealing products to customers worldwide. It is part of the Trelleborg AB company, which is headquartered in Sweden.

The property was purchased from the WH Smith Pension Fund for £1.965million, a 10% net initial yield and capital value of c. £58 per sq. ft. At the time of purchase, the lease had approximately 3.5 years until expiry. Discussions were held with Trelleborg regarding a lease renewal and extension of the property but unfortunately it was not possible to provide enough accommodation for its long-term expansion plans. A lease renewal has been concluded for three and a half years, giving investors an extended income stream and a future opportunity to extend and refurbish the space, sub-divide it into smaller units and create a very sustainable long-term investment.

Current yield with the improved rent is 10.85%.

Spectrum, Solent Business Park - Refinanced December 2016

Spectrum, Solent Business Park

The building is around 30 years old, totals just under 40,000 sq ft on three floors and has an excellent parking ratio of 1:200. Previously tenanted by Santander, and owned by Mapeley which was in financial diffi culty, Craigard secured the opportunity to acquire the freehold in October 2012 on a very short timetable at a highly attractive figure of £800,000 – £20 per sq ft.

The building required refurbishment and new M&E but has excellent flexible floor plates and good floor-to-ceiling heights. At this extraordinary pricing, Craigard quickly assembled a syndicate to acquire the building in under a month, receiving support from two other corporate investors in raising the cash to purchase and refurbish the building (a pre-let of the ground floor was secured to MITIE). Craigard has systematically remodelled the building into a modern energy efficient (EPC rating B) facility that is now fully let with six tenants paying rents of £10.00 - £12.50 per sq ft. After rent frees expire the annual rental of the building is set to climb to around £475,000.

After careful analysis, Craigard offered the investors the opportunity to sell the property on conclusion of the initial business plan, or to refi nance and hold it because rents before the recession were in the range of £15.00 - £17.00 per sq ft on Solent Business Park. There is no reason, with declining supply, that rents should not recover to that level over the next few years. Given it is newly refurbished, the building is an attractive investment and there are real prospects for further returns.

Investors have taken this concept on board and refinancing has been completed with Santander – raising £3.2million against a current value of £6million. This allowed investors repayment of their original stakes, rolled up interest of 8% per annum and Craigard has been paid part of its performance bonus – reinvesting some of its fee as equity in the deal. One of the investors decided not to participate in the refinancing, so an agreement was reached to acquire its stake. This is likely to be the first of a number of Craigard syndicate acquisitions where the property still has prospects for future return and investors will be offered the opportunity to retain the asset.

Northgate Darlington – Purchased December 2013

An opportunist buy inside two weeks of a property that failed to sell at auction, these three retail units are directly opposite Marks & Spencer's, and were acquired for £1.05 million at a 12.75% initial yield. Tenants are Macdonalds, British Heart Foundation and YMCA on a temporary let.

Lloyds provided £500K of debt, with the remaining balance coming from investors.

In the first couple of months of ownership a deal was agreed to relocate British Heart Foundation at an improved rent on a 10 year lease term. Works were then completed to enhance the appearance of the building.

MacDonalds exercised a break in 2016 and a dilapidations claim has just been concluded. Marketing of the vacant unit has suffered due to a very lack lustre northern retail market. The small kiosk has been let to a local ice cream company.

Negotiations are in hand to acquire land to the rear of the site for residential development which will also include the upper parts of the retail frontage.