Long Income King’s Cross London Investment

54-58 Caledonian Road | King’s Cross | London | N1 9DP

£4,750,000

subject to contract

5.78% NIY

Summary

  • An opportunity to acquire a Freehold investment in a prime Central London area;

  • The property is located within close proximity to the new King’s Cross development area;

  • In excess of 17 years unexpired lease term, without tenant breaks;

  • 5 yearly rent reviews to the higher of: passing rent, open market and RPI subject to a cap of 5% per annum;

  • Hostel (Sui Generis) use;

  • Landlord only break option (without penalty) in 2026;

  • 6,253 sq ft GIA

  • Medium term redevelopment opportunity, subject to planning;

  • £4,750,000, subject to contract;

  • Net initial yield of 5.78%;

  • Capital value of £760 per sq ft which is at a discount to the vacant possession value

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Location

The subject property is situated in King’s Cross, within the London Borough of Islington.

King’s Cross is one of the largest regeneration projects in Europe. The 67-acre site is owned by the King’s Cross Central Limited Partnership, a joint venture between developer Argent and pension fund AustralianSuper. It is undergoing a huge transformation which, according to the development’s website, will feature 50 new buildings, 1,900 new homes, 20 new streets, 10 new public parks and squares and 26 acres of open space. A number of global businesses such as Google, YouTube, Facebook, Havas, Universal Music and Louis Vuitton have all chosen to locate here. As a result, King’s Cross has become one of the most attractive places to live, work and visit in London. For further information see here.

King’s Cross is home to some of London’s renowned sites including The British Library and Central Saint Martins, the world-famous arts and design college.

King’s Cross is an exceptional national and international travel hub. The two major railway stations of King’s Cross and St Pancras provide mainline rail services throughout the UK. St Pancras International is home to Eurostar with direct services throughout Europe including Paris, Brussels and Lille. King’s Cross Underground station provides access to the Victoria, Piccadilly, Northern, Metropolitan and Hammersmith & City lines, and is within Zone 1. In addition, Euston Station is approximately 500 metres away.

The City of London and Docklands are situated to the south-east, approximately 5 km (3 miles) and 13 km (8 miles) respectively. London City Airport is approximately 14km (9 miles) to the south-east, Heathrow Airport approximately 31km (19 miles) to the south-west, Luton Airport 51km (32 miles) to the north and Gatwick Airport 48km (30 miles) to the south.

Situation

The subject property benefits from excellent communications and is within a couple of hundred metres of King’s Cross Station and St Pancras mainline and underground stations.

The property occupies a prominent position on the east side of Caledonian Road (A5204), close to its junction with the A501 Pentonville Road / Euston Road. The newly developed Institute of Physics, a £13.5 million scheme which opened in 2018, is directly opposite. This section of Caledonian Road is characterised by a mixture of commercial and residential use. The property benefits from being located within easy walking distance of the many amenities surrounding one of the busiest transport hubs in the country.

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Description

The property comprises a four-storey building arranged over lower ground, ground and two upper floors. We understand the building was constructed in the mid to late nineteenth century as three separate terraced town houses which have subsequently been converted into one single building, currently used as a hostel.

The building is of traditional brick construction and has been extended at lower ground floor level to the rear, to provide additional accommodation.

The entire property is used for the purposes of a hostel providing short-stay accommodation for youths and tourists. The property extends to 21 rooms / dormitories (including 6 private bedrooms) and 114 bed spaces. There are WC and shower facilities on each floor plus a communal kitchen, bar area and launderette on the lower ground floor.

Accommodation

The property has been measured by BKR Floor Plans and provides the following areas:

Lower Ground Floor 239.31 sq m 2,576 sq ft
Ground Floor 122.07 sq m 1,314 sq ft
First Floor 108.60 sq m 1,169 sq ft
Second Floor 110.92 sq m 1,194 sq ft
Total 580.90 sq m 6,253 sq ft

A set of floor plans is available to download and the measured survey report will be re-addressed to a purchaser at a cost of £495 + VAT.

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Rateable Value

According to the Valuation Office website the rateable value for the property is as follows:

Address Description Rateable Value
54-58 Caledonian Road Hostel and premises £76,500

The business rate multiplier is 50.4 pence per pound.

Planning

The property is not a Listed Building and is situated within the Keystone Crescent Conservation Area.

The property benefits from Sui Generis use class under the Town and County Planning (Use Classes) Order 1988.

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Tenure

Freehold.

Tenancy

The property, trading as Home Hostel, is let to Northstar Hotels Limited (personally guaranteed by Mr Zaman), on assignment from Tangerine Ventures Limited.

The lease, which is full repairing and insuring, is for a term of 20 years from 1st September 2016, expiring on 31st August 2036 (in excess of 17 years unexpired lease term). There is a Landlord only option to determine the lease on 1st September 2026.

The current passing rent is £292,440 per annum (£503.42 per sq m / £46.77 per sq ft overall). The tenant pays the rent monthly. The lease benefits from an upwards only rent review to open market rental value on 1st September 2021, 2026 and 2031 to the higher of passing rent, open market and RPI subject to a cap of 105% per annum.

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Covenant

Tenant - Northstar Hotels Limited (Co. No. 03918990) has reported the following figures:

Year Ending 25th October 2018
Net Assets £2,146,251

There is a personal guarantee from the Director, Mr Zaman.

Market Commentary

Residential Capital Values

Our enquiries indicate that residential accommodation in the area has been selling up to £2,000 per sq ft (£21,529 per sq m).

For example, Gasholders London is a unique new development of 145 apartments and penthouses built within a refurbished triplet of Grade II-listed, cast-iron gasholder guide frames, next to the Regent’s Canal. Comprising a mixture of studio, 1-bed, 2-bed, 3-bed and penthouses, prices achieved have been between £1,500-£2,000 per sq ft.

Luma is a new development on Stable Street which is due for completion in 2021. All the apartments have sold off-plan, achieving an average sale price of approximately £1,500 per sq ft.

The 13-storey Plimsoll Building is situated on Handyside Street, overlooking the Regent’s Canal and Gasholder Park. This recently completed collection of one, two and three bedroom apartments, duplexes and penthouses has achieved an average sale price of approximately £1,500 per sq ft with only one of the 178 apartments remaining available.

King’s Cross Quarter is a collection of 119 luxury apartments by Regal London. We are advised that there are only seven apartments remaining with the scheme achieving an average sale price of £1,550 per sq ft.

In comparison to the asking price for the subject property, new developments are achieving more than double the capital value based upon the asking price for the investment, thereby providing attractive development potential.

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VAT

The property has been registered for VAT. It is anticipated that the sale will be treated as a Transfer of a Going Concern (TOGC).

Proposal

We are instructed to seek offers in the region of £4,750,000 (Four Million, Seven Hundred and Fifty Thousand Pounds), subject to contract, reflecting a net initial yield of 5.78% assuming purchaser’s costs of 6.58%.

Please note that a purchaser will be re-charged the costs of the surveys and searches which are provided in the data room.

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Investment Considerations

  1. An opportunity to acquire a freehold Central London investment;

  2. The property is well located in close proximity to the King’s Cross re-development, one of London’s largest regeneration areas which has attracted recognised international companies;

  3. In excess of 17 years unexpired lease term, without tenant breaks;

  4. A purchase at the asking price represents a capital value at significant discount to figures being achieved for new nearby residential schemes;

  5. 5 yearly rent reviews to the higher of: passing rent, open market and RPI subject to a cap of 5% per annum;

  6. Landlord only break option (without penalty) in 2026;

  7. Medium term redevelopment opportunity, subject to planning;

  8. Opportunity to seek change of use back to residential, subject to planning;

  9. A purchase at the asking price reflects an attractive net initial yield;

Data Room and clicktopurchase®

Access to the data room and for the ability to purchase online with speed and ease, please click the clicktopurchase® “C” icon or the clicktopurchase® side bar. Purchasers will be able to access the complete legal package, clear verification and submit legally-binding offers to acquire the property.

Purchasers benefit from the trust, security and transparency provided by the platform. All activities, including the online contract execution, will form part of the electronic audit trail which is anchored in the clicktopurchase® Blockchain.

clicktopurchase® provides the opportunity for any investor, whether located UK or abroad, to uniquely purchase online with ease and certainty. To learn more about clicktopurchase®, click here.

Finance

We have partnered with a leading finance adviser to provide loan services. To learn more, please visit our “Finance” section.

finance

Contact Us

Singer Vielle   +44 (0) 207 935 7200
Dale Henry dale@singervielle.co.uk +44 (0) 203 701 1356
Neil Singer neil@singervielle.co.uk +44 (0) 203 478 9120
Daniel Elia daniel@singervielle.co.uk +44 (0) 203 701 1353

Vendors Solicitor

Joelson    
Andrew Clissold andrew.c@joelsonlaw.com +44 (0) 207 438 0988
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