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The Oystercatcher Portfolio A Diverse Residential Investment Portfolio

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Page 1: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

TheOystercatcher

Port folio

A Diverse Residential Investment Portfolio

Page 2: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

2 | Oystercatcher Portfolio

The Oystercatcher Portfolio

Executive Summary

A stabilised regional portfolio comprising seven residential

assets. This is a rare opportunity to buy into a Private

Rented Sector portfolio consisting predominately of

freehold, unbroken blocks. The portfolio offers both a

diverse income stream and the opportunity of a break-up

to the owner occupier and buy-to-let investor markets.

Following a period of circa 18 months of extensive

refurbishment, the owners have appointed Savills (UK)

Ltd to market the Portfolio for sale.

Portfolio Performance

The occupancy level as at 1st September 2015 was 97%.

As at the same date the passing rent per annum shows

a 7.65% increase on the total gross income received

over the course of 2014.

The Portfolio is managed by Touchstone Residential

Ltd. In total the operating costs including maintenance,

management, utilities and write offs over the year

01/06/14 - 31/05/15 accounted for 38.4% of the estimated

rental value.

The current owners have undertaken a programme of

refurbishment over the last year to position the portfolio

for sale, this has significantly increased the occupancy

rate from 85% as at 31st August 2014 to 97% as at 1st

September 2015.

We would anticipate an incoming investor over the short

to medium term to be able to further reduce the gross to

net income leakage closer to the IPD index for ‘All AST’s’

(34.3% in 2014).

The table below sets out the operating cost items as a % of

the estimated rental value (a more detailed breakdown is

contained within the dataroom):

Annual Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £173,849 20.1%

Management £101,891 11.8%

Utilities £22,326 2.6%

Ground Rent & Service

Charge£27,915 3.2%

Write Offs £219 0.03%

Other & Unallocated £5,806 0.7%

Total £332,006 38.4%

The Opportunity

The Portfolio represents an opportunity to acquire a well

balanced residential investment portfolio situated across

England. The assets are located across the North West,

North East, West Midlands, East Midlands and Yorkshire &

Humberside. It provides an incoming investor with a core

income stream, whilst also being well positioned for an investor

to benefit from anticipated future house price growth. This

gives an incoming investor the opportunity to also pursue

a phased break-up of the individual apartments to both the

owner occupier and buy-to-let markets, with the added benefit

of the creation of ground rent income on the freehold assets.

The assets are located in strong local rental locations close

to a mix of universities, employment and leisure hubs. The

apartments are offered for rent at competitive price points

in the local markets. The Portfolio presents the opportunity

for an incoming investor to acquire the assets beneath

reinstatement value.

The Residential Market

Hometrack House Price Cities Index for July 2015 reports

an average UK year on year increase of 6.2%. The report

highlights that the “northern powerhouse” cities, including

Manchester, Newcastle and Sheffield, have registered a

pick-up in growth since 2013, however average prices are

still below those of 2007. Growth over the last 3 months

(+4.3%) is at the fastest rate for 11 years. There remains further

upside for house prices in regional cities outside London. The

table below reflects Savills’ capital growth forecast for the

next 5 years.

Savills House Price Forecast

2015 2016 2017 2018 2019 5 year

North East 1.0% 3.5% 3.5% 2.0% 2.0% 12.6%

North West 1.0% 4.0% 4.0% 2.0% 2.0% 13.7%

Yorkshire & Humberside 1.5% 4.5% 4.5% 2.5% 2.5% 16.5%

West Midlands 2.0% 4.5% 4.5% 3.0% 3.0% 18.2%

East Midlands 2.0% 5.0% 5.0% 3.0% 3.0% 19.3%

Source: Savills Research, 2015

The rising demand for rented housing over the past decade

and lack of new housing supply has driven the price of

housing beyond the reach of a large segment of the

population. Our expectation is that the PRS will continue to

expand for the remainder of the decade, to 6.6m households

in the UK by 2019, which is around 250,000 new PRS

households per annum. Savills rental growth forecast for the

UK (excluding London) for the next 5 years is as follows:

Savills Rental Growth Forecast

2015 2016 2017 2018 2019 5 year

Mainstream Markets (excluding London) 2.0% 2.5% 3.0% 3.0% 3.5% 14.8%

Source: Savills Research, 2015

Page 3: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Oystercatcher Portfolio | 3

Summary

Block Location TenureNo. of units

Passing Rent/PA

ERV/PA ERP

1 42-56 Caversham Place Sutton Coldfield Leasehold 8 £64,560 £69,600 £1,000,000

2 Eastwood & Stoneleigh Court Manchester Freehold 26 £179,820 £185,640 £3,050,000

3 Sharrow View Sheffield Freehold 20 £133,560 £138,000 £2,340,000

4 91-107B Gell Street Sheffield Freehold 26 £167,280 £179,400 £2,920,000

5 9-24 Foundry Court Newcastle Freehold 16 £87,036 £91,200 £1,350,000

6 1-22 Langley Mere Newcastle Freehold 22 £100,860 £123,600 £1,680,000

7 Manor Court Grimsby Leasehold 16 £76,500 £78,750 £1,240,000

Total 134 £809,616 £866,190 £13,580,000

ERV - Estimated Rental Value. The amount a property in good, lettable condition can be rented for annually on the open market.

A1(M)M40

M6

M180

A1(M)

M1

London

Manchester

Sheffield

Birmingham

Sutton Coldfield

Grimsby

Newcastle

42-56 Caversham Place 1

Eastwood & Stoneleigh Court2

91-107B Gell Street

8-46 Sharrow View

4

3

9-24 Foundry Court

1-22 Langley Mere

5

6

Manor Court 7

ERP - Estimated Realisation Price. The amount the asset could be sold for with vacant possession, in good condition and assuming a reasonable marketing period. The ERP includes a price assuming the freehold interest is sold separately from the leasehold interests on the freehold blocks. This assumes a ground rent income of £250 PA / unit, capitalised at 3.5%.

Page 4: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Sutton Park

Perry Common

Sutton Coldfield

Birmingham

TheBelfry

42-56 Caversham Place

M6

M6

M6

M42

4 | Oystercatcher Portfolio

Oystercatcher Portfolio

42 – 56 Caversham Place Sutton Coldfield, B73 6HY

Units 8

ERP £1,000,000

Passing Rent (pa) £64,560

Occupancy 100%

ERV (pa) £69,600

Tenure Leasehold

Description

• Unbroken block comprising apartments subject to

999 year leasehold interests from January 2001

• 8 x two bedroom flats

• Held subject to 8 x AST’s

• Parking

• Ground rent of £400 per annum (£50/ apartment)

currently payable in addition to a service charge.

1

Location

Caversham Place comprises a single block of eight self contained flats with an enclosed car park at ground floor level, and four upper floors. Sutton Coldfield train station (with regular services into Birmingham New Street station in 20 minutes) is within walking distance (0.7 miles) along with accessible bus routes from Birmingham Road.

The current average asking rent (Zoopla) for a two bedroom flat in the B73 post code area is £634 pcm, c.6.5% beneath the average 2 bedroom rent passing in Caversham Place.

Birmingham PRS Overview

In autumn 2013, Birmingham City Council approved its Housing

Growth Plan, which foresees a need for 80,000 new homes in

Birmingham by 2031. Over the last ten years, the PRS has

continued to expand, doubling in size, and now representing

20% of homes in the city of Birmingham.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £4,973 7.1%

Management £7,924 11.4%

Utilities £1,359 2.0%

Ground Rent & Service Charge

£20,903 30.0%

Write Offs £0 0.0%

Other & Unallocated £0 0.0%

Total £35,159 50.5%

One unit was partially refurbished in 2015 at a cost of c.£500. A

further £1,500 was spent on replacing domestic appliances.

Page 5: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

A57(M)

A6010

A5103

Manchester

Manchester Grammar School

Manchester University Fallowfield Campus

Manchester High School for Girls

University of Manchester

Manchester Metropolitan

University

Manchester Piccadilly Station

Eastwood & Stoneleigh

Court

Oystercatcher Portfolio | 5

Oystercatcher Portfolio

Eastwood Court and Stoneleigh Court Manchester, M14 6JU

Units 26

ERP £3,050,000

Passing Rent (pa) £179,820

Occupancy 100%

ERV (pa) £185,640

Tenure Freehold

Description

• Two freehold unbroken blocks

• 26 x two bedroom flats

• Held subject to 25 x ASTs & 1 x Assured Tenancy

• Communal garden space

• Parking

2

Location

The property comprises two adjacent blocks of flats arranged

over ground floor and rising to three upper levels. It is situated

in the heart of the popular area of Fallowfield. The property

is ideally located for easy train and bus access to Manchester

City Centre. Both the University of Manchester and Manchester

Metropolitan University campuses are within a 10 minute walk.

The current average asking rent (Zoopla) for a two bedroom

flat in the M14 post code area is £690 pcm, c.20% above

the average 2 bedroom rent passing in Eastwood Court and

Stoneleigh Court.

Manchester PRS Overview

The PRS in Manchester accounts for 30% of all households,

higher than the proportion in London. This is mostly driven

by young adults, with 69% of 25 – 34 year old households

renting privately. There is a shortage of private rental

accommodation in the city which is forecast to worsen.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £23,151 12.5%

Management £24,029 12.9%

Utilities £8,661 4.7%

Write Offs £68 0.04%

Other & Unallocated £0 0.0%

Total £55,909 30.1%

All 26 flats have undergone full refurbishment over the last 5

years. Following a health and safety report, recommendations

were implemented at a cost of £3,900 and £1,650 was spent

on roof works.

Page 6: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Sheffield

Sheffield Railway Station

The University of Sheffield

The University of Sheffield

Moor Market

Crook Valley

Park

A61

A57

A625

Sheffield Hallam

University

Orchard Square Shopping Centre

Sharrow View

6 | Oystercatcher Portfolio

Description

• Freehold, unbroken block

• 20 x two bedroom flats

• Held subject to 20 x AST’s

• Parking

Oystercatcher Portfolio

Sharrow View Sheffield, S7 1ND

Units 20

ERP £2,340,000

Passing Rent (pa) £133,560

Occupancy 100%

ERV (pa) £138,000

Tenure Freehold

3

Location

Sharrow View comprises a purpose built block of flats

arranged over ground floor and rising to third floor level.

It is a private, freehold development accessed off Sharrow

Lane. Tesco, numerous pubs and restaurants are only a

short distance from Sharrow Vale, Ecclesall Road and

Sheffield City Centre, are approximately 1 mile to the north

east.

The current average asking rent (Zoopla) for a two bedroom

flat in the S7 post code area is £595 pcm, c.6.8% above the

average 2 bedroom rent passing in Sharrow View.

Sheffield PRS Overview

The PRS in Sheffield has doubled in the past 10 years. There

are now around 36,000 households in the city’s private rented

sector (16% of the city’s housing stock). Savills Research

believe that due to a growing population, circa 16,600 homes

need to be delivered annually to meet the growing demand.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £31,309 22.6%

Management £16,539 12.0%

Utilities £3,915 2.8%

Write Offs £0 0.0%

Other & Unallocated £756 0.5%

Total £52,519 37.9%

10 out of 20 flats at Sharrow View have been fully

refurbished over the past five years. 50% of these have

been refurbished in 2015, at a total cost of c.£8,600.

Page 7: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Sheffield

Sheffield Railway Station

Sheffield Hallam

University

Orchard Square Shopping Centre

A61

A57

A625

The University of Sheffield

Moor Market

Gell Street

Oystercatcher Portfolio | 7

Description

• Freehold, unbroken block

• 26 x two bedroom flats

• Held subject to 25 x ASTs & 1 void

• Parking

Oystercatcher Portfolio

91 – 107b Gell Street Sheffield, S3 7QT

Units 26

ERP £2,920,000

Passing Rent (pa) £167,280

Occupancy 96%

ERV (pa) £179,400

Tenure Freehold

4

Location

The property comprises an ‘L-shaped’ building offering

twenty-six residential flats over ground floor, first and

second floor levels. It is accessed via a pend off Gell Street.

Located in the Devonshire Green Quarter of the City, it is

within 0.5 miles of Sheffield City Centre. The University

of Sheffield is 0.5 miles to the north of the property and

Sheffield Hallam University is 0.7 miles to the west. The two

universities have a combined count of 59,700 students,

of which 47,500 (80%) are full-time and likely to require

accommodation.

The current average asking rent (Zoopla) for a two

bedroom flat in the S3 post code area is £777 pcm, c.40%

above the average 2 bedroom rent passing in Gell Street.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £60,877 33.9%

Management £20,476 11.4%

Utilities £3,936 2.2%

Write Offs £45 0.05%

Other & Unallocated £756 0.4%

Total £86,090 47.7%

12 of the 26 units at Gell Street have been fully refurbished

during the past five years. Last year this amounted to

c.£19,000 whilst a further £18,000 was spent on electrical

works including replacing extractor fans in all bathrooms.

Page 8: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Newcastle

Newcastle University

Library

Northumbria Business

School

Newcastle Railway Station

A167(M)

Baltic Centre for Contemporary Art

St Peters Marina

Quayside

Foundry Court

8 | Oystercatcher Portfolio

Oystercatcher Portfolio

9 – 24 Foundry Court Newcastle, NE6 1UG

Units 16

ERP £1,350,000

Passing Rent (pa) £87,036

Occupancy 100%

ERV (pa) £91,200

Tenure Freehold

Description

• Freehold, unbroken block

• 8 x one bedroom flats & 8 x two bedroom flats

• Held subject to 15 x AST’s & 1 x Assured Tenancy

• Parking

5

Location

The property comprises two adjacent blocks, each providing eight flats arranged over ground floor and three upper levels. It is approximately 1 mile from Newcastle City Centre. The property also benefits from excellent road links and Byker Metro Station (0.6 miles) provides convenient access to the city centre. In the NE6 postcode area, the current average asking price (Zoopla) of a 1 bedroom flat is £415 pcm and £532 pcm for a 2 bedroom flat. This is c.4.8% below and c.12.9% above the current average passing rents of 1 and 2 bedroom

flats respectively in Foundry Court.

Newcastle PRS Overview

The PRS accounts for 13.2% of households in Newcastle. The average house price in Newcastle according to Hometrack in July 2015 was £123,200, a rise of 10% from 2009, whilst house

prices have risen by 2.5% over the last 12 months.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £22,755 24.9%

Management £9,776 10.7%

Utilities £1,330 1.5%

Write Offs £106 0.1%

Other & Unallocated £4,294 4.7%

Total £38,261 42.3%

9 of the 16 apartments have been fully refurbished, of which

three were carried out over 2014/2015 at a total cost of

c.£11,000.

Page 9: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Newcastle Railway Station

Town Moor Park

Quayside

Benton Metro

Station

Newcastleupon Tyne

A16(M)

Langley Mere

Oystercatcher Portfolio | 9

Oystercatcher Portfolio

1 – 22 Langley Mere Newcastle, NE12 7FN

Units 22

ERP £1,680,000

Passing Rent (pa) £100,860

Occupancy 86%

ERV (pa) £123,600

Tenure Freehold

Description

• Freehold, unbroken block

• 14 x one bedroom & 8 x two bedrooms flats

• Held subject to 16 x AST’s & 3 x Assured Tenancies

• Parking

6

Location

The property comprises terraced houses split to provide

twenty two flats over two levels incorporating single garages.

Langley Mere is located in Forest Hall, a popular suburb

of Newcastle-upon-Tyne. Benton Metro Station is situated

0.6 miles from the property offering access into the City Centre

and Universities. There is also easy access to local shops and

amenities at Springfield Park.

In the NE12 postcode area, the current average asking price

(Zoopla) of a 1 bedroom flat is £471 pcm and a 2 bedroom

flat is £550 pcm. This is c.10.5% and c.18.5% above the current

average passing rents of 1 and 2 bedroom flats respectively in

Langley Mere.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £18,706 15.1%

Management £13,126 10.6%

Utilities £627 0.5%

Write Offs £0 0.0%

Other & Unallocated £0 0.0%

Total £32,459 26.2%

8 of the 22 units have been fully refurbished over the past

five years. Two full and one partial refurbishments have

been carried out in 2015, totalling c.£9,500.

Page 10: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Grimsby Town Railway Station

Peoples Park

Freshney Place Shopping Centre

Grimsby

A16

A1243

A46

Manor Court

10 | Oystercatcher Portfolio

Description

• Broken block comprising apartments subject to 125

year leasehold interests from October 1994

• 8 x one bedroom flats & 8 x two bedroom flats

• Held subject to 15 x AST’s & 1 Assured Tenancy

• Ground rent of £800 per annum (£50/ unit) in

addition to a service charge

Oystercatcher Portfolio

Manor Court Grimsby, DN32 0SD

Units 16

ERP £1,240,000

Passing Rent (pa) £76,500

Occupancy 100%

ERV (pa) £78,750

Tenure Leasehold

7

Location

Manor Court comprises two, three and four storeys of interlinked

residential flatted accommodation (totalling 30 apartments)

arranged in a U-shape. The property is located in central Grimsby,

0.2 miles to the south of Grimsby Town Station. There is an Asda

supermarket approximately 0.8 miles to the east. In the DN32

postcode area, the current average asking price (Zoopla) of a 1

bedroom flat is £338 pcm and a 2 bedroom flat is £360 pcm. This

is c.12.2% and c.12.6% below the current average passing rents of 1

and 2 bedroom flats respectively in Manor Court.

Grimsby PRS Overview

The 2011 Census showed 19.6% of households in Grimsby

were within the private rented sector, and Savills anticipate

that this is likely to have increased further since this date.

Savills forecasts that capital values in the wider East Midlands

region are set to grow by 19.3% over the next 5 years.

Operating Costs

Operating costs

(01/06/14 - 31/05/15) Cost

% of ERV

(01/09/15)

Maintenance £12,077 15.3%

Management £10,020 12.7%

Utilities £2,497 3.2%

Ground Rent & Service Charge

£6,616 8.4%

Write Offs £0 0.0%

Other & Unallocated £0 0.0%

Total £31,211 39.6%

There has been an ongoing refurbishment programme.

Last year, c.£4,000 was spent on replacing carpets and

repainting works across four units.

Page 11: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

Oystercatcher Portfolio | 11

Disposal Process

The Oystercatcher Portfolio is being offered for sale by

means of an Informal Tender process. Further details are

provided within the Sales Process Letter.

Viewing

In order to keep tenant disruption to a minimum no internal

access to apartments will be given prior to Stage 1 bids.

Parties shortlisted and invited to submit Stage 2 bids will

be given the opportunity to internally inspect a sample of

properties within each development prior to submitting

their offer at Stage 2.

Internal photographs of a sample of the apartments are

available within the dataroom.

Contacts

George Hepburne-Scott

Residential Investment

+44 (0)207 016 3761

+44 (0)7968 550 401

[email protected]

Matthew McBride

Residential Investment

+44 (0)207 409 5990

+44 (0)7845 195 512

[email protected]

Peter Allen

Head of UK Residential Investment

+44 (0)207 7409 5972

+44 (0)7968 550 311

[email protected]

Important Notice

Savills, their clients and any joint agents give notice that:

1. They are not authorised to make or give any representations or warranties in relation to the property either here or elsewhere, either on their own behalf or on behalf of their client or otherwise. They assume no responsibility for any statement that may be made in these particulars. These particulars do not form part of any offer or contract and must not be relied upon as statements or representations of fact.

2. Any areas, measurements or distances are approximate. The text, photographs and plans are for guidance only and are not necessarily comprehensive. It should not be assumed that the property has all necessary planning, building regulation or other consents and Savills have not tested any services, equipment or facilities. Purchasers must satisfy themselves by inspection or otherwise.

Designed and Produced by Savills Marketing: 020 7499 8644

September 2015

33 Margaret Street,

London, W1G 0JD

Dataroom

A full suite of property information (including EPCs,) is

available in the dataroom: www.savills.com/oystercatcher.

Please contact Matthew McBride to receive login details to

gain access to the dataroom.

Guide price

Offers in excess of £10,000,000 are invited for the whole

portfolio, subject to contract and existing tenancies

representing a gross yield on passing rent of 8.1% and

representing a gross yield on ERV of 8.7%.

Page 12: The Oystercatcher Portfolio - Savillspdf.savills.com/documents/The Oystercatcher Portfolio brochure.pdf · The Oystercatcher Portfolio Executive Summary A stabilised regional portfolio

12 | Oystercatcher Portfolio