• Situated within London’s Royal Borough of Kingston Upon Thames

• Newly developed supermarket investment

• Secure covenant - Co-Operative Group Food Limited

• Highly secure income – Pre-Tax Profits £207.9 million

• New 15 year lease from 2019, without breaks

• 5 yearly rent reviews in line with CPI

• £2,650,000, subject to contract

• 5.0% net initial yield

The subject property occupies a prominent position fronting Villiers Avenue, at its junction with Lower Marsh Lane. Surbiton Station is 1.3 km (0.8 miles) to the south-west and Kingston Upon Thames Station is 1.6 km (1 mile) to the north.

The property provides the retail offering for a wider residential scheme, Villiers Point, a flagship new development comprising of 39 private and 10 affordable homes ranging from 1-bedroom maisonettes to 4-bedroom family houses, set within a landscaped setting.

The property not only benefits from being in a densely populated residential area but is also adjacent to a local retail parade with occupiers including a newsagents, café and bakers.

Kingston University Campus and Halls of Residence are within close proximity to the subject property. Hampton Court Palace and Bushy Park, home to the famous Diana Fountain, are also a short distance away.

The property comprises a newly constructed building over ground and three upper floors, with the investment being the ground floor supermarket. Practical completion occurred in August 2019 and the supermarket has been fitted out by the tenant to a high standard in their usual corporate style.

The sale includes the car park area to the front of the property, providing 7 car parking spaces.

The upper floors comprise ten apartments. Whilst legally part of the sale, the tenure section below explains this section in relation to the investment.
The purchaser will be provided with a Checkmate insurance policy in relation to the construction on completion.

A Phase I Assessment was carried out by Delta Simons in October 2019 which concluded that “the Site represents an overall investment opportunity with a Low risk” and “flood risk at the Site is considered to be Low”. A copy of this report is available to download and will be assigned to a purchaser on completion at a cost of £2,845 + VAT.

The investment ownership is in effect a freehold plus a “virtual” freehold given the long leasehold arrangement as explained below.

SUMMARY:

• The entire building is held by the vendor on a freehold basis (and the freeholder also has a 125 year lease over the car park and road area to the front of the retail unit).

• The entire building is let to “Paragon”, a housing association on a 125 year long lease.

• “Paragon” sublet the commercial element to freeholder on a 125 year (less two days) long lease

• The long-leaseholder (also the freeholder), then let the commercial element to Co-Operative Group Food Limited (15 year lease term commenced in 2019 and incorporates a tenant option for a further 15 year term)

The vendor is selling both the freehold and long leasehold of the commercial element (as well as the lease of the car park and road area), thereby removing any management input for the freeholder, given Paragon have a full repairing and insuring obligation.

At the end of the Paragon long lease, the entire accommodation reverts to the freeholder since residential property is excluded from statutory rights to renew, as with commercial leases. Further, the property is not occupied by Paragon since housing associations provide residential accommodation, hence the tenant has no rights of renewal.

DETAIL:

The whole building is let by the freeholder to Paragon Asra Housing Limited (‘Paragon’) on a full repairing and lease for a term of 125 years from 8 February 2019 at a rent of £1 per annum. Paragon sub-let the residential accommodation as housing association accommodation, comprising 10 flats.

Paragon have granted a lease of the commercial section on the ground floor to the vendor, for 125 years from 8 February 2019 at a rent of £1 per annum. The lease provides for the long leaseholder of the commercial section to pay a service charge, and contribute a fair proportion to the costs of insuring the entire premises.

The vendor, as the long leaseholder of the commercial section, has let the accommodation for a term of 15 years (with a tenant option for a further 15 years) to Co-operative Group Food Limited from 7 August 2019 at an initial rent of £140,000 per annum. The vendor’s obligations to pay the service charge and insurance in the leaseback described above are passed on to The Co-operative Group Food Limited through the Co-op’s lease.

In relation to the car park and road area to the front of the retail unit, the freehold of this area is owned by Thames Water and let to the freeholder for a term of 125 years from 8 December 2016 at a peppercorn rent. Both Paragon as long leaseholder and Co-Op as occupational tenant have been granted rights by the freeholder over this area. The long leasehold interest also forms part of the sale.

The net effect is a freehold sale of the property, and a long leasehold of the car park area, and the long lease of the commercial element (subject to the lease to the Co-op) with a purchaser deriving secure income from Co-Operative Group.

The property is well secured to Co-Operative Group Food Limited (No. 26715R) which has reported the following figures;

The company is a wholly owned subsidiary of Co-operative Group Limited.

With origins tracing back to 1844 the Co-Operative Group has become one of the world’s largest consumer co-operatives and the largest mutual business in the United Kingdom, with interests across food, funerals, insurance, electrical and legal services. Co-operative Group is the UK’s fifth biggest food retailer with more than 2,500 local convenience and medium-sized stores, employing around 70,000 people.

For further information visit www.co-operative.coop.

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

We are seeking offers in the region of £2,650,000 (Two Million, Six Hundred and Fifty Thousand Pounds), subject to contract, reflecting a net initial yield of 5.0%, assuming standard purchaser’s costs of 6.40%.

Please note that a purchaser will be re-charged the cost of the searches and surveys which are provided in the data room.

1. An opportunity to acquire a new supermarket investment;

2. The investment provides highly secure from the covenant of Co-Operative Group Food Limited;

3. New 15 year lease from 2019 with no breaks;

4. The lease benefits from rent increased in line with changes to the Consumer Price Index (capped and collared annually between 1% and 3%.;

5. Situated within the affluent London borough of Kinston Upon Thames, with good communications to Central London and the M25 Motorway;

6. The property forms the retail offering for a flagship new residential development;

7. A purchase at the asking price will provide an investor with an attractive net initial yield;

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