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