Convenience Store and PFS Investment Let to 5A1 Covenant on Long Unbroken Lease

Dawlish Road, Exeter, Devon, EX6 8AA

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Property Type Investment
Availability For Sale
Size 2,036 sq ft
Freehold Price £1,492,000

Well located convenience store and BP branded petrol filling station

Location

The service station is located in Exminster approximately 3 miles south of Exeter city centre close to Matford. The City of Exeter is a major regional centre for the south-west peninsula and has a resident population of some 94,000. The city is located immediately adjacent to the M5 Motorway and has its own airport.

Key Points

  • Let for 20 years no breaks to WS Retail Limited with a guarantee from Palmer & Harvey McLane Ltd
  • Fixed uplifts at 2.5% per annum payable 5 yearly
  • Passing rent £95,000 per annum
  • Purchase price: £1,492,000
  • Net initial yield of 6% and a reversionary yield at year 5 to 6.78%

The site area is of a broadly regular shape extending to some 0.578 acres fronting the A379 which connects to the A38 and junction 31 of the M5 motorway.

The convenience store forms a rectangular shaped retail unit on ground floor with storage to the rear of the unit. The tenant, Central Stores, has recently rebranded to their standard corporate specification.  The unit is predominantly single storey building under a flat roof with a small first floor office. The fuel forecourt is protected by a steel-framed, illuminated canopy.

In addition to the convenience store there is also a generous area for car parking.

Convenience Store
Ancillary

2,306 sq ft 188 sq m

Tenure

Freehold.

Environmental

A phase II environmental report is available upon request.  Under the terms of the lease WS Retail Ltd and Palmer Harvey McLane Limited are both fully responsible for the environmental status of site.

Tenancy

The entire property is let to WS Retail Limited (trading as Central Convenience Stores) with a guarantee from Palmer Harvey & McLane Limited for a term of 20 years from 20th June 2016 on FRI terms and subject to 5 yearly upward only rent reviews with fixed uplifts at 2.5% per annum compounded throughout. The commencing rental is £95,000 per annum.

Rent

Year Rent Reversionary
Yield
June 2001 £104,089 pa 6.78%
June 2026 £117,767 pa 7.68%
June 2031 £133,242 pa 8.69%

Trading

We understand from our vendor client that the convenience store business currently has sales of £18,000 per week, with a fuel throughput of 2.7 million litres per annum. The new tenant Central Stores are forecasting an additional £7,000 per week from the convenience store by offering a more comprehensive range of products and 3 million litres pa for the fuel.

Market Conditions

There has been considerable activity in the forecourt sector over the last 3 years, with occupier demand intensifying, as well as an influx of private equity investment, which has had a positive influence on values.  The forecourt investment market has also witnessed yield compression driven by the attraction of long term leases, guaranteed rental growth and 5A1 tenant covenants.

VAT

This property is elected for VAT. It is assumed the purchase will be conducted by way of a TOGC.

Proposal

We are instructed to seek offers in excess of £1,492,000 (subject to contract) for the freehold interest, which reflects a net initial yield of 6% assuming purchasers costs at 6.1%.

Covenant

WS Retail Ltd (trading as “Central Stores”) operate appx 50 stores in the South West, they have been successfully expanding their business and are now showing a profit.  P&H guarantee the income for the whole 20 year term.

For the year ending April 2015:

Turnover - £36.6m
Gross Profit - £6.7m
Total Assets - £157,000

Palmer & Harvey McLane Limited (P&H) act as full guarantor throughout the lease term and own 100% of WS Retail Ltd who are the operating tenant. It is the UK’s number 1 delivered wholesaler, with an annual turnover of more than £4 billion, serving multiple, convenience, forecourt and CTN retail outlets.  

For the year ending April 2014:

Turnover - £4.175 billion
Gross profit - £161m
Net assets - £107m
Shareholders’ funds - £127m

Palmer & Harvey McLane Limited has 3,400 employees and Dun & Bradstreet rating of 5A1 representing a minimum risk  of business failure. Further information is available at www.palmerharvey.co.uk

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