Well Secured, Greater London Day Nursery Investment

Bright Horizons | 2 Printers Avenue | Whippendell Road | Watford | WD18 7QR

£2,660,000

subject to contract

EXCHANGED

Summary

  • Adjacent to a major new 485-home residential scheme by Orion

  • Greater London Investment Opportunity

  • Let to Bright Horizons, one of the UK’s leading childcare providers

  • Highly secure income – tenant Shareholders’ Funds £138 million. Ultimate parent company market capitalization of $6.55b

  • In excess of 12.5 years unexpired lease term (7.5 years to break)

  • Situated within a large catchment area, close to Watford town centre

  • £2,660,000, subject to contract

  • 6.0% NIY

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Location

Watford is a major Greater London commuter town in the county of Hertfordshire, within the M25 Motorway. It is located approximately 25km (15 miles) north west of Central London, 25km (15 miles) south of Luton, 60km (35 miles) east of Oxford, 11 km (7 miles) south of Hemel Hempstead and 13 km (8 miles) south-west of St Albans.

The town benefits from good road communications and is situated approximately 3.2 km (2 miles) south-west of Junction 5 of the M1 Motorway, accessed via the A411 Hempstead Road and 5 km (3 miles) south-east of Junction 19 of the M25 Motorway.

Watford is well served by public transport and is connected to the national railway network. The town benefits from three separate train stations; Watford Junction, Watford High Street and North Watford. Services between London Euston to Watford Junction provide fastest journey times of approximately 18 minutes. Watford Junction is situated at the end of the TfL Overground line and Watford Tube Station provides rapid services into Central London via the Metropolitan line.

Luton Airport is located 29 km (18 miles) to the north and is accessible via train or by road via the M1 Motorway. Heathrow Airport is located 24 km (15 miles) to the south and is accessed via the M25 Motorway.

Watford’s accessibility makes it an attractive place for business and as a result acts as the UK base for Total Oil, TK Maxx, Costco and JD Wetherspoon.

Situation

The property is situated approximately 2 km (1 mile) west of Watford town centre on Whippendell Road at its junction with Printers Avenue.

The property benefits from being in a densely populated residential area called Holywell which, according to the 2011 Census has a total population of 8,626. The nursery forms part of a modern residential development with other surrounding occupiers including Budgens, Premier Inn, Brewers Fayre and Bridgewater Pharmacy. The property is within walking distance of Croxley Park which is a large industrial estate and business park. The Nursery has very good access with Watford Underground Station less than 1.6 km (1 mile) to the north-east and multiple bus routes making it accessible to the whole of Watford and beyond.

Ascot Road Development Site

The subject property is adjacent to a major new residential-led mixed-use scheme by Orion. Situated on a 1.58 hectare (3.9 acre) site, planning permission was obtained in October 2017 for the development which is set to provide 485 new homes, restaurants, cafes, shops, a new public space including woodland gardens, a tree-lined walk and generous landscaped areas.

Demolition works have been taking place throughout 2018 with the commencement of the main development works scheduled to begin imminently. Completion of the development is estimated for Autumn 2019. It is anticipated that the site will provide over 1,000 new jobs/apprenticeships. For more information see: www.ascotroad-watford.co.uk

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR
Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Description

The property comprises a modern ground floor nursery below 3 storeys of residential apartments which do not form part of the sale. The property benefits from two large outdoor playground areas and a surface car park to the front and side of the property providing 8 car parking spaces.

The nursery has a GOOD Ofsted report and was awarded RoSPA Gold Award, See www.brighthorizons.co.uk

Accommodation

The property has been measured by BKR Floor Plans and provides the following Gross Internal Area:

Ground Floor 600.04 sq m 6,459 sq ft

A set of floorplans are available to download and the measured survey report will be assigned to a purchaser at a cost of £425 + VAT.

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR
Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Tenure

The property (Bright Horizons Day Nursery and Pre-School, 2 Printers Avenue, Whippendell Road, Watford, Herts, WD18 7QR. Registered with leasehold title absolute number HD452157) is held under a head lease dated 6th December 2005 granted by the then freeholder, Frontier Key (Watford) Limited, for a term of 999 years from 6th December 2005 at a peppercorn rent.

The freehold interest in the property was shared in early 2013 between the two current freeholders, who are closely associated for administrative and operational purposes. One freeholder owns the building known as Block B, Whippendell Road, the ground floor of which includes the subject Day Nursery and Pre-School. The other freeholder owns the remainder of the Estate, which includes the Nursery’s adjoining outside play area, which is within the subject head lease.

Within the Estate’s freehold are also all the car parking areas of the Estate. The head lease includes (i) the exclusive right throughout the term to use the 8 allocated car parking spaces located close to the outside play area and the Nursery’s main entrance and (ii) occasional and temporary non-exclusive parking rights in the Estate’s communal parking facilities.

Tenancy

The entirety of the subject property is underlet to Bright Horizons Family Solutions Limited for a term of 25 years commencing 5th July 2006 until 4th July 2031 (in excess of 12.5 years unexpired). There is a tenant’s option to break on 5th July 2026, subject to 6 months’ prior written notice.  The tenant is responsible for maintaining the interior of the subject property and plus external redecoration and pays a service charge that covers the costs of the head lessee’s responsibilities to the freeholders.

The current rent passing is £170,218.40 per annum (£283.68 per sq m / £26.35 per sq ft). The underlease provides for five yearly upward only rent reviews. The next rent review is on 5th July 2021.

The tenant has a right to the exclusive use of 8 dedicated car parking spaces.

The underlease also contains a covenant by the freeholder in favour of the tenant that the freeholder of the Estate (i) will allow free weekday parking between 7.30am and 6.30pm for at least 5 private cars within the Estate’s communal parking facilities and (ii) subject to consideration of the interests of the Estate as a whole and the demand for parking, will try to procure free weekday parking during the same hours for a further 5 private cars within the Estate’s communal parking facilities. It is understood that only an additional 4 parking permits have been granted to the tenant to date.
The currently permitted use is as a “childrens day nursery together with ancillary training and incidental sales of related baby products and videos or any use within Class D1 of the Town and Country Planning (Use Classes) Order 1987 and for purposes ancillary to that use”.

The head lease provides for the freeholders to maintain the structural parts of the Block B building and contains insurance and service charge provisions. By formal arrangement in a Side Letter in July 2006 between the then head lessee and the freeholders, the occupying tenant pays directly to the freeholders all sums due under the occupational underlease. So long as these payments are made the freeholders will not claim the equivalent sums due under the head lease, effectively by-passing the head lessee who maintains property owner’s liability and loss of rent insurance, recovering the full cost from the occupying tenant.

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR
Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Service Charge

A due service charge proportion is payable by the tenant directly to the superior landlord. Copies of the service charge documentation is available to download.

Covenant

Bright Horizons Family Solutions Limited (Company Number 02328679) has reported the following figures;

  31st December 2017 31st December 2016
Total Income £182,061,000 £174,182,000
Pre-Tax Profit £15,601,000 £17,941,000
Shareholders’ Funds £138,768,000 £126,677,000

Bright Horizons is one of the UK’s largest childcare providers, with over 300 nurseries across the UK and over 700 worldwide. They were formed in 1986 and are one of the UK’s most experienced and established brands . Bright Horizons are still looking to expand and have acquired Zoom Nurseries and Yellow Dot Nurseries in 2018, adding a total of 17 new nurseries to their portfolio.

Bright Horizons report that they care for over 25,000 children each week and have high customer satisfaction levels at “96% from parents and 100% from clients”. It is also reported in their accounts that they are recognized by ‘The Great Places to Work Institute’ as one of the Best Workplaces in the UK since 2006 and are the only company in the childcare sector to achieve this. For more information visit: www.brighthorizons.co.uk/about.

Bright Horizons Family Solutions Limited is a wholly owned subsidiary of BHFS Two Limited. The company’s ultimate controlling party is Bright Horizons Family Solutions Inc which has a market capitalization of $6.5 billion (24.10.2018).

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR
Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Investment Evidence

Looking at the evidence below it can be seen that nursery investments sold recently achieved low yields of 4.75% and 4.5% respectively.

Address Tenant Yield Rent Lease Expiry Price Date Sold
176 Charlton Road, Charlton, London Busy Bees Nurseries Limited 4.75% £38.88 19.36 years £3.705m September 2017
216 Springfield Road, Chelmsford Busy Bees Nurseries Limited 4.5% £21.78 23.62 years £2.75m February 2018

VAT

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

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR
Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Proposal

Our client is seeking offers in the region of £2,660,000 (Two Million, Six Hundred and Sixty Thousand Pounds) subject to contract reflecting a net initial yield of 6.0%, assuming purchasers’ costs of 6.11%.

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

Investment Considerations

  1. An opportunity to acquire a modern Greater London day nursery investment;

  2. The site is well located within a large catchment area, close to Watford town centre;

  3. The site is adjacent to a substantial new development which is to provide 485 new homes;

  4. Highly secure income from Bright Horizons Family Solutions Limited (Shareholder’s Funds £138m), one of the UK’s leading childcare providers;

  5. Long income investment with over 12.5 years unexpired lease term and over 7.5 years to break;

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

Bright Horizons | 2 Printers Avenue | | Whippendell Road | |  | Watford | | WD18 7QR

Contact Us

Singer Vielle   +44 (0) 207 935 7200
Neil Singer neil@singervielle.co.uk +44 (0) 203 478 9120
Dale Henry dale@singervielle.co.uk +44 (0) 203 701 1356
Faye Langoulant faye@singervielle.co.uk +44 (0) 203 478 9122
Louanne Malan louanne@singervielle.co.uk +44 (0) 203 701 1386

Vendors Solicitor

WSM (Solicitors) LLP +44 (0) 208 879 4300
Tim Sweetland tim.sweetland@wsmsolicitors.com
customer service