Fairacre

Acquired in April 2002 for £26 million, this shopping centre of some 270,000 sq ft was suffering from years of neglect.

The Sainsbury’s anchor store, still with a 13-year unexpired term, had been vacated some two years prior to our acquisition and had been boarded up. In spite of this vacancy, the anchor store income assisted in making this scheme eminently fundable.

The centre presented itself as a tertiary parade of shops. The main road frontage gave no indication of the substantial covered shopping centre behind. The centre accommodated, amongst others, WH Smith, Boots, Kwik Save, Peacocks and New Look.

The centre’s lack of prominence left it struggling to attract customers and new retailers alike.

Fairacre set about turning the scheme around.

• Morale at the centre was low both among staff and occupiers. We met every tenant in the centre, placing as much importance on the florist in the mall as the manager of Woolworths/WH Smith.
• A restructuring of the Sainsbury’s lease was agreed to allow for sublettings to Wilkinson and Iceland.  This returned vibrancy to the scheme as footfall increased.
• We completed long-outstanding rent reviews ignored by our predecessors.
• We put Cowley on the retailers’ map with regular newsletters and other advertising initiatives.
• We committed significant capital to refurbish the out-dated services and obtained planning permission to erect substantial signage at the centre.

At acquisition the passing rent was £1.8m per annum, with Zone A rents of £40 per sq ft.  Fairacre grew the income to £2.8m per annum (£60 per sq ft in Zone A); Threadneedle bought the Centre for £46.5m in November 2004.

Fairacre were appointed to asset manage a portfolio consisting of 72 High Street shops in the spring of 2011 after the landlord had been put into administration.  This is a three-year mandate on behalf of LPA Receivers appointed by a major lender.

Working alongside the Receivers, Fairacre set about stabilising the income stream, regularising numerous undocumented tenancies and implementing a robust management regime.  Detailed liaison with the managing agents and legal team enabled us to stabilise the portfolio after 18 months of administration, establishing a clearer picture of the assets under our control.

Fairacre inherited a high vacancy rate as well as many tenancies holding over.  Letting agents and L&T specialists were introduced to create income and formalise existing occupations, leading to a significant increase in capital value.

Property-by-property, Fairacre assessed all opportunities to add value, through a number of strategies including lease renewals and restructuring, planning applications, refurbishment and redevelopment or a re-letting exercise.

With each asset’s position protected, and where possible enhanced, Fairacre are continuing a strategy to realise capital through a disposal programme.

Leicester City Centre is one of the UK’s top retail locations. The Haymarket Shopping Centre, comprising some 350,000 sq ft is the "value" scheme in the city centre, situated opposite Highcross.

This asset was of significant interest to both public property companies and institutions, however, it was held in a complex corporate structure by Kingfisher PLC. Fairacre's application of both property and corporate skills overcame the numerous issues in the acquisition, allowing us to succeed against our larger competitors. The scheme was purchased in 2003 for approximately £58m.

Having unlocked the opportunity, we proactively managed the scheme, completing outstanding rent reviews, rationalising and co-ordinating a potential development site to the rear and entered into detailed discussions with Leicester City Council relating to the purchase of the car park. With so much activity in Leicester City Centre, it was imperative to keep the Haymarket Centre at the forefront of the Council’s mind and we became heavily involved with the Leicester re-generation committee.

In a short space of time, we had repositioned the opportunity from a complicated corporate transaction, to a straightforward, prime real estate asset with added value potential. We sold the scheme to ING for £77.75 million in November 2004.

Queen’s Square was placed into LPA Receivership in January 2010.

The 200,000 sq ft centre is held under an antiquated and highly-geared headlease from the council and has suffered from a lack of investment for many years.  There are numerous vacant units and the centre struggles with a steadily declining income stream.

Fairacre has been appointed by the Receivers as a ‘replacement borrower’ to stabilise the centre and maximise recovery over a five-year business plan.

Fairacre’s role involves:

• Devising the strategic business plan.
• Negotiation with the council for the refurbishment of the centre in line with its obligations under the headlease.
• Appointment and management of a project team to design and undertake additional refurbishment works.
• Negotiation with the council and Tesco in connection with a link from Queen’s Square to the proposed 500,000 sq ft Tesco development to the rear.
• Co-ordinating the professional team handling the letting strategy, centre management and Landlord &Tenant work.
• Negotiation with the council to agree a new, commercially viable headlease.
• Overseeing the finances of the asset, including loan repayment.

As a result of Fairacre’s involvement, matters that have been in discussion for many years are now approaching resolution.