• Freehold restaurant & retail investment

• Town centre location

• Let to Pizza Express & Subway

• 60% of income secured against Pizza Express, SH Funds £525m

• 60% of retail income secured for in excess of 22 years

• A1/A3 planning consent

• 6.95% net initial yield

The historic town of Newport is the main retail location on the Isle of Wight. The subject property is situated in the heart of the town centre, at the corner of Pyle Street and Town Lane which acts as a thoroughfare linking Marks & Spencer, Morrisons and the bus station to the south with the prime retail pitch of High Street to the north.

Occupiers on Pyle Street include TK Maxx, The Cooperative Food, Santander and Lloyds Pharmacy. Other nearby occupiers include Peacocks, Jane Norman, New Look, H&M and Sports Direct. St Thomas’ Square is immediately to the north of the property and provides a range of shops, cafes and restaurants. There is a pay & display car park to the rear of the property accommodating approximately 35 vehicles, plus an NCP pay & display car park accessed via Pyle Street which provides 270 car parking spaces.

The property is a modern mixed use building of steel frame construction comprising two ground floor retail units and 16 residential apartments on three upper floors which have been sold off on long leases.

Internally, Unit 1 (Pizza Express) has been fitted out as a restaurant in the tenant’s typical corporate style providing for approximately 90 covers, with an open plan Pizzeria. The kitchen and ancillary areas, comprising a store room and staff area, are located to the rear of the unit.

Unit 2 (Subway) comprises a fast food restaurant fitted out in the tenant’s typical corporate style with an open plan preparation counter and providing for approximately 5 covers.

The property benefits from a service yard to the rear, accessed via Town Lane. Access to the residential upper parts is via a separate entrance fronting Pyle Street.

Freehold

Tenancy

Unit 1

Let to Pizza Express (Restaurants) Limited on effectively full repairing and insuring terms for a term of 35 years from 24th June 2003, expiring 23rd June 2038. Therefore, there is in excess of 22 years unexpired lease term. The current passing rent is £44,000 per annum (£159 per sq m / £14.76 per sq ft overall). The lease benefits from 5 yearly upwards only rent reviews, the next being on 23rd June 2018. It is assumed that the premises have an agreed gross internal area of 2,981 sq ft for rent review purposes.

Unit 2

Let to Subway Realty Limited on effectively full repairing and insuring terms, subject to a Schedule of Condition, for a term of 15 years from 2nd April 2013, expiring 1st April 2028 (12 years unexpired lease term). There is a tenant’s break option on 2nd April 2021, subject to 6 months’ prior written notice. The tenant pays rent monthly.

The current passing rent is £23,000 per annum and the lease is subject to the following fixed rental increases:

2nd April 2016 – 1st April 2017 £23,000 per annum
2nd April 2017 – 1st April 2018 £25,000 per annum
2nd April 2018 – 1st April 2023 £28,000 per annum

The lease is subject to an RPI-linked rent review (capped and collared at 1% & 4%) on 2nd April 2023.

The vendor will top up the rent at completion to £28,000 per annum which equates to £33.06 Zone A.

The landlord charges the retail tenants a further 5% of the contracted rent in respect of a management fee.

Upper Floors

The 16 residential apartments on the upper floors have all been let on 125 year leases commencing between October 2003 and July 2004, producing a total ground rent of £1,475 per annum. Notices under the Landlord and Tenant Act 1987 (As Amended) have been served on the residential tenants.

Following a Leasehold Valuation Tribunal ruling in November 2012, the service charge management for the property was appointed to John Rowell Estate Management. Further details are available in the Data Room.

Therefore, an investor will benefit from a total income of £73,475 per annum excluding the management fee.

The current passing rent for Unit 2 (Subway) of £23,000 per annum equates to £27.16 Zone A and the 'topped up' rent of £28,000 per annum equates to £33.06 Zone A.  We understand prime rents in Newport are currently in the region of £65.00 Zone A on the High Street with rent on St James' Square currently in the order of £45.00 Zone A.

Value Added Tax

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

Proposal

Our client is seeking £1,000,000 (One Million Pounds), subject to contract, reflecting a net initial yield of 6.95% assuming standard purchaser's costs of 5.75%.

Investment Considerations

1. An opportunity to acquire a freehold retail and leisure investment;

2. The property occupies a prominent position within Newport town centre;

3. 60% of the income is secured against Pizza Express (Restaurants) Limited - SH Funds £525m;

4. 60% of the retail income secured for in excess of 22 years;

5. The property benefits from A1 and A3 planning consent;

6. A purchase at the asking price reflects an attractive net initial yield;

7. The investment provides a purchaser with an attractive lot size.