Prominent Retail Warehouse Investment - Argos
Argos | Transit Way | Plymouth | PL5 3TW
subject to contract
Highly prominent site with low site cover
Freehold stand-alone unit
Established and popular shopping destination with surrounding occupiers including Tesco, Matalan, B&M and Lidl
Situated within the heart of a densely populated residential area
Let to the secure covenant of Argos Limited (Net Assets £527.3m), owned by FTSE 100 company J Sainsbury plc
Let until June 2030 (tenant break June 2025)
The property benefits from Open A1 (non-food) planning consent (now Use Class E)
Options for multiple uses given the property’s prominence and configuration, should the current tenant vacate at lease expiry
No rent arrears. No rent payment delays during lockdown
Argos have remained open during 2020 other than when required to close under lockdown
Offers in the region of £2,450,000, subject to contract
9.3% net initial yield
Plymouth is the largest conurbation in the south west region of England and a vibrant waterfront city, situated between the South West coastline and the Dartmoor National Park.
The city is located some 72 km (45 miles) south west of Exeter, 87 km (54 miles) east of Truro and 200 km (124 miles) south west of Bristol. It is well connected by road and rail lying at the junction of the A386 and A38, which links to the M5 Motorway at Exeter.
Plymouth’s mainline railway station has a journey time to London of just over 3 hours and to Bristol Temple Meads of approximately 2 hours. In addition, the city is an important continental and national sea port.
With a growing population of 263,000, an economic output of £5.2 billion and 105,100 jobs, Plymouth is the most significant urban area on the South West peninsula. A further 100,000 people live within the city’s travel to work area (Source: visitplymouth.co.uk). The University of Plymouth is home to over 19,000 students and 2,500 staff.
Plymouth is the largest centre for shopping in the South West, outside of Bristol.
The property occupies a highly prominent position at the entrance to the popular Transit Way retail park. There are several other national occupiers within the immediate vicinity including a Tesco Superstore, Lidl, Matalan, B&M and Magnet. These adjacent tenants provide an extensive customer draw and high level of footfall.
The property also benefits from being in a densely populated residential area as can be seen from the aerial photographs.
The property is situated off Crownhill Road (B3413) which links directly with the A386 less than 1.6 km (1 mile) to the east. The A386 provides direct access to Plymouth city centre approximately 2.4 km (1.5 miles) to the south. The A38 is approximately 2.1 km (1.3 miles) to the west and is the primary east-west arterial route to Cornwall in the west and Exeter in the east.
The property comprises a stand-alone retail warehouse unit within a retail park environment. The property benefits from 53 surfaced car parking spaces (including 4 disabled spaces), 10 cycle spaces together with a secure service yard to the north-east of the unit.
The building is of steel frame construction with a minimum clear height to underside of haunch of 6.5 metres (21 feet) with a part glazed front elevation. The unit benefits from two entrances to the front elevations which could provide for easy subdivision in the future if required.
The tenant has constructed a full cover mezzanine floor as part of their fit-out, together with two staircases, a goods lift, conveyor belt and amenity block. Copies of the Licences to Carry Out Works are available to download in the Data Room.
The property was constructed in 2010 which included the tenant’s fit-out. At the time of construction, warranties were provided by the professional team for a term of 12 years from 2010; these are available to view in the data room.
In addition, the site includes an aerial mast in the south-east corner.
The property has been measured by BKR Floor Plans and provides the following areas:
|Ground Floor||10,562 sq ft GIA||981.20 sq m GIA|
|*Mezzanine Floor||10,562 sq ft GIA||981.20 sq m GIA|
|Total Gross Internal||21,123 sq ft||1,962.40 sq m|
*Note that the mezzanine formed part of the tenant’s fit-out and is not rentalised but has the potential to be rentalised upon lease expiry and re-letting if desired.
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 £795 + VAT.
We estimate the site area to be approximately 0.4 hectares (1 acre), providing a low site cover of 24%.
At the time of the development, environmental consultants John Grimes Partnership Limited were appointed “to provide professional services in relation to the ground investigations and environmental contamination”. Furthermore, a site investigation report of January 2010 by the consultants state “It is concluded that the hydrocarbon contamination encountered on the site does not represent a significant risk to either human health or the environment. Therefore, it is concluded that the site, with respect to hydrocarbon contamination, can be developed without any remediation”. A copy of the report is available to download.
The property benefits from Open A1 (non-food) planning consent. The user clause in the occupational lease states:
“Not to use the Premises other than as a retail shop or shops for the sale and/or provision of goods merchandises and services as available from Argos from time to time together with storage and ancillary office and staff facilities or such other use (other than the use of the Premises principally for the sale of food) within Class A1 of the Schedule to the Town and Country Planning (Use Classes) Order 1987 as approved by the Landlord (such approval not to be unreasonably withheld or delayed).”
The Government has introduced radical reforms to the planning system and Use Classes Order. As of 1st September 2020, new planning regulations allow significantly greater flexibility for buildings and land to change use without the need to obtain planning permission.
A new use Class E has replaced the following use classes:
- Class A1 - shops;
- Class A2 - financial and professional services;
- Class A3 - restaurants and cafes; and
- Class B1 – business
This means that land or buildings utilised for the above uses will not need to obtain planning permission for changes within this use class. For further information see here.
Therefore, the site has a wide range of possible uses should the current tenant vacate.
The property is let to Argos Limited on a full repairing and insuring lease for a term of 20 years from 21st June 2010, expiring on 20th June 2030. There is a tenant’s break option on 21st June 2025, subject to 6 months’ prior written notice.
The current passing rent is £236,250 per annum. The lease benefits from 5 yearly upwards only rent reviews. The June 2020 rent review is still open.
Argos have recently announced a closure programme for many retail stores. We understand that Sainsbury’s have issued letters very recently to the majority of Argos landlords, either stating that “the store(s) we lease from you, which has not traded since March, will remain closed and will not reopen”, or “I can confirm that the store(s) we currently lease from you will be reviewed as part of the plan announced today”. On 5th November 2020, the vendor received the latter form of letter which is available on request. We understand that the unit is highly regarded by the tenant, indicated by their trading throughout 2020. These approaches to landlords are seeking discussions in terms of level of rent but to date no proposal has been received and under current arrangements, unless specifically agreed between the parties, the tenant is legally committed to pay the existing rent under the terms of the lease.
There is an additional £7,071.29 per annum of income from a telephone mast let to Hutchison 3G UK Limited and EE Limited for a term of 15 years from 1st October 2008. The lease benefits from 5 yearly upwards only rent reviews; the 2018 rent review is still open.
Therefore, an investor will benefit from a total income of £243,321 per annum.
All rent is paid and up to date, with no arrears.
Argos Limited (Co. No. 01081551), has reported the following figures:
|9th March 2019||10th March 2018|
|Pre-Tax Profits (Loss)||(£57,868,000)*||(£145,305,000)*|
*Exceptional costs totalling £53.6 million for 2019 (2018: £148.9m) were in respect of costs associated with the integration of Argos into the J Sainsbury Group, following acquisition.
Argos Limited is wholly owned by J Sainsbury’s plc which is a FTSE 100 company and listed on the London Stock Exchange. Notwithstanding the challenges of COVID-19, the First Quarter Trading Statement for the 16 weeks to 27th June 2020 (published by J Sainsbury’s plc, July 2020) reported Argos sales being up 10.7%.
Argos have an estimated 29 million store customers and nearly 1 billion online customers per year. The company offer 60,000 different products with a national network of 1,200 stores and collection points. Stores have reopened from June, closely following the government guidelines for social distancing (including the installation of Perspex screens) for the safety of customers and staff. For further information please visit: www.about.sainsburys.co.uk/great-products-and-services/argos.
J Sainsbury’s plc (Co No. 00185647) has reported the following figures:
|7th March 2020||10th March 2019|
Hutchison 3G UK Limited (Co No. 03885486) has reported the following figures:
|31st December 2018||31st December 2017|
EE Limited (Co No. 02382161) has reported the following figures:
|31st March 2020||31st March 2021|
The property has been elected for VAT. It is anticipated that the sale will be treated as a Transfer of a Going Concern (TOGC).
We are seeking offers in the region of £2,450,000 (Two Million, Four Hundred and Fifty Thousand Pounds), subject to contract, reflecting a net initial yield of 9.3%, after allowing for standard purchaser’s costs of 6.37%.
Please note that a purchaser will be re-charged the cost of the surveys and searches which are provided in the data room and stated in the Special Conditions of Sale.
An opportunity to acquire a freehold retail warehouse investment;
A stand-alone unit occupying a highly prominent position at the entrance to an established and popular retail park;
The property benefits from being in a densely populated residential area;
Primarily let to the secure covenant of Argos Limited (Net Assets £527.3m), owned by FTSE 100 company J Sainsbury plc;
Given the prominence of the site we believe the property offers good re-letting prospects should the current tenant vacate at lease expiry, with a wide range of potential uses;
The large mezzanine provides additional accommodation capable of being rentalised should the tenant vacate;
The property is very accessible by car with a generous car parking provision. With social distancing continuing to be the new normal for some time to come, it has been suggested that retail parks and the spacious environment they offer to shop safely will be a favoured destination by many.
A purchase at the asking price reflects an attractive net initial yield;
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