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.

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.

In November 2008, LaSalle Investment Managers, as fund managers on behalf of a UK PLC pension fund, approached Fairacre to asset manage this 33-acre, 900,000 sq ft, multi-let industrial estate in Edmonton,North London. Before Fairacre's involvement, the estate suffered from declining income, deteriorating building stock as well as significant and further increasing non-recoverable expenditure.

Fairacre’s role includes:

• Halting the rapid decline in net income

• Increasing the income over a prescribed period through:

o   Implementation of refurbishment and improvement works across the scheme.

o   Rebranding and fresh marketing of the site.

o   Tenant engineering.

o   Re-gearing existing leases, re-marketing vacant space and seeking new revenue sources. 

Fairacre has stabilised the income by:

• Meeting key existing tenants and instilling confidence through direct landlord interface.
• Appointing experienced project managers, tasked with the implementation of immediate and essential repairs to two important blocks in order to retain tenants and to provide a base for future lettings.
• Removing a loss making self-storage facility, and the implementation of reconfiguration works to allow the relocation of a major trade-counter tenant, negotiating a surrender of an existing lease and a new lease on larger space.
• The retention and relocation of the principal storage tenants on exclusive leases to enhance net revenues.
• The reletting of the space vacated by the trade counter tenant to ensure 100% occupancy of the block.
• Implementing a strategy for growing net revenues, including:

Acquired for around £3 million in 2008, this property comprises two modern industrial units built in the early 1990’s, totalling some 53,000 sq ft.  We were attracted to the asset due to its excellent location and high quality modern construction.

The units were let under one headlease and underlet on two short-term tenancies.

Asset enhancement initiatives have been successfully completed as follows:

• Rent reviews settled.
• Surrender of headlease.
• New institutional leases to former sub-tenant on 20-year term without break.

Brunel House, a 225,000 sq ft office building in central Cardiff, was one of the distressed assets from the collapse of Dawnay Day.

Under Fairacre’s guidance, LPA Receivers were appointed in 2009. Fairacre was brought in to take control.  Fairacre’s agreement with the Receiver and the Bank ensures that each party’s interest is fully aligned.

The building had a precarious short-term cash flow problem with a number of major tenants’ leases close to or beyond expiry.  Fairacre set about stabilising the short and medium-term income stream. 

Lease extensions were agreed at levels that would cover the various shortfalls and service the debt. Placing the asset into LPA Receivership had eliminated the Landlord’s empty rates liabilities, helping the property to get back on its feet.

Furthermore, in a difficult occupational market Fairacre’s letting team has secured a major tenant for over 40,000 sq ft of previously vacant space.

From a position of relative stability, Fairacre is now analysing the potential enhancement opportunities. The building is tired and in need of a significant overhaul.  It is clear that the “do-nothing” option will see Brunel House become increasingly uncompetitive in the market. 

Our view is that this “iconic” building can be successfully contemporised,thereby creating an opportunity to deliver an attractive and saleable investment into an improving market.