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Well Secured Day Nursery Investment

Busy Bees Kestrel Way | Shire Park | Welwyn Garden City | Hertfordshire | AL7 1TN

£820,000

asking price

SOLD

Summary

  • Attractive South East Investment Opportunity

  • Let to Busy Bees, the largest childcare nursery provider in the UK

  • Highly secure income; Shareholders’ Funds £86.45m

  • Annual RPI-linked rent reviews, uncapped

  • Subject property has operated as a day nursery since 1994

  • Situated adjacent to Tesco’s Headquarters

  • Freehold

  • 8.0% net initial yield

Location

Welwyn Garden City is located within Hertfordshire, approximately 39 km (24 miles) north of London, 21 km (13 miles) south-east of Luton and 13 km (8 miles) south of Stevenage.

The town benefits from very good road communications, being located adjacent to the A1 (M) which provides direct access to London and the north east of England. Junction 23 of the M25 Motorway is approximately 16 km (10 miles) to the south and the M1/M25 Interchange is some 18 km (11 miles) to the south-west. There are regular train services from Welwyn Garden City to London’s Kings Cross and Moorgate with a fastest journey time of approximately 25 minutes. There are also frequent services to Cambridge to the north. The town is situated approximately 21 km (13 miles) south-east of London Luton Airport, the UK’s fifth largest airport.

Situation

The subject property is situated immediately adjacent to Tesco’s headquarters within the highly established Shire Park, the premier business park in Welwyn Garden City.

It occupies a prominent position at one of the park’s entrances and is accessed via Kestrel Way. Other major occupiers such as Roche also have their headquarters on the park, with other corporate occupiers including Xerox and Walt Disney.

Welwyn Garden City town centre is located 1.6 km (1 mile) to the south-west with the train station and the A1M Motorway also easily accessible. The town centre’s many amenities are within a short walking distance, including the Howard Shopping Centre which provides 22,297 sq m (240,000 sq ft) of quality retail space with 58 units visited by around 8 million people per annum. The property also benefits from being located adjacent to a densely populated residential area.

We understand that a significant amount of the tenant's revenue is generated from the adjacent Roche and Tesco Headquarters, in addition to the general public.

Description

Set within an attractive landscaped environment, the property comprises a purpose built single storey nursery building with brick elevations beneath a pitched roof. 

There are several outdoor playground areas to the rear and a self-contained surface car park to the front of the site.

Internally the building provides a spacious nursery including a sensory room, office, toilets, a children’s bathroom and a secure entry system with CCTV.  The nursery has been rated as ‘Outstanding’ by OFSTED.  See www.busybeeschildcare.co.uk.  

Accommodation

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

Ground Floor 454.19 sq m 4,889 sq ft


A set of floor plans is available to download and the measured survey report is available for assignment to a purchaser. 


Site

The property benefits from a site area of approximately 0.38 hectares (0.95 acres).

Tenure

Freehold.


Tenancy

The property is entirely let to Busy Bees Day Nurseries (Trading) Limited, guaranteed by Busy Bees Nurseries Limited on a full repairing and insuring lease for a term of 25 years from 19th April 1994, expiring 18th April 2019.

The current passing rent is £69,391.77 per annum (£152.78 per sq m / £14.19 per sq ft). The lease benefits from annual RPI-linked rent reviews, uncapped. The next rent review is on 19th April 2017.

The permitted user under the terms of the lease is “Childcare and ancillary training facilities and/or any use within Class B1 and D1 of the Town and County Planning (Use Classes) Order 1987”.

 

Covenant

The tenant, Busy Bees Day Nurseries (Trading) Ltd (Co. No. 03229362), has reported the following figures;

  31st December 2015 31st December 2014
Total Income £25,809,000 £24,850,000
Pre-Tax Profit  £7,782,000 £7,311,000
Shareholders’ Funds  £86,450,000 £78,525,000


The guarantor, Busy Bees Nurseries Ltd (Co. No. 03454787), has reported the following figures;

  31st December 2015 31st December 2014
Total Income  £48,317,000 £34,060,882
Pre-Tax Profit £6,543,000 £4,708,000
Shareholders’ Funds £53,912,000 £47,076,000


The tenant is part of the Busy Bees group of companies, the largest childcare nursery provider in the United Kingdom. Established in 1983, Busy Bees has 249 nurseries in the UK and was acquired in 2013 by the Canadian pension fund, The Ontario Teachers’ Pension Plan, for a reported £220 million. Busy Bees have expanded to Singapore and Malaysia and are actively looking to acquire further sites.

For further information please visit www.busybeeschildcare.co.uk and www.busybeesglobal.com.


Value Added Tax

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

Investment Evidence

We are aware of the following day nursery investment transactions:

Address Tenant Rent Lease Expiry Price Date Sold
85 High Street, Egham Busy Bees Nurseries Ltd £120,000
(£19.72 psf)
Aug 2035
(TBO)
£2.585m
4.36% NIY
May 2016
87 Brookside South, East Barnet, London EN4 Bright Horizons £145,000
(£20 psf)
Sept 2025
(TBO)
£2.3m/
5.95% NIY
Under Offer
50 Old Road,
London SE13
Bright Horizons £110,425
(£20 psf)
Dec 2025 £1.1m/
5.4% NIY
Feb 2016
1 Morley Crescent,
Milton Keynes
Busy Bees Nurseries Ltd £110,000
(£18 psf)
Dec 2034 £1.745m/
5.95% NIY
Oct 2015
2 Armstrong Road, Littlemore, Oxford Busy Bees Nurseries Ltd £110,000
(£18 psf)
May 2035 £1.89m/
5.5% NIY

Sept 2015
Hanmore Road Basingstoke Busy Bees Nurseries Ltd £110,425
(£18 psf)
Oct 2024 £1.6m/
6.5% NIY

May 2015

Proposal

Our client is seeking £820,000 (Eight Hundred and Twenty Thousand Pounds), subject to contract, reflecting a net initial yield of 8.0%, assuming standard purchaser’s costs of 5.52%.


Investment Considerations

  1. An opportunity to acquire a freehold day nursery investment in the South East;

  2. The investment provides highly secure income being let to Busy Bees, the UK’s largest childcare nursery provider with

  3. Shareholders’ Funds of £86.45 million;

  4. The lease benefits from annual RPI-linked rent reviews, uncapped;

  5. The subject property is purpose built and has operated as a day nursery since 1994;

  6. The property is well-located within a premier business park in the heart of the town, adjacent to Tesco's headquarters;

  7. The site presents a potential development opportunity in the future, subject to obtaining the necessary consents;

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

  9. The investment provides a purchaser with an attractive lot size.

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