Commercial property auction update 16 th March 2011

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Tamsin Cole
5 years ago
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1 Commercial property auction update 16 th March 2011

2 Welcome The Importance of auction sales as a leading indicator as well as an extremely effective market place for both buyers and sellers What did happen in 2010? What s selling Where are we in the auction cycle? Future issues and predictions

Who we are The former Jones Lang LaSalle Auction team for 25 years transferred to Acuitus in 2010 The leading specialist UK commercial property auction and investment company in 2011 with intimate

3 Who we are The former Jones Lang LaSalle Auction team for 25 years transferred to Acuitus in 2010 The leading specialist UK commercial property auction and investment company in 2011 with intimate knowledge of the private investor and private property company market Chairman and auctioneer of Acuitus Former European Capital Markets Director and auctioneer of Jones Lang LaSalle Chairman of the UK RICS Real Estate Auction Group Richard Auterac

4 So what did happen in the auction market in 2010 (1) ARAS Auction Results Analysis System. Seven London-based auctioneers account for circa 80% of commercial property sales Key results for 2010 Amount sold in the room 533,000,000 Numbers offered 1,638 Numbers sold 1,192 Buyer take-up rate 72.8% Yields (4-qtr rolling average) Prime 5.37% Secondary 7.07% High Yield 8.71%

5 So what did happen in 2010 (2) The market momentum pushed the market through the 2008 collapse and into a recovery in 2009/10. This false dawn evaporated in the second half of 2010 for secondary assets. The light seen at the end of the tunnel in 2009 is now the light of the train receding into the distance for anything thatisn t prime or very good secondary!

6 A feel for what s selling Central London City Central London West End Office - Greater London Office - outside Greater London High Street retail (prime) Licensed premises Motor trade Medical Ground rent Multi let (secondary) High Street retail (good secondary) High Street retail (poor secondary) Bank (prime) Bank (secondary) Supermarket

7 December 2010 sale Central London (City) 37/38 Bow Lane, London, EC4M 9AY Sale Price m Net Initial Yield 5.97% 680/sq ft capital value Multi-let expiries in 2/3 years

8 February 2011 sale Central London (West End) 113 Crawford Street, London W1H 2JG Sale Price - 940,000 Early expiry of shop lease and AST s Net Initial Yield 4.35% 735/sq ft capital value

December 2010 Office investment (Greater London) Refuge House, 9-10 River Front, Enfield Sale Price - 3.

9 December 2010 Office investment (Greater London) Refuge House, 9-10 River Front, Enfield Sale Price m Net Initial Yield 9.61% 135/sq ft capital value 25,132 sq ft Multi let to 18 tenants on short leases

10 February 2011 sale Office investment (outside London) 2 Friars Bridge Road, Ipswich IP1 1AQ Sale Price m Net Initial Yield 14.04% 105/sq ft capital value 22,602 sq ft Let to L&G until 2015

11 December 2010 sale High street retail (prime) 219 High Street, Lewes, East Sussex Sale Price - 1.7m Net Initial Yield 5.64% W H Smith until 2024

February 2011 sale Retail investment (secondary) 76-78 Lumley Road, Skegness PE25 3NG

12 February 2011 sale Retail investment (secondary) Lumley Road, Skegness PE25 3NG Sale Price m Net Initial Yield 8.41% Let to Greggs and Clinton Cards until 2014/2015

13 February 2011 Retail investment (poor secondary) Vaughan Street, Llanelli SA15 3TY Sale Price - 800,000m Net Initial Yield 17.22% Let to Burton and Ethel Austin Early expiries Rental value 40% lower LPA Receiver seller

14 2010 sale Bank investment (prime) 18 North Street, Bishop s Stortford, Hertfordshire, CM23 2LP Sale Price - 1.1m Net Initial Yield 5.72% Let to HSBC 10 years with 5 year break LPA Receiver sale Local Investor purchaser

15 February 2011 sale Bank investment (secondary) 1 Leeming Street, Market Place, Mansfield Notts. NG18 1LU Sale Price - 950,000m Net Initial Yield 7.38% Let to HSBC 10 years unexpired with 2016 break

16 February 2011 sale Public house investment 13 East Barnet Road, New Barnet, London EN4 8RR Sale Price m Net Initial Yield 6.10% Let to JD Wetherspoon Plc 17 years to lease break

17 February 2011 sale Tyre depot investment 85 Old Shoreham Road, Hove, East Sussex BN3 5TE Sale Price m Net Initial Yield 5.83% Kwik Fit (GB) Ltd until 2029

February 2011 sale Medical investment Devonshire House, 84-88 Pinner Road, Harrow HA1 4HZ Sale Price - 1.

18 February 2011 sale Medical investment Devonshire House, Pinner Road, Harrow HA1 4HZ Sale Price m Net Initial Yield 4.06% 156/sq ft Ground let to Harrow Health Care Centre until 2014 First floor vacant

19 February 2011 sale Industrial ground rent Tyne Road, Middlefield Industrial Estate, Sandy, Bedfordshire Sale Price m Net Initial Yield 4.82% Strong demand for Ground Rent Investments Highly Secure income

October 2010 sale retail and residential investment 334-342 Bath Road Hounslow West TW4 7HW Sale Price - 2.810m Net Initial Yield 3.

20 October 2010 sale retail and residential investment Bath Road Hounslow West TW4 7HW Sale Price m Net Initial Yield 3.22% Part vacant, residential upper floors and local traders Management intensive LPA Receiver seller (CBRE) Local entrepreneur buyer

21 m The auction cycle since the 1980 s where are we now? Amount invested sold in room Sold in room Rolling Avg Source: ARAS Business Development July Q Q Q Q Q Q4

22 Percent (%) The auction cycle since the 1980 s where are we now? Yields High Yield 8.71% Secondary 7.07% Prime 5.37% ARAS Average Yield ARAS Lower Average ARAS Upper Average 5 Year Swap

23 Future issues and predictions Valuation adjustment for secondary stock Rising inflation will help and hinder Sufficient cash for the moment but for how long and at what price? The widening prime/secondary yield gap will become manifest Continuing good demand for prime properties Demand for more secondary stock but only if all potential downsides are factored into price Good buying opportunities for those with the knowledge and skill Owners without knowledge and skill will struggle and values may fall further

24 Acuitus our expertise Sales by auction and private treaty of primarily the smaller (sub 10m) prime property and secondary stock and portfolios Advising on asset management and marketing strategies for our sellers Advising on acquisitions and identifying the opportunities and risks for our buying clients Auction dates for th April 26 th May 7 th July 18 th October 8 th December

25 Commercial property auction update 16 th March 2011

Trade buyers return increases competition for limited stock

MARKETVIEW United Kingdom Healthcare, Q3 2015 Trade buyers return increases competition for limited stock 4.50% (4.75%) 4.50% (4.50%) 5.00% (5.00%) 5.50% (5.50%) *Arrows indicate yield direction. Previous