An irregularly shaped site of about 4.59 acres, consisting of a mix of portal frame warehouses and office buildings, totalling 32,880 sq ft. To the rear of the site was large yard used as open storage.
This site was listed in the auction showing £67,790 of income, with 25,470sq ft vacant, and very short leases.
One of the country’s top investors snapped it up, believing it to be a bargain. What did he see that others didn’t? A rural location some 20 minutes from the outskirts of Milton Keynes.
One inside track he most likely had was from a local commercial agent who believed he could rent it easily. With empty units it obviously offered an easy opportunity to boost the rents if you could maintain the existing tenants.
Following purchase unit 1 was soon let out for £23,000, Unit 2 £13,000, Unit 5, £48,000, Unit 7 at £13,000, Unit 8 £13,000, the yard was rented at £58,000. I can’t find data for unit 4, but let’s put it in at a pro-rata rate, £40,000. That brings the total rent roll to £208,000.
Off the record, I heard the income had risen to £320,000, and the total investment in the site was £200,000
The site was purchased for £950k, at a 7% return. Once fully let the site showed a 22% return. A fantastic deal.
So, what can we learn from this? The purchaser knew he could rent such units, most likely based off his own knowledge and that of his close contacts, the commercial agents. Others looked at the site and, based on the short leases and vacant units, didn’t see the value.
The site offered lots of potential with its mix of units and open storage, with the potential to expand by developing more units, along with a potential fallback position of redeveloping the site to residential should the units have proved hard to let.
The site consisted of a total of 32,780sq ft plus the storage land. Excluding the storage land, the buildings sold for £29/sq ft, a price you couldn’t build them for, so you effectively got the land for free and the buildings for less than build cost.
Those sites in future that have a poor rent roll, vacant units, look a bit scruffy and run down, might just be a piece of gold.