It’s the end of the week and with the click of a button Allsop’s first commercial auction catalogue of the year goes live to in excess of 57,000 subscribers. Along with the usual interesting range of lots including a Shopping Centre in Coventry guided at £5.5M+ is a portfolio of six banks newly let to Santander, to be sold on behalf of a major property company.
Several days into the marketing and my phone buzzes with a BBC notification informing “HSBC to close 82 branches this year”. Why then with negative press on branch closures in this sector would you invest in one?
Two weeks pass and my phone has hardly stopping ringing with enquiries on them. We ended up selling all six banks, the majority with fiercely competitive bidding and at least 10 registered bidders on each lot. There is no doubt that an average yield of 4.9% for 5 year income is exceptional.
It turns out, for comparable locations, we sold some of these Santander banks with 5 year income for stronger yields than those we sold offering 15 years to Barclays back in 2007 and 2008!
Lot 1 in Chingford for example selling for 4% against lot 1 Leytonstone at 4.5% back in March 2008 or lot 12 Wallington, which sold at 4.3% compared with lot 1 in Coulsdon at 4.5% in July 2007.
Why were the bank investments so popular?
The private investor’s hunger for low risk, reliable income streams is as high as ever. The fundamentals behind the desirability of these assets are:
Undoubted income – hassle free quarterly rent payments.
Affordability/Rent – these were all let at rebased rent levels and the market judged the rental levels to be sustainable.
Entire Freehold – unexploited upper parts are likely to lend themselves to residential use with potential to extract value by simple redevelopment if the tenant changes.
Location – if the bank vacates at lease expiry these locations are good to re let, location is key.
Money is cheap and with interest rates remaining at 0.1%, the lowest ever in UK history and the prospect of negative interest rates, an average 4.9% return offering a hassle free income stream seems very attractive.
The 23rd March Commercial Auction catalogue has just been released and there are 34 more Santander banks. If you are thinking about your next acquisition perhaps you should take the opportunity of considering one of these.
After all – you can bank on it!
