Cinnabar Court, Daresbury Park, Cheshire
Purchase price: £860,000
Yield: 10.08%
The Brief
LRI LLP were instructed in February 2011 to source a high yielding investment property. The client had a budget of £400,000 and gave us a far reaching scope in terms of location but wanted a ‘relatively’ secure investment that would yield above 9 per cent. The client was willing to borrow up to 60 per cent of the purchase price.
The Property
As this was an unusually unstructured instruction we realised we had to throw the net wide to source a property that would fit the aspirations of our client. Our agent contacts in the North of England were able to alert us to the opportunity to acquire a grade A office building on one of the North West’s premier business parks. What really attracted us was the strong tenant (Assura Medical Ltd) who are part of the Virgin Group and the excellent transport links the site enjoys adjacent as it is to the M56 and 6 miles from the M56 / M6 interchange.
The Deal
The vendor was seeking £910,000 which would have reflected a yield of 9.45%. Though seemingly a good deal and satisfying our client’s criteria, we sensed in current market conditions we would be able to push the vendor a little further. After a period of negotiation we managed to secure the deal at £860,000 representing a 10.08% yield and a £50,000 saving for our client.
The Challenges
Despite the brief given to us, there is sometimes a reluctance on behalf of an investor to look outside the confines of the South East. We were able to demonstrate that the strategically placed business park (equidistance between Manchester and Liverpool), combined with the blue chips occupying other properties in Daresbury Park (DeVere Group plc, ABB, BNFL) means that this is clearly a business hub in the North-West.
Our aim is always to balance the risk: reward ratio so it is ‘heads you win, tails you don’t lose’. Despite the tenant having a break option in their lease after five years, through inspections and conversations held with various local agents we were able to satisfy our client that the tenant has a long-term commitment to the site, not least through the sparkling fit out they have carried out at the premises.
Management and Disposal
LRI have subsequently sold this asset on behalf of the client following a 5 year hold. The sale included a successful re-letting process and dilapidations negotiation.
Market
Update
January 2020: A Clear Vision for 2020 (148k PDF)
January 2019: UK Commercial Property – Heading into 2019 (151k PDF)
January 2018: Commercial property predictions for 2018 (260k PDF)
January 2017: Political landscape continues
to impact on UK Commercial Property
(not necessarily in a bad way). (260k PDF)