• 100% prime retailing pitch, within the historic walls of Chester city centre

• Let until July 2026 to the undoubted covenant of Telefonica UK Limited (Net Assets £2.65bn) trading as “O2”

• Rent rebased in March 2020 - 25% below previous prime rental levels

• Tenant has committed to a new lease during COVID-19

• The only O2 Store in Chester

• Chester is the 3rd best place to live in the 2020 UK Hot Housing Index (Source: Property Week/CACI)

• Freehold

• Potential future redevelopment of the upper parts, subject to consents

• Rare opportunity to acquire in a world-famous location

• £1,350,000, subject to contract

• 7.0% Net Initial Yield

Chester is one of the region’s premier retail destinations, boasting an attractive and appealing retail environment. Its retail heart is focused on Eastgate Street, extending into Foregate Street and Northgate Street. There are a number of well-known tenants with a presence here including Primark, Boots, Marks and Spencer and Hickory’s Smokehouse – the US company’s first opening in the UK was in Chester.

The pedestrianised section of Eastgate Street that falls within the historic Roman walls is regarded as the true prime pitch where the subject property is situated.

Chester is also famous for its Row Level trading format, with its principal thoroughfares accommodating the distinctive two-level properties known as “The Rows”. This provides a unique and appealing retail environment that attracts up market, boutique style retailers, shoppers and tourists alike.

The property occupies a 100% prime trading location on the pedestrianised Eastgate Street, close to the junction with The Cross. The property sits within arguably the strongest footfall area inside the city, lies opposite to Mappin & Webb and Jo Malone with Jack Wills and Fat Face in close proximity. During the recent “Eat Out to Help Out” scheme, of the 155 restaurants registered in the city of Chester, the average number of attendees per restaurant was 17% higher than the national average, highlighting the strong draw of the city centre (Source: chester.westcheshiregrowth.co.uk).

The subject property is the only O2 store within Chester city centre. The nearest branch is some 5 miles (8 km) to the west at Broughton Shopping Park with the next closest being some 7 miles (11 km) to the north in Ellesmere Port.

The property comprises a mid-terrace retail building with two self-contained retail units, one on Street level and one on Row level. Constructed in part 18th century and part mid 20th century, the building is formed of brick masonry with a pitched slate roof with timber sash windows.

At Street level, the property provides ground floor retail accommodation with storage/ancillary accommodation on the first floor at the rear.

There is further self-contained retail accommodation at Row level, with sales and ancillary/storage at first and second floor levels. The third-floor front of the property was previously used as a residential flat which is no longer in use, providing a buyer with an opportunity to redevelop this area and provide residential accommodation. There is a small service yard at the rear of the property, accessed via Leen Lane.

The property has been fitted out by O2 to their usual corporate style.

The entire property is let to Telefonica UK Limited t/a O2. The Row level retail premises have previously been sub-let but are currently vacant.

According to the Valuation Office website, the rateable value for the property is as follows;

The business rates multiplier is currently 51.2 pence per pound and the small business rate multiplier is 49.9 pence per pound for rateable values below £51,000.

As the property is Grade II Listed there are no empty business rates payable.

The property has been measured by BKR Floor Plans and provides the following accommodation:

A set of floor plans is available to download and will be re-addressed to a purchaser at a cost of £495 + VAT.

The entire property is fully let to Telefonica UK Limited, trading as O2, until July 2026 at £100,000 per annum.

The tenant has been in occupation since 2006. The current lease runs from 28th July 2016 until 27th July 2021. A reversionary lease was signed in March 2020 whereby the term was extended to 27th July 2026 and the rent was reduced from £128,750 per annum to £100,000 per annum (a 22% reduction).

The passing rent of £100,000 per annum equates to a Zone A rate of £155 per sq ft, allowing for £5.00 per sq ft on the first floor and £15,000 per annum in respect of 11 Eastgate Row North.

The lease is subject to a rent-free period of 6 months expiring on 31st July 2021. The tenant is also due to receive a rent free period of 3 months upon completion of shop fit works (subject to fit-out works being completed by the tenant with a long stop date of 30th March 2022). The vendor will ‘top-up’ the income by an appropriate adjustment on the completion sum in order that a purchaser does not suffer an income shortfall.

Under the terms of the lease, the tenant is liable to keep the premises in good and substantial repair and condition throughout the term. The tenant is also liable to maintain and repair the row stall and steps as defined in Section 80 Part XI of the Cheshire County Council Act (Rows and Stalls) 1980. A copy of the Act can be found here.

The tenant has an excellent payment record. All rents are paid and up to date, with no arrears.

We have analysed the passing rent of £100,000 per annum to reflect £155 Zone A on 17 Eastgate Street. Given the reversionary lease was only agreed in March 2020, we consider the property to be rack rented.

However, given prime rents in Chester have previously reached £210 Zone A, we believe the re-based rent offers excellent value and positive prospects for future growth given the passing rent is over 25% below previous prime levels within the city.

The property has been elected for VAT. It is anticipated that the sale will be treated as a Transfer of a Going Concern (TOGC).

Although they are demised to O2 within their lease, the tenant does not occupy 11 Eastgate Row North. Historically it had been sub-let to And Albert Fair and is now vacant. This could provide a buyer with an opportunity to take these premises back from O2 and let to a commercial tenant or consider a residential conversion of the second and third floors.

Subject to consents, it is suggested the second and third upper floors could potentially provide residential accommodation with an exit value in the region of £300,000 (£250 per sq ft / £2,690 sq m capital value) after refurbishment, providing an opportunity to enhance value.

1. An opportunity to purchase a highly secure investment within the internationally renowned city of Chester

2. Chester is a major tourist attraction with 14 million visitors in 2018. The property is located in a 100% prime position;

3. Let to the Undoubted covenant from Telefonica UK Limited (Net Worth £2.65bn) until July 2026;

4. The property is the only O2 store in Chester;

5. Grade II Listed property in Chester’s Historic Conservation Area;

6. The tenant has recently renewed their lease proving their commitment to the property;

7. Rent rebased from £128,750 pa to £100,000 pa thereby offering good prospects for future rental growth;

8. New rent is 22% less than previous rent;

9. An opportunity to acquire a rare Freehold;

10. Future redevelopment potential of the upper parts, subject to consents.

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