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Accommodation
The property has been measured by BKR Floor Plans and provides the following Gross Internal Area:
| Ground Floor | 3,313.28 sq m | 35,665 sq ft |
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 £695 + VAT.
Site
We estimate the site area to be approximately 0.88 hectares (2.16 acres), providing a low site cover of 38%.
A Site Solutions Assessment by Argyll Environmental was obtained in September 2022 which states that the site has ‘Passed’ for both Contaminated Land and Flood Risk and that “no Liabilities have been identified. No further action is required”. A copy of the report is available to download in the data room.
Planning
The property benefits from Open A1 non-food planning consent.
The Permitted Use in the occupational lease is “as a retail shop for the sale and display of tents camping caravanning and outdoor activity equipment and related accessories associated ancillary outdoor insulated/protective clothing and footwear (but provided that the retail area for such clothing and footwear does not cover more than 20% of the net floor area of the retail unit) and items ancillary thereto together with ancillary café offices and storerooms or for the retail sale of such goods (excluding food and drink) within Class A1 (a) of the Schedule to the Town and Country Planning (Use Classes) Order 1987”.
Tenure
Freehold.
Tenancy
The property is let to Go Outdoors Retail Limited on effectively a full repairing and insuring lease, subject to a Schedule of Condition, for a term of 20 years from 18th March 2013, expiring on 17th March 2033 (in excess of 10 years unexpired lease term).
The current passing rent is £152,396 per annum (£46 per sq m / £4.27 per sq ft). There are five yearly upward only rent reviews with the next being on 18th March 2023, to the greater of the passing rent and the Open Market Value, capped at 3% pa compounded.
The original lease did not include any tenant break options. As a result of the Covid-19 Pandemic the tenant re-negotiated the lease terms across their store portfolio with respective landlords and insisted on break options being inserted into their leases. Therefore, in accordance with a Deed of Variation dated 4th December 2020, there is a tenant’s break option on 29th September 2025 and 29th September 2030, subject to not less than six months’ notice.
Covenant
Outdoors Retail Limited (Co. No. 12659342) reported the following figures:
| Turnover | £316,320,000 |
| Pre-Tax Profits | £21,494,000 |
| Shareholders’ Funds | £45,704,000 |
Go Outdoors mission is to inspire and equip everyone for life outdoors. Go Outdoors is the UK’s leading outdoor specialist retailer, having the widest in-store range of outdoor clothing, footwear and equipment while serving a broad range of outdoor activities including walking, camping, caravanning, cycling, fishing, running and equestrian. For further information see www.gooutdoors.co.uk.
The company is a wholly owned subsidiary of JD Sports Fashion Plc.
Established in 1981, the JD Group is a leading global omnichannel retailer of Sports, Fashion and Outdoor brands. The Group now has approximately 3,400 stores across 32 territories, with a strong presence in the UK, Europe, North America and Asia Pacific. For the year ending 29th January 2022, JD Sports Fashion Plc reported a Revenue of £8.6 billion, Pre-Tax Profits of £654.7 million and Total Equity of £2.4 billion.
The accounts state that “our Outdoor businesses had a much improved year with an elevated demand for holidays in the UK and a general recognition of the physical and mental health benefits of spending time outdoors combining to drive a strong demand for outdoor living and cycling categories in particular”…..“we are confident that people will look to maintain a more active lifestyle and that the welcoming and engaging atmosphere in all of our stores will continue to inspire people to spend time outdoors”.
The positive progress in the Outdoor businesses is reflected in the fact that, even though the majority of stores were closed through the first quarter, there were record revenues in Outdoor in the year with total sales of £513.4 million (2021: £359.3 million). Outdoor also returned to profitability in the period with Pre-Tax Profits of £25.9 million.
Following a sharp downturn in sales due to the Covid-19 pandemic, in June 2020 Go Outdoors appointed Deloitte as its administrator to review the business and oversee a restructuring process which involved a sale of the business back to JD Sports for £56.5 million. As part of the agreement, Go Outdoors was granted a licence to occupy the 67 stores at the date of Administration for a period until October 2021 to enable the Company the opportunity to negotiate new leases with the respective landlords. As a result, many stores have been retained at rebased rental levels.
Underlying Value Opportunities
Should the tenant exercise their break option in September 2025 and vacate the property, we suggest there is significant potential to seek change of use for industrial, subject to planning.
There has been exponential take-up and sustained growth in all aspects of the industrial market. A dearth of available stock has driven up rents and capital values to benchmarking levels. 2021 saw average rental growth to over 25%, some way over independent forecasts pre-Covid-19 of 3-5%, that in itself was a strong prediction. Rents have been increased to such a degree that secondary industrial premises are attracting rents over and above new build deals of but 12-18 months prior. The lack of speculatively built property is not only allowing record rental growth in secondary premises, but also offering opportunities for developers to drive rent further still in the delivery of Grade A space.
The Worcestershire industrial market has seen significant activity with exceptionally strong demand and take up and a critically weak immediate supply and insignificant pipeline of development. A result is that developers have decided to speculatively build, for example at St Modwen’s Nunnery Park scheme on the eastern edge of Worcester where buildings of 19,000 sq ft, 27,500 sq ft and 48,000 sq ft completed in 2020 were let almost immediately post lockdown at rents between £6.50 – 6.75 per sq ft on 10-year leases, that are now considered highly reversionary.
St Modwen committed further speculative build at Broomhall Business Park on the southern edge of Worcester with the developer quoting £7.25 per sq ft on a 30,000 sq ft unit. It is understood that a deal has since concluded off a headline rent of £8.00 per sq ft. (Source: Harris Lamb).
With regards to the subject property, if one were to seek change the use to industrial then we are advised that there is a distinct lack of supply of units of a similar size, with strong local/regional demand. The configuration of the unit is such that it should also allow for subdivision if required.
We are advised that the property is likely to command a rent of circa £6.00 per sq ft. Hence, an implied rental value of £213,990 per annum based on industrial values.
Alternatively, the low-density site offers considerable re-development potential for a variety of uses, subject to planning.
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 offers of £2,500,000 (Two Million, Five Hundred Thousand Pounds), subject to contract, reflecting a net initial yield of 5.73%, assuming standard purchaser’s costs of 6.38%.
Please note that a purchaser will be re-charged the costs of the measured survey (£695 + VAT) and searches (£2,032.07) which are provided in the data room.
Please note that a purchaser will be charged a Transaction Fee of £10,000 plus VAT.
Investment Considerations
An opportunity to acquire a freehold retail warehouse investment;
Let to Go Outdoors Retail Limited, a wholly owned subsidiary of JD Sports (Market Cap £8.2 billion);
Low passing rent of £4.27 per sq ft in comparison to industrial rents in excess of £6.00 per sq ft. Next rent review in March 2023;
Situated in an established commercial location, surrounded by numerous uses including industrial and trade-counter;
The property sits on a 2.16 acre site with a low site cover of 38%;
Future alternative use and redevelopment potential;
The property is underpinned by industrial use value;
A purchase at the asking price reflects an attractive net initial yield;
