A smart approach to commercial assets Working in partnership with - PowerPoint PPT Presentation

A smart approach to commercial assets Working in partnership with Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Today’s speakers Bob Agnew Partner, Head of Commercial Real Estate Croftons Solicitors Gareth Kreike Managing Director Longden & Cook Real Estate Jonathan Drake Service Director – Business Development Salix Homes Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Opportunities… when RP is the OCCUPIER Bob Agnew, Croftons, & Gareth Kreike, Longden & Cook Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: break clauses Potential to… • Reduce rental overheads • Potential source of extra revenue Example: • 10 year lease • Annual rent £50K • Break option at end of year 5 Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: break clauses Exercising the break option • Terminates lease • Often used when premises are surplus to operational requirements Be careful with conditions! Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: break clauses ‘But we intend to remain in occupation…’ • RPs: strong tenant covenant = good for the money, valuable to landlords • Consider ‘selling’ break option back for a premium • Dependent on market, not always suitable • Benefits: – For landlord: tenant retained, reliable income protected, enhanced property value – For tenant: ‘free’ cash with zero impact on operations Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: lease re-gears A what? Renegotiation of lease during current term, often linked with extending occupation period. • Opportunity to leverage value as a strong tenant covenant. Benefits: – Landlord: nervous of losing a good tenant, rental void, and liability for business rates = keen to secure new lease – Tenant: committed to remain, earlier certainty of prolonged occupation, negotiate favourable incentives (eg rent-free period) • Look at re-gear two years before lease term expiry Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: sale & lease-back Less common, but an opportunity for some RPs. Applicable: • Where you own premises • Money/equity tied-up • With RPs seen as strong tenants, consider sale of freehold subject to a favourable leaseback to RP • Release substantial capital sum, albeit with ongoing rental liability. Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: sale & lease-back Issues? • Not suitable for all – particularly if the premises already secured to a lender But… • Can be a useful source of capital, with no disruption to operations Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

• Established 1891 • Specialising in the management and valuation of commercial and residential property So much to talk about and so little time! Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: dilapidations • What are your repairing obligations? • ‘Put and keep’ • When does the lease expire? • Are you intending to vacate? • Limitations on the potential claim • What actions should you consider? • Costs Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as occupier: rent reviews • What are they meant to achieve? • How do they work? • Legislation? • Agree/disagree • Third Party Determination • Costs Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Managing a commercial portfolio Jonathan Drake, Service Director – Business Development, Salix Homes Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Shop portfolio – what it isn’t Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Shop portfolio – what it is Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Shop portfolio – what it is • 45 shops • 15 voids • 3 illegal assignments • Lapsed leases • Tenancies at will • Community assets • Potential of £102,000 income p.a. Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

What have we done so far • New valuations • Lease renegotiations • Empty Homes property fund - £170,000 (x6 empty units) • Illegal assignments • Payment plans • Legal actions • Let 3 units Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

In conclusion Sweating the assets vs… Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Opportunities… when RP is the LANDLORD Gareth Kreike, Longden & Cook, & Bob Agnew, Croftons Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: property management • Repairing and other obligations of the Parties • Is there a lease in place? • Do you have a copy? • What is the rent? • Is it being paid? • Are there any arrears? Arrears collection? • Is it occupied? If so by whom? • When was it last inspected? Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: service charges • What are Service Charges (typical mixed use building)? • How should they be calculated? • What does the lease say? • Collection • Do you need to update your commercial leases to reflect reality or commercial sense (or both)? Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: outsourcing • Commercial Property Management and Service Charge operation – does it fit your organisation ? • Should you outsource? • Reduce costs, improve efficiency and effectiveness Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: valuation • Ensure that you are maximising your assets • Diarise rent reviews – always aim for even a modest uplift • Use specialist valuers for rental value advice and implementation of rent review procedures • Portfolio valuation – how much is the commercial element of your property portfolio worth? Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: reviewing leases Streamline your commercial property management • Are your leases readily accessible and up to date? • Are all key dates known/noted? Typical issues • Repair issue with H&S implications: RP doesn’t know who is responsible – out of caution, RP arranges and funds the repair • Mixed bag of tenants, different leases, inconsistency of obligations = difficult to manage Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: reviewing leases • We can review your leases, creating a dynamic spreadsheet, highlighting key dates and responsibilities • Low-cost exercise, and • Save unnecessary expenditure, reduce the management time allocated to managing your commercial lettings Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

RP as landlord: adopt a bespoke, ‘house style’ lease Advantages • Consistency of responsibilities • Harness internal input to ensure leases reflect organisational needs • Maximise recovery of costs on shared items, (eg maintenance of common parts) • Much easier to manage, helping preserve and enhance the value of, and returns from, your commercial stock Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Any questions…? Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities

Bob Agnew 0161 214 6185 / bob.agnew@croftons.co.uk Gareth Kreike 0161 737 0111 / gk@longdencook.com Jonathan Drake 0800 218 2000 / jonathan.drake@salixhomes.org Housing & Regeneration I Commercial Real Estate I Conveyancing I Charities