A smart approach to commercial assets Working in partnership with - - PowerPoint PPT Presentation

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

A smart approach to commercial assets

Working in partnership with

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Today’s speakers

Bob Agnew

Partner, Head of Commercial Real Estate Croftons Solicitors

Gareth Kreike

Managing Director Longden & Cook Real Estate

Jonathan Drake

Service Director – Business Development Salix Homes

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Opportunities…

when RP is the OCCUPIER

Bob Agnew, Croftons, & Gareth Kreike, Longden & Cook

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: break clauses

Potential to…

• Reduce rental overheads
• Potential source of extra revenue

Example:

• 10 year lease
• Annual rent £50K
• Break option at end of year 5

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RP as occupier: break clauses

Exercising the break option

• Terminates lease
• Often used when premises are surplus to
• perational requirements

Be careful with conditions!

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RP as occupier: break clauses

‘But we intend to remain in occupation…’

• RPs: strong tenant covenant = good for the

money, valuable to landlords

• Consider ‘selling’ break option back for a premium
• Dependent on market, not always suitable
• Benefits:

– For landlord: tenant retained, reliable income protected, enhanced property value – For tenant: ‘free’ cash with zero impact on operations

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RP as occupier: lease re-gears

A what? Renegotiation of lease during current term,

• ften linked with extending occupation period.
• Opportunity to leverage value as a strong tenant
• covenant. Benefits:

– Landlord: nervous of losing a good tenant, rental void, and liability for business rates = keen to secure new lease – Tenant: committed to remain, earlier certainty of prolonged occupation, negotiate favourable incentives (eg rent-free period)

• Look at re-gear two years before lease term expiry

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RP as occupier: sale & lease-back

Less common, but an opportunity for some RPs.

Applicable:

• Where you own premises
• Money/equity tied-up
• With RPs seen as strong tenants, consider sale of

freehold subject to a favourable leaseback to RP

• Release substantial capital sum, albeit with ongoing

rental liability.

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RP as occupier: sale & lease-back

Issues?

• Not suitable for all – particularly if the

premises already secured to a lender But…

• Can be a useful source of capital, with no

disruption to operations

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• Established 1891
• Specialising in the management and

valuation of commercial and residential property So much to talk about and so little time!

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: dilapidations

• What are your repairing obligations?
• ‘Put and keep’
• When does the lease expire?
• Are you intending to vacate?
• Limitations on the potential claim
• What actions should you consider?
• Costs

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RP as occupier: rent reviews

• What are they meant to achieve?
• How do they work?
• Legislation?
• Agree/disagree
• Third Party Determination
• Costs

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Managing a commercial portfolio

Jonathan Drake, Service Director – Business Development, Salix Homes

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Shop portfolio – what it isn’t

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Shop portfolio – what it is

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Shop portfolio – what it is

• 45 shops
• 15 voids
• 3 illegal assignments
• Lapsed leases
• Tenancies at will
• Community assets
• Potential of £102,000 income p.a.

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What have we done so far

• New valuations
• Lease renegotiations
• Empty Homes property fund - £170,000

(x6 empty units)

• Illegal assignments
• Payment plans
• Legal actions
• Let 3 units

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In conclusion

Sweating the assets vs…

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Opportunities…

when RP is the LANDLORD

Gareth Kreike, Longden & Cook, & Bob Agnew, Croftons

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: property management

• Repairing and other obligations of the Parties
• Is there a lease in place?
• Do you have a copy?
• What is the rent?
• Is it being paid?
• Are there any arrears? Arrears collection?
• Is it occupied? If so by whom?
• When was it last inspected?

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RP as landlord: service charges

• What are Service Charges (typical mixed

use building)?

• How should they be calculated?
• What does the lease say?
• Collection
• Do you need to update your commercial

leases to reflect reality or commercial sense (or both)?

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RP as landlord: outsourcing

• Commercial Property Management and

Service Charge operation – does it fit your

• rganisation?
• Should you outsource?
• Reduce costs, improve efficiency and

effectiveness

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RP as landlord: valuation

• Ensure that you are maximising your assets
• Diarise rent reviews – always aim for even

a modest uplift

• Use specialist valuers for rental value

advice and implementation of rent review procedures

• Portfolio valuation – how much is the

commercial element of your property portfolio worth?

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RP as landlord: reviewing leases

Streamline your commercial property management

• Are your leases readily accessible and up to date?
• Are all key dates known/noted?

Typical issues

• Repair issue with H&S implications: RP doesn’t

know who is responsible – out of caution, RP arranges and funds the repair

• Mixed bag of tenants, different leases,

inconsistency of obligations = difficult to manage

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RP as landlord: reviewing leases

• We can review your leases, creating a

dynamic spreadsheet, highlighting key dates and responsibilities

• Low-cost exercise, and
• Save unnecessary expenditure, reduce the

management time allocated to managing your commercial lettings

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RP as landlord: adopt a bespoke, ‘house style’ lease

Advantages

• Consistency of responsibilities
• Harness internal input to ensure leases reflect
• rganisational needs
• Maximise recovery of costs on shared items,

(eg maintenance of common parts)

• Much easier to manage, helping preserve

and enhance the value of, and returns from, your commercial stock

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Any questions…?

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Bob Agnew

0161 214 6185 / bob.agnew@croftons.co.uk

Gareth Kreike

0161 737 0111 / gk@longdencook.com

Jonathan Drake

0800 218 2000 / jonathan.drake@salixhomes.org