GCW_Sept2016

www.gcw.co.uk GCW Newsletter Autumn 2016

Big in Retail

AUSTIN REED ADVICE PRIVATE INVESTORS
DELIVERS results COMMIT TO RETAIL

GCW appointed to review failed retailer’s property portfolio p2 GCW’s investment
team explains why
TK MAXX SIGNS TO STAY RETAILERS BACK EPSOM retail opportunities
Sheffield’s Orchard Square GCW completes strategic are in favour with
secures anchor tenant p3 plans for Ashley Centre p2
private investors p4

www.gcw.co.uk

GCW takes on
London mixed-
use scheme

roadside GCW brings expertise to
Austin Reed administration
■ Housebuilder, Barratt
London has appointed High Street creditors. It agreed a number “Austin Reed had an
GCW to act as retail letting of deals securing premiums attractive portfolio and we
agent on its new mixed-use ■ GCW has completed the from retailer occupiers or were able to capitalise on
development on London’s latest in a series of high surrenders with landlords this. We had two months
South Bank. profile appointments on including the surrender of from late April to market the
retailer administrations, properties and agree deals
The development will acting for AlixPartners on the “Austin Reed had an whilst working in tandem
include 336 apartments and collapsed menswear chain attractive portfolio with AlixPartners who was
penthouses and around Austin Reed. and we were able to trying to sell the business as
51,500 sq ft of commercial capitalise on this” a going concern,” says GCW
space of which 16,500 sq ft GCW was appointed to director Simon Morris.
will be retail and restaurant review the property portfolios the lease to the landlord of
units. The two and half acre of the three brands operated Austin Reed’s flagship store GCW has established a
site is prominently located on by the 116-year old retailer at 100 Regent Street for a strong reputation for acting
the corner of Blackfriars Road in 150 stores, Austin Reed, substantial premium. The on retailer administrations
and Borough Road at St Giles Country Casuals and Viyella retailers who took on leases including shoe retailer,
Circus and is immediately and establish the potential include White Stuff, EE and Brantano, Jessop Group and
adjacent to London South for raising capital through Fraser Hart. Fenn Wright Manson.
Bank’s University Campus. assignments and surrenders
It will be delivered in phases of leases. GCW marketed MORE INFORMATION from
from July 2017 to mid-2018. the opportunities and
GCW will let up to 10 retail raised substantial sums for [email protected]
and restaurant units from
700 to 4,200 sq ft with street Epsom enjoys retailer confidence
frontages.
shopping centres Warehouse is also relocating from the High
“This is an exciting Street into the scheme in a 1,000 sq ft store
opportunity for GCW and ■ GCW’s asset management and leasing on a 10 year lease at £66,500 pa.
we look forward to working work at Epsom’s Ashley Centre continues
with Barratt London on this to pay dividends as confidence in both the New Look has also agreed a deal to
large, mixed-use regeneration centre and the town continues to boom. relocate to an expanded 8,000 sq ft store.
project,” says GCW director The existing store will be sub-divided for a
Simon Horner. Planning has been secured, outside the fashion and cosmetic retailer.
centre, to remodel 93/95 High Street to
“Our focus will be on create a new store with 1,900 sq ft on the MORE INFORMATION from [email protected]
developing a strong return on ground floor and 700 sq ft on the first and
capital for our client as well three residential units. The retail unit was
as creating the right tenant pre-let to Pret a Manger on a 10 year lease at
mix for such a substantial £115,000 pa with six months rent free and
residential scheme,” he adds. will open in Autumn next year.

The project is GCW’s first In a further show of confidence in the
letting appointment for centre Waitrose has begun a £3 million refit
Barratt London and follows of its 28,000 sq ft supermarket. Carphone
on from its success on the
Hadley Mace development in
Greenwich Square.

MORE INFORMATION from
[email protected]

2 GCW ■ Autumn 2016

BIG IN RETAIL

LAP secures TK Deals
Maxx in Sheffield

shopping centres reinforces Orchard Square’s GCW has agreed a deal to bring clothing retailer Quiz to
position as one of Sheffield’s Portsmouth’s Cascades shopping centre. Quiz takes a
■ TK Maxx has made a strong pre-eminent retail locations five year lease at £95,000 pa with six month rent free
commitment to its future in and reflects our anchor on a shop with 1,990 sq ft on ground floor and 964 sq ft
Sheffield’s Orchard Square tenant’s commitment to on first floor.
shopping centre with a the centre,” says LAP chief
restructure and extension to executive, John Heller. GCW has agreed two lettings for Dunfermline’s Kingsgate
its lease. centre. Mountain Warehouse takes a 2,000 sq ft unit
“Although TK Maxx has on the High Street adjacent to the centre on a five year
The retailer, who has been a tenant for many lease at £45,000 pa. Inside the centre, Vision Express
occupied a key store at the years, the current 46,000 sq has agreed a 10 year lease extension with a tenant break
shopping centre for 20 years, ft store was created in 2008 in the fifth year at £60,000 pa for its 1,500 sq ft store.
has agreed to remove a break specifically to meet its needs,
clause exercisable in August as part of our on-going asset Independent coffee retailer, Second Cup moves to
2018 and extend its lease management programme Harrow’s St Anns shopping centre in a GCW deal for
to March 2026. The deal by to improve and upgrade owner Orchard Street Investment Management. The
GCW for owner London & Orchard Square’s retail offer,” retailer takes a 1,500 sq ft unit on a 10 year lease at
Associated Properties (LAP) he adds. £65,000 pa or 9% of turnover with 12 months rent free.
creates an almost 10-year
unbroken term at a current MORE INFORMATION from Stationery retailer, Smiggle is the latest letting at
rent of £475,000 pa. Maidenhead’s Nicholsons Shopping Centre following
[email protected] the recent opening of H&M which is trading well above
“This re-geared lease expectations. Smiggle takes a 1,200 sq ft unit on a 10
year lease at £32,000 pa with 18 months rent free.
The Cornish Bakery
wins design accolades The latest GCW deal at Salisbury’s Old George Mall also
involves Smiggle who takes a 883 sq ft ground sales
high street GCW is working with The unit to make the centre almost fully let. The unit is on
Cornish Bakery to secure its a 10 year lease with a tenant break in the fifth year, at
■ The Cornish Bakery’s continued expansion and is £78,000 pa with 9 months rent free.
successful rebrand continues looking to add 10 more stores
to win plaudits with a positive next year. The latest openings Starbucks will open in a 1,100 sq ft unit in Ealing’s
response from customers, are a 1,500 sq ft store on Central Buildings, opposite Ealing Station on a 10 year
landlords and recognition Sidmouth High Street on a lease at £107,500 pa with six months rent free. The GCW
from an international design 10 year lease with a tenant deal for Benson Elliot is part of a transformation of this
award. break in year five at £44,000 block into travel convenience retailing to serve the new
pa; and a 900 sq ft unit on Crossrail station.
The retailer rebranded Institute Road, Swanage on
earlier this year from Pasty an assignment of the existing GCW has agreed a deal for Superdrug to take a store on
Presto with improved facias lease expiring in 2026 at Nottingham’s Carrington Street, adjacent to the railway
and updated interiors rolled £19,000 pa.  station, as part of its roll out into travel sites.  The 3,100
out across the UK. It has won sq ft unit is on a 10 year lease with a tenant only break in
an International Food and MORE INFORMATION from the fifth year at £40,000 pa with six months rent free.
Beverage Excellence (FAB)
Award for the interior design [email protected] GCW has concluded a deal to bring hamburger chain,
of a rebrand. Byron to Birmingham New Street in a 1,500 sq ft unit on
behalf of the previous tenant Cashino.

GCW ■ Autumn 2016 3

Opinion

GCW’s investment team expects the strong demand for retail property from private investors

and family trusts to continue as uncertain financial markets encourage a flight to safety.

private investors Display

confidence in retail
Prior to the EU referendum the
demand from private investors Below: GCW directors Fiona corner trading position and was let on a new
and family trusts for good Nichols and James Pearson 10 year lease to Costa Coffee with a tenant
quality retail assets was helping break in the sixth year. The final sale price
GCW’s investment team to reflected a net initial yield of below 4% but is
secure strong levels of interest subject to confidentiality.

for client sales. Competitive bidding
“Canterbury is an attractive cathedral city
GCW secured the sale of four of the 14 with a large catchment but this was a simple,
straightforward freehold building in a normal
properties across the Toucan and Peacock town. The level of interest and competitive
bidding is a clear illustration of the demand
portfolios earlier this year for from private investors for well let assets in
quality towns,” says GCW director Fiona
APAM and US-based Varde Nichols.

Partners. All of the properties “The level of GCW also generated strong demand for a
sold to private investors at interest and competitive prime retail parade on Bancroft, Hitchin let
significant profits.
bidding is a clear
A private family trust
purchased two of the well

let assets on Culver Street illustration of the demand
West, Colchester occupied by from private investors for
Superdrug and Office Shoes

with 9.5 years remaining well let assets
on the lease; and Broad in quality
towns“
Street, Reading let to Lloyds
Bank with 10 years and 5
months remaining, for £6.5

million and £4.76 million

respectively, reflecting

yields of 5.71% and 4.33%.

The Lloyds Bank with 10 years 8 months

unexpired on High Street, Lincoln was also

sold to a private investor for £3.15 million

showing an initial yield of 4.5%. In the third

deal, a restaurant on Queen Street, Cardiff

was sold to a property company for £2.16

million reflecting a net initial yield of 7.19%.

Profitable deal

GCW had previously acted for Varde and
APAM in a competitive bidding situation to
acquire the portfolios for £51.3 million.

“These sales have produced a profitable
exit over a short period of time and provide
further evidence of the merit in investing
in the UK retail sector,” says Simon Cooke,
director at APAM.

The trend for strong demand in the
private investor sector of the market was also
reflected in GCW’s sale of the Costa Coffee on
Canterbury’s High Street which attracted 29
bids significantly better than the asking price
of £1.4 million reflecting 5.75%. The property,
which was just off prime pitch, occupied a

4 GCW ■ Autumn 2016

to Prezzo, White Stuff and Monsoon with a BIG IN RETAIL
WAULT of 8.9 years. Initially marketed for
£3.587 million reflecting an initial yield of 6%, Sutton owner backs
it was sold to a family trust following two very GCW experience
competitive rounds of bids for £3.901 million
reflecting a yield of 5.48%. GCW advised the shopping centres creation of three A3 units on
sellers, Marlborough Properties, who acquired the ground floor opposite
the block in 2012 for £3.2 million. ■ GCW has been retained to the existing Empire Cinema,
work with the new owner of improving the linkage
All of these deals were completed during Sutton’s St Nicholas shopping between the High Street
the run up to the EU referendum and the centre, AEW Europe, on a and St Nicholas Way. The
Brexit result did hamper a number of other range of asset management amalgamation of several
deals that were under offer at the time of the initiatives. units to create a large fashion
vote. However following initial uncertainty, anchor will follow.
GCW sees private investor confidence New lettings include
returning. jewellery retailer, Pandora MORE INFORMATION from
moving into the shopping
Business as usual centre in a 2,302 sq ft unit [email protected]
“Like a large number of agencies we lost a over ground and first floor on
couple of transactions with the i ncreased a 10 year lease at £50,000 pa.
uncertainty scaring off the buyer. However that Existing tenant Toy Barnhaus
initial reaction has now been tempered and it has upsized to a new 3,471 sq
appears that in the private investor sector it ft ground floor and basement
will be business as usual through the rest of the unit on a 10 year lease paying
year,” says GCW director James Pearson. a stepped rent averaging
£59,000 pa.
A cut to the base rate to 0.25% in early
August alongside other easing measures in The next phase of
place should strengthen the demand for the development will be the
100% prime retail assets in strong towns,
particularly those in the South East, that are Shoppers give Sailmakers
well let and to solid covenants, and in the £1 a thumbs up in Ipswich
million to £5 million lot range.
shopping centres driving up rents with an
“These assets, whilst offering sharp returns increase from £35-40 to
compared to other commercial property are ■ Retailers in Ipswich’s £45-£50 Zone A with scope
still favourable to the volatile stock market and refurbished Sailmakers to increase to £60 once the
historic low gilt yields. It is often commented shopping centre are enjoying centre is near full occupancy.
that in these markets we see a flight to prime increased sales as the centre
and that is happening now,” adds Pearson. enjoys a higher profile and The latest letting agreed
increasing footfall. by GCW sees plus-size ladies
Strongest demand retailer Yours take a 2,000
GCW sees the strongest demand from Year on year increases in sq ft store at £50,000 pa on
private investors in towns that have either sales turnover include 2.8% at a 10 year lease with a tenant
been rebased and provide the possibility of Poudland, 3% at Quiz and 4% break in the fifth year. The
rental growth or towns where rents were not at Top Shop. Other retailers deal follows four key lettings
affected by the downturn. Pearson points to such as coffee shop, BB’s earlier in the year.
competitive bidding situations in recent post- who has moved back into
Brexit transactions such as a property let to the centre are enjoying sales MORE INFORMATION from
Hobbs in Harrogate and another to Oasis in above target for the year.
Chichester as good examples of this demand. [email protected]
The improvements are
However whilst GCW expects demand from
private investors to continue, the challenge for
vendors is to get the best price.

“From our experience you can’t simply
rely on the quality of the asset to generate
the best sale figures. We believe that GCW’s
focus on developing in-depth sales stories

will be essential in continuing to attract
high levels of interest,” says Pearson.

“Our thorough understanding of the
retail market enables us to highlight selling
points that others might not recognise
and this will be essential over the next few
months,” he adds.

MORE INFORMATION from

[email protected]

GCW ■ Autumn 2016 5

www.gcw.co.uk

M&S purchase boosts Harlow
tenant mix with new brands

shopping centres eight of the nine new units a 2,400 sq ft store on a 10 year
bringing a host of new brands lease at £80,000 pa.
■ Nine new retail units into the centre.
created from a vacated Marks The deals include: Four more units are
& Spencer store adjacent ■ Exercise4less taking 30,000 under offer and one unit, a
to Harlow’s Harvey Centre sq ft across ground, first and prominent 3,665 sq ft store, is
have provided a boost for the second floor on a 15 year lease still to let.
centre. at £138,150 pa.
■ Jeweller F Hinds opening The redevelopment of the
GCW agreed the purchase in a 1,900 sq ft store on a 15 Marks & Spencer store creates
of the long leasehold of the year lease at £40,000 pa with a an improved entrance mall for
store for £2.9 million late last turnover top-up. the Harvey Centre and also
year for the centre owners ■ Food retailer Gyms Kitchen provides a direct link from the
Addington Capital. It then taking a 2,370 sq ft unit on a 10 traditional prime shopping
worked with the owners to year lease at £60,000 pa. area on Harlow’s Broad Walk
target retailers and establish ■ Health and wellbeing retailer into the centre.
a good tenant mix in the new Holland and Barrett agreeing
development. MORE INFORMATION from

It has agreed deals to let [email protected]

GCW delivers lease renewal briefing to clients

Professional Reported cases from this field “These judgements send a Judge was very critical of
are relatively rare and both message to both retailers and the quality and relevance of
■ The latest GCW client focused on the assumptions landlords in lease renewal evidence offered, stressing
seminar highlighted two which should be made when negotiations. They may well the importance of securing
recent legal rulings which valuing properties for a lease have an impact on the terms well-qualified witnesses when
may have a significant impact renewal. In both instances which can be agreed and are going to Court.
on future lease renewal it was decided that the already influencing some
negotiations. tenants should be allowed an negotiations,” says GCW GCW’s regular seminar
appropriate rent free period director, Clive Gillingwater.  series focuses on updating
The seminar focused on for fitting out in the valuation clients on key retail trends
the likely implications from approach adopted and that The cases also highlight and market developments.
two reported cases, Odey this should be reflected in the the importance of the
Asset Management v Telford terms agreed. evidence given by Expert MORE INFORMATION from
Properties and Britel Fund Witnesses. In one ruling the
Trustees Limited v B&Q. [email protected]

GCW secures Castlecap buys in northern retail centres
outdoor Deal
investment High Street West opposite include Shoe Zone and Toni
■ GCW’s high street team has Primark which acts as an & Guy alongside a number of
secured its first two deals for ■ GCW’s investment team entrance to The Bridges independent retailers.
retailer, Mountain Warehouse in has secured two successful shopping centre. The property
Sherbourne and Christchurch. purchases for property is made up of eight retail units MORE INFORMATION from
company, Castlecap over 0.41 acres and tenants [email protected]
Mountain Warehouse Investments in Oldham and
will open on Cheap Street, Sunderland for £3.25 million,
Sherborne in a store with reflecting an initial yield of
1,438 sq ft sales space on 12.84%.
ground floor and 426 sq ft on
the first floor on a new 10 year The property in Oldham
lease at £55,000 pa. It also is made up of four retail
takes a store on Christchurch units fronting onto the
High Street with 2,073 sq ft of pedestrianised High Street
sales space on a new 10 year close to Spindles Town Square
lease at an average rent of shopping centre. The property
£52,500 pa. is let to Heron Foods, Thomas
Cook Travel and William Hill.
MORE INFORMATION from
[email protected] In Sunderland, Castlecap
has purchased a property on
the pedestrianised section of

6 GCW ■ Autumn 2016

GCW directors support Opinion Martyn Pitt
property careers
Retailers – Beware of
corporate on a subject that they had new accounting rules
no knowledge of three days
■ GCW is increasing earlier. We fully support the Although not scheduled to come into force
its support for Reading need to harness this passion until 2019, a new leasing standard – IFRS 16
Real Estate Foundation’s and energy into the industry – is already starting to send tremors around
innovative programme to from a new wave of thinkers,” the retail industry. Analysts calculate that companies
widen access to the real estate says GCW director Simon such as Tesco and Greggs could have billions of debt
profession. The programme, Morris. added to their balance sheets, but it’s not just the
Pathways to Property, raises larger retailers that will be affected. Any business with
awareness of real estate “There’s a clear disconnect a portfolio of short-leasehold property should start
as a subject of study to between the industry and evaluating the impact of the new rules.
academically able pupils from consumers and Pathways
disadvantaged and non- In simple terms, IFRS 16 will require the majority
traditional backgrounds. The “We fully support the of operating leases to be brought onto the balance
project targets 16-17 year olds need to harness this sheet. Currently, they are treated as off-balance sheet
through a series of summer passion and energy financing and rent is simply written off each year as a
schools, presentations into the industry” charge against profit. With effect from 1 January 2019,
and work experience the net present value of all future rental payments
opportunities. to Property seems the ideal will be capitalised as an asset on the balance sheet
vehicle to try and rebalance and an equal amount treated as a liability.
GCW directors Simon this,” he adds.
Morris and Simon Horner In the future, rental payments will no longer
have been involved in GCW signed up to sponsor be treated as an expense against profit. Instead, a
making presentations to Pathways to Property for three provision for depreciation on the value of the asset
schools to promote careers years. It provides funding will be made as well as an interest charge on the
in the property industry and towards the programme, acts deemed liability. In practical terms, the cost effect
as a mentor on the degree as an industry ambassador of this will be front-end loaded and will result in
programme at Reading and hosts students for work profits being hit most in the early years of any new
University. Both took part experience in its London lease. What’s more, the liability will need to
in activities at this year’s office. Pathways to Property is be reassessed every time there are updates
summer school alongside now in its fourth year. during the lease term.
GCW surveyor Alex Ashe.
MORE INFORMATION from IFRS 16 is seen as being a way of
“The attendees were [email protected] creating a level playing field between those
motivated, intelligent, companies that borrow to buy an asset
engaging and seemed fearless and those that finance their principal
in putting forward arguments assets through lease agreements. It
also attempts to bring transparency to
a company’s accounts by revealing its
future financing obligations.

The standard could have significant
consequences for many retailers. With
rent being replaced by interest and
depreciation, reported levels of EBIT
and EBITDA will change dramatically.
This could affect both banking
covenants and any other items that are
linked to these profitability measures.
Similarly, accounting ratios – particularly
relating to gearing and interest cover
– will also be affected. Finally, the
accounting benefits of improved equity
and reduced debt currently brought about
by sale and leaseback transactions will be
negatively impacted, possibly bringing about
a reduction in these transactions.

Whilst 2019 might seem a long way off,
the potential impact of IFRS 16 means that
the retail property industry needs to begin
preparing for it now.

MORE INFORMATION from [email protected]

GCW ■ Autumn 2016 7

Q&A

Oli Horton was promoted to director in GCW’s specialist retail Big in Retail
investment team earlier this summer. He talks about his role at
GCW and what’s behind his successful career to date. KE Y CONTACTS
Shopping
How did you break into retail property? What can we see on your desk?
■ I’ve followed a very conventional route ■ Some fruit, a broken iPhone charger and, Centre Agency
and it’s worked well – a degree in Real in good GCW tradition, several completely Duncan Kite
Estate Management at Nottingham Trent unworn ties. David Gooch
including an industry placement year at Nick Warr
Churston Heard put me in a strong position Tell us something people
to get my first full-time role. might not know? Chris Hovington
■ As Hollywood Horton, I’ve fought and won Phil Michael
How did you arrive at GCW? two charity boxing matches. Each match Phil Fishwick
■ Via a speculative email to partner Fiona involves three, two-minute rounds and it’s
Nichols when I graduated. I was lucky with gruelling so I have to train intensively for Harry Wildsmith
timing as she had just made the decision several months beforehand to be prepared Rupert Rudkin
to recruit someone in the investment for the fight.
team. I knew that I wanted to work in retail High Street Agency
investment and was aware of GCW from my Describe your favourite day at work? Simon Morris
industry placement year. I did my homework ■ GCW’s 25th anniversary trip to the ski Gareth Storer
and got the job. resort of Morzine is a definite highlight.
The whole company of 28 surveyors and James Crittenden
Where did you learn your support staff enjoyed two days in the snow Patrick Bates
property skills? to mark the birthday.
■ After six years at GCW, I have to say I’ve Investment
learnt pretty much everything here. I joined And your favourite days Fiona Nichols
as a graduate, passed my APC exams after away from work? James Pearson
the first year and then was promoted ■ They are mostly about playing and
through surveyor, associate director and watching sport, I play rugby, football and ski Oli Horton
now director in the investment team. as much as I can as well as watching both Alex Matthews
my beloved Arsenal and Bath rugby teams
What’s the most satisfying Professional
deal you’ve done? continue to underperform. Consultancy
■ Buying the Toucan and Clive Gillingwater
Peacock retail portfolios for What was the last
£51.3 million for Varde Partners book you read? Lisa Manley
and APAM. It wasn’t just about ■ I was completely hooked on Alex Ash
the size of the deal. It created The Truth About the Harry
lots of knock-on work for Quebec Affair by Joel Dicker. Roadside Retail
GCW’s high-street agency and Simon Horner
professional teams as well as What’s your Tim Ashe
the investment team. favourite saying?
■ “It’s nil nil.” My fellow director www.gcw.uk
What’s your favourite property 020 7408 0030
on the Monopoly board? James Pearson and I repeat
■ Definitely Angel Islington. this after every completed
I lived there till I was 5 and transaction. It reminds
never understood as a us of playing sport
child why it was one of at school and that
the cheapest properties. you are only as
It definitely isn’t now in good as your
the real London market so next score.
maybe I could spot value at
an early age.