Unlocking value – Cutlers Gate, Sheffield
When we acquired this 61,000 sq ft grade A office building, it was let for a further 10 years to Capita Business Services Limited. The building was completed in 2011 and provides modern office accommodation over ground and seven upper floors with 131 car parking spaces. It is occupied by Capita Hartshead, the pension administration subsidiary.
We approached the tenant with a proposal to regear its lease in order to improve our income stream. A deal was struck for a new reversionary lease which provided a term certain of 25 years from completion. The five-yearly, upward-only rent review provisions were replaced by annual uplifts in line with the Retail Prices Index (RPI) throughout the term. The RPI increase will be capped at 3.00% per annum and collared at 0.00% per annum.
The lease remains in the name of Capita Business Services Limited, but we negotiated a guarantee from Capita plc for the duration of the term, giving us a further layer of security.
The transaction had a positive impact for us. At completion, it increased the weighted average unexpired lease term (WAULT) to lease expiries of our portfolio from 6.36 years to 9.12 years and it increased our net asset value (NAV) by £1.3 million.
This is a good example of our asset management style: unlocking value from a ‘dry’ asset through understanding the tenant’s needs and creating a robust and attractive income stream.