• Rare and exciting opportunity

• Multi-let city centre restaurant opportunity

• Weighted Average Unexpired Lease Term - 12.21 years

• Manchester is the 2nd largest economy in England

• Discount to prime city centre rental levels

• Significant growth location

• Active Management Add-Value Opportunity

• Offers in excess of £5,000,000, subject to contract

• 7.0% Net Initial Yield

Manchester is the largest economy in the United Kingdom, outside London.

The city is recognised as a world-class location in a plethora of sectors including business, financial, employment, retail, leisure, sport, tourism, culture, learning and resident population. Global headquarters in Manchester and Greater Manchester include Ford Credit, Gazprom, Bank of New York Mellon, Google, Emirates, Etihad, PZ Cussons, The Co-operative Group and Umbro. UK and European HQ’s include Brothers, Kellogg’s, Adidas, Siemens and Totesport

The Manchester region continues to benefit from significant inward investment originating in global centres such as China, Europe, the Middle East and the United States. A number of strategic developments are progressing;

• MediaCityUK is a £500 million project comprising 40 acres. The first phase was completed in 2011 and is home to the BBC, ITV and University of Salford. MediaCityUK is supported by Manchester Investment Development Agency Service (MIDAS) which works with the 10 local authorities of Greater Manchester to attract inward investment into the region by promoting Manchester as a leading business location. For more information visit www.mediacityuk.co.uk.

• NOMA is the largest development in the United Kingdom at a cost of £800 million. A 20 acre mixed-use development of approximately 4 million sq ft in the city centre the first building is known as One Angel Square comprises 330,000 sq ft. Occupied by the Co-operative Group it was reported that the building was purchased by a Chinese state-owned fund for £142 million in 2013. For more information visit www.noma-manchester.com.

• Etihad Campus is a three phase project on the land adjacent to the Manchester City Football Club’s Etihad Stadium. The development is funded by investment from the United Arab Emirates.

• Airport City is one of the largest development schemes in the United Kingdom. With a reported £800 million investment by Chinese and Middle Eastern investors the proposals are for 5 million sq ft of office, logistics and manufacturing accommodation. For more information visit www.airportcity.co.uk.

• St. John’s is a mixed use development by Allied London on the former Granada Homes site. The developer is creating a new neighbourhood containing 320 hotel bedrooms, 560,000 sq ft of workspace, 240,000 sq ft of retail and 13 acres of public realm. For more information visit stjohnsmanchester.com.
  

• Mayfield is a proposed £850 million mixed –use community regeneration project on a 24 acre site adjacent to Piccadilly station. The site will provide 1,300 homes, 800,000 sq ft of office space, a 350 bedroom hotel, retail and leisure facilities and a new city park. U+I has been selected as the development partner alongside Manchester City Council and Transport for Greater Manchester.

The Northern Powerhouse is an initiative which proposes to boost economic growth across the north of England with Manchester at its heart. The proposal involves improvements to housing, transport links, investment in science and innovation and planning policies including proposals for HS2 and HS3 high speed rail links. An elected Mayor of Manchester will be put in place who will have significant devolved powers.

The city is major retail and tourist destination and is the United Kingdom’s third most popular city for international visitors. Tourism is estimated to provide an additional multi-billion injection to the economy of Manchester.

The residential market in Manchester has experienced significant growth in terms of population, price and rental. The city centre is currently one of the most interesting residential development markets in the country with increasing numbers choosing to live in the city centre which has spawned a considerable increase in development in both the sales and letting sectors. Manchester also has one of the largest student campuses in Europe with four universities having approximately 185,000 students.

Manchester is an established global sporting and cultural city with two world class football teams in Manchester City and Manchester United, a test cricket ground at Old Trafford, the Manchester Arena which is visited by over £1m people a year at music and sporting events, the BBC Philharmonic, The Halle Orchestra as well as various museums and galleries.

Manchester’s restaurant market continues to become increasingly cosmopolitan and sophisticated reflected in increased headline rents, some of the highest in the country outside of London.

Within Manchester city centre the prime locations are Corn Exchange, Deansgate and Spinningfields. The iconic Grade II listed Corn Exchange re-opened in July 2015 following a multi-million pound refurbishment and is home to a large number of restaurants including Byron, The Cosy Club, Pho, Pizza Express, Vapiano and Wahaca. We understand the headline rents achieved are circa £50 per sq ft. For more information visit cornexchangemanchester.co.uk

Deansgate is one of Manchester’s main streets and is home to various restaurants including The Living Room, Hawksmoor, Evuna, and Deansgate Lock as well as a number of bars and also All Star Lanes. We understand current prime rental levels on Deansgate sit at circa £40 per sq ft.

The Ivy has recently announced it is opening at Spinningfields cementing the location as Manchester’s luxury dining quarter. We understand that headline rents between £35 per sq ft and £40 per sq ft have been achieved and current operators include Manchester House, The Refinery, Comptoir Libanais, The Oast House, The Alchemist and Iberica.

Other parts of the city are emerging too as increasing numbers of independent restaurateurs and bar operators look to gain a foothold maintaining the strength of the occupier market. The Northern Quarter for example is a new and upcoming area favoured by similarly new and upcoming operators with rental values between £10 per sq ft and £15 per sq ft.

At the time of its construction in 2004 The Quadrangle was reportedly Manchester’s largest mixed-use development of its type comprising 228 apartments, commercial accommodation and a secure underground car park all designed around a central courtyard.

The interest for sale is a long lease of the commercial areas and the basement car park. The commercial accommodation comprises a total of 11 units fronting Chester Street and Hulme Street of which 8 are the main income generating units, including Nando's, with 2 units which have been sold off and an office unit which is not a properly designated lettable area. In addition, there is a resident’s car park which is for the sole use by the commercial and residental tenants.

The scheme provides attractive, well configured accommodation arranged over ground, mezzanine and first floors, fitted out the current tenants’ trading styles. Attractive outside customer seating benefits the units fronting Chester Street including Nando’s, Bakchich and Zouk. Access to the car park is from Measham Mews via Hulme Street.

The property has been measured by Lane & Frankham and provides the following gross internal floor areas;

The measured survey report is available to download.

*Denotes tenants improvement

The property benefits from planning permission for a mixed use development comprising A1/A2/A3 uses with construction of 228 apartments with associated car park and a new multi storey car park.

The property is let to 8 restaurant tenants and 1 office tenant plus income from 2 let car parking spaces in accordance with the tenancy schedule which is available to download.

The leases are drawn on effective full repairing and insuring terms via a service charge contribution.

The total gross annual rental income is £386,914 and the total net receivable income after deduction of service charge shortfalls is currently £371,509.71 per annum.

In summary;

The opportunity offers a purchaser an excellent opportunity to acquire a very interesting investment in one of the United Kingdom’s major cities providing ongoing asset management prospects in a significantly improving area of Manchester city centre.

The property is located in a major growth location with a number of surrounding significant development projects underway which will attract new businesses, occupiers and residents to this part of the city centre providing opportunities for a purchaser to replace tenants and drive rents forward therefore enhancing value at the property, by both rent improvement and yield shift.

Nando’s has recently completed a major re-modelling of their unit at a cost of approximately £1m plus fit-out we understand, demonstrating their commitment to the property which should act as a catalyst for attracting stronger covenants.

Based upon our opinion of ERV we suggest the rental value for the ground floor of the property is in the order of £382,672 per annum reflecting £17.50 per sq ft for the Chester Street units and £23.00 per sq ft for the Hulme Street units.

In the future it may be possible to rentalise the first / second floor areas within the restaurants and by applying half rent to the mezzanine’s the total rental income could rise to £493,058 per annum.

These rents are a significant discount to the top rents in the city as outlined earlier.

A Service Charge Schedule is available to download outlining the service charge per unit.

The service charge due to the Freehold Management Company by the owner of the commercial element is currently £16,521 per annum which is recovered from the commercial tenants on a pro-rata basis by floor area.

There are service charge caps in place regarding certain commercial units/occupiers, as follows;

• Unit 3 - Nando’s

Have a straightforward cap founded on a base figure of £2,572.50 plus VAT from 2007 which is increased annually in accordance with RPI. The cap currently stands at £3,302.40 plus VAT which is updated on reconciliation. The true service charge apportions if there was no cap in place would currently be £13,810.62 plus VAT hence there is a landlord shortfall of £10,508.22 plus VAT.

• Unit 9 – Manchester Alliance Church

Under their long leasehold, management fees are restricted to 10% of expenditure, they are not required to make any contribution towards the maintenance of the residential lifts and no VAT is payable on their proportion. They currently pay £7,990.13 based on a true service charge apportion of £10,251.22 with the landlord making up the shortfall of £2,261.09 (including VAT).

Zouk Restaurant Services Limited, Yongzhi Shao and P. Stone & A.J. Bell (PP) Trustees Limited also have a 10% cap on management fees however this has never been applied to the service charge account since its existence and our clients managing agents have continued with the same arrangement they inherited from their predecessors.

In summary;

The last 3 years-service charge budgets are available download.

The property has been registered for VAT, however, it is envisaged the transaction will be treated as a Transfer of a Going Concern (TOGC).

1. A rare and exciting opportunity to acquire a multi-let leisure investment in a major growth location in Manchester city centre;

2. Manchester is the largest economic centre in England outside London and is the fastest growing regional capital in the United Kingdom;

3. Multi-let to tenants including Nando’s providing a diverse and interesting spread of income with an WAULT of 9.83 years to breaks and 12.21 expiries.

4. In addition to providing a Weighted Average Unexpired Lease Term of over 12 years the property offers a purchaser excellent opportunities to actively manage by improving tenant mix and enhancing the passing rents;

5. The property is located in a strategic part of the city and the immediate surrounding area is set to benefit significantly from a number of new development and regeneration projects;

6. Nando’s has recently completed a major re-modelling of their unit demonstrating long term commitment to the property and the location;

7. A purchase at the asking price will provide an investor with an attractive net initial yield with potential to significantly improve.

8. A purchase at the asking price would provide a total potential reversionary yield of 9.25%.