the problem: A client was looking for a particular investment to expand his portfolio.
We located a perfect fit in a small parade of secondary shops in a strong location in a large residential area, immediately adjacent to a mainline train station in Bexleyheath. A large loading / parking yard to the rear with a detached but derelict building, once used as a store but now redundant, made this an attractive prospect.
On the ground floor there was a Co-op convenience store plus four smaller shops in the parade and a local business was using the entire first floor.
We identified some rental growth from the smaller local shops on review / renewal with potential rental and capital appreciation to be realised by better use of the large first floor of the property and the derelict building.
The tenant of the first floor was paying a low, market rent. However, the value of this space could be significantly enhance by converting to residential accommodation.
A small scheme of flats could also be built to replace the derelict building.
We successfully purchased the property on behalf of our client. The small retail units provide a good and relatively secure income for the client. They have a strong covenant in the convenience store, but due to the more local nature of the other shops in the parade the income return is still attractive when compared with other investments.
There is a good spread of risk due to the number of tenants and the variety of unit sizes.
We are reviewing the possibility of a residential scheme in the upper parts and the rear yard, which would significantly enhance the rental income, and also its capital value.
We will undertake a schedule of works to improve the condition, appearance and longevity of the building in order to achieve the best rents for the shops. All rents will be reviewed and all leases renewed in a timely fashion to ensure the client benefits from any uplift in the market rent.
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