Auction & Date: Allsop on 3rd July 2018
Lot #: 4
Town: Stoke Newington
Address: 150-152 Stoke Newington High Street, N16 7JP
Investment Opportunity: Freehold Bank Investment
Tenant: HSBC Bank plc until 2023 (not in occupation)
Blue Alpine’s Proprietary Scoring: Pre-Auction
Locational Analysis:
Stoke Newington, a densely populated area, is within the London Borough of Hackney, some 4 miles north-east of Central London. Hackney has a population of approx. 273,500 and the GDHI (gross disposable household income) per head of £18,529. Looking at nearby property sales for Hackney, from January 2017 to January 2018, the total value property sales were approx. 1.9 billion and the total number of property sales 2,602 transactions.
Snapshot of Property Pre-Auction:
Tenancy & Accommodation:
The entire property is at present let to HSBC BANK PLC for a term of 15 years from 4th June 2008 at a current rent of £46,024.55 per annum. The lease provides for annual rent reviews linked to RPI (capped and collared to a minimum of 2.5% and maximum of 5.5%) and contains full repairing and insuring covenants. Therefore, the rent will rise to a minimum of:
4th June 2019 – £47,175.16 per annum
4th June 2020 – £48,354.14 per annum
4th June 2021 – £49,563.41 per annum
4th June 2022 – £50,802.49 per annum
The tenant is not in occupation. The property has been sub-let to Universal Office Equipment (UK) Limited at £42,738 per annum (reviewable on the same basis as the HSBC lease) until 6th February 2023.
The property provides the following accommodation and dimensions:
Blue Alpine’s Pre-Auction Commentary (PAC):
This property is entirely let to a HSBC Bank plc until 2023, so 5 years remaining on the lease. However, HSBC is not in occupation. The property has been sub-let to Universal Office Equipment (UK) Limited at £42,738 per annum (reviewable on the same basis as the HSBC lease) until 6th February 2023. HSBC is liable for the lease and for the year ending 31st December 2017, HSBC Bank plc reported a pre-tax profit of £2.37bn, shareholders’ funds of £44.049bn and a net worth of £38.113bn.
The property is arranged on ground and two upper floors to provide a ground floor banking hall with ancillary accommodation above and basement storage. This property is located on the east side of Stoke Newington Road (A10), between its junctions with Sanford Lane and Brooke Road.
Nearby occupiers include Iceland, Costa Coffee, Savers, Post Office, Sports Direct, Dixy Chicken, William Hill, Franco Manca, Halifax, Sainsbury’s Local and Ladbrokes, amongst a range of local traders.
The pre-auction yield is 5.41%, we consider average yields for the Stoke Newington area to be between 4% – 6%. Therefore, if the property is acquired at the guide price, this is a healthy yield.
The current Rateable Value for the commercial shop unit is £39,500, while the rent is £ 46,024.55. The previous Rateable Value was £33,250 in 2010, so there was an appreciation of Rateable Value.
We consider this investment opportunity as a buy and hold for the short-term. There is potential for converting the two upper floors into two 1-bedroom flats in 2023 on expiry of the lease with HSBC, dependent on gaining the necessary local planning permission. A conservative estimate of the resale value for each 1-bedroom flat is approximately £350,000 (total resale value £700,00).
References:
Blue Alpine’s Proprietary Investment Scoring System:
At Blue Alpine, we consider many aspects of a property before investing. Therefore, we have created a proprietary scoring system for property investment opportunities. To name a few categories we consider for our proprietary scoring system, but this is not the exhaustive list: planning, property condition, occupier, surrounding properties, location, yield, the lease, rent versus rateable value, etc. The total score possible for any property is 40 points. Please find below the score ranges and their respective buying signal.
Disclaimer: All views expressed in this article are Blue Alpine’s and do not represent the opinions of any other agency, organisation, employer or company whatsoever. Assumptions made in the analysis are not reflective of the position of any entity other than Blue Alpine’s – and, since we are critically-thinking human beings, these views are always subject to change, revision, and rethinking at any time. Please do not hold us to them in perpetuity.
The authors and Blue Alpine are not to be held responsible for misuse, reuse, recycled and cited and/or uncited copies of content within this article by others.
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