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EPC
The property has a recent EPC rating of A-21.
Planning
The property was granted planning permission in November 2022 for the conversion and extension of the existing building to form a local convenience store (ref: 11/22/0213). A copy of the planning consent is available to download from the data room.
Accommodation
The property provides a total ground floor Gross Internal Area of 348.39 sq m (3,750 sq ft).
A floor plan is available to download.
Tenure
The property comprises of two titles. The building is held Freehold (title no. LAN215711) whilst a section of the car park is a Virtual Freehold interest (999-year lease at peppercorn rent, title no. LAN215892). A site plan is available to download. Please also refer to the title documents in the data room for further information.
Tenancy
The property is let to Tesco Stores Limited on a full repairing and insuring lease for a term of 15 years from 24 January 2024, expiring on 23rd January 2039.
The initial rent is £87,500 per annum (£23.33 per sq ft). The lease benefits from five yearly upward only rent reviews calculated in line with the All Items Retail Prices Index (RPI), compounded annually with a collar and cap of 1% and 3%.
Based on assumed annual RPI growth of 3.0% over the duration of the lease the rent could increase to:
| Year 6-10 | £101,436 per annum |
| Year 11-15 | £117,592 per annum |
Covenant
Tesco Stores Ltd (Company Number 00519500) is a wholly owned subsidiary of Tesco Plc the largest grocery stores business in the UK with a market share of 27%. Tesco was established in 1919 and is a multinational grocery and merchandise retailer currently operating from approximately 3,712 stores throughout England, Scotland, Wales and Northern Ireland, employs c. 330,000 people globally and has an annual turnover of £65 billion.
Tesco Stores Ltd is the principal operating company for Tesco Plc. For the year ending 25th February 2023 the company reported the following figures:
| Turnover | £47,481,000,000 |
| Pre-tax Profit | £565,000,000 |
| Shareholder’s Funds | £4,385,000,000 |
For the year ending February 2023 Tesco Plc recently reported revenue growth to
£65,762m from £61,344m the previous year, reflecting an increase of 7.2%. For further
information please visit their web site: www.tescoplc.com.
VAT
The property is elected for VAT. We anticipate that the sale should be capable of being treated as a Transfer of Going Concern (TOGC).
Proposal
We are instructed to seek a figure of £1,435,000 (One Million, Four Hundred and Thirty-Five Thousand Pounds), subject to contract, reflecting a net initial yield of 5.75%, assuming standard purchaser’s costs of 6.07%.
Assuming RPI is settled at the cap of 3% the potential return for the next two RPI-linked rent reviews would be as follows:
• Running yield (January 2029) 6.7%
• Running yield (January 2034) 7.7%
Investment Considerations
An opportunity to acquire a new convenience store investment;
Let to the undoubted covenant of Tesco Stores Limited;
New 15 year lease completed in 2nd April 2024 for a term running from 24th January 2024, without breaks;
The lease benefits from annually calculated 5 yearly upward only rent reviews geared to the All Items Retail Prices Index (RPI);
The property occupies a prominent roadside location in a densely populated residential suburb, providing the main retail provision for the immediate area;
The property benefits from an EPC rating of A-21;
A purchase at the asking price reflects an attractive yield profile;
Attractive lot size for an investor;
