Workout Restructuring
Over the past 12 months Fairacre has been appointed by LPA Receivers on a 5 year workout mandate to asset manage four major projects totalling some 800,000 sq ft.
Fairacre has been incentivised to protect income and generate greater value. The lender recognises the benefit of professional property owners running the asset whilst also ensuring the process is cost effective and efficient for both the borrower and lender. Fairacre believes that 2010 will generate £250m+ of further projects of this nature and is well positioned to provide the necessary resource.
Fairacre’s tailored platform gives the lender the ability to combine the insolvency process and asset management to take control of troubled assets within a flexible workout structure. Fairacre has developed a number of close working relationships with LPA. Receivers and insolvency professionals to deliver a smooth transfer of control which protects the asset and reduces time and effort required from the lender.
Following the successful transition of a number of assets Fairacre has been able to inject an immediate energy and positive response from tenants and professionals, countering any concerns of the LPA Receivership
Fairacre Asset Management has been appointed to;
- Increase capital value
- Diminish the effect of a non-performing loan
- Stem falling net operating income
- Protect fragile tenancies
- Manage capital expenditure
With the Lender benefiting from…
- Ownership
- ‘Roll your sleeves up’ asset management
- Fresh ideas
Target to sell each asset within 5 years
The Pithay, Bristol in LPA Receivership
In September 2009, FAM was installed as replacement asset manager of The Pithay, a 1960s, multi-let office building with ancillary retail totalling some 180,000 sq ft. Approximately 40,000 sq ft is currently vacant.
Principal challenge
A well located building suffering from current and future potential voids, declining revenues, dated accommodation and a general lack of tenant demand.
Objectives
- Continue ongoing existing tenant lease renewal negotiations to underpin current income
- Re-visit marketing & letting strategy to promote early lettings of vacant space
- Manage further capital expenditure to exterior/common parts & vacant space to create attractive, lettable accommodation
- Prepare for sale within 5 years
Results so far….
- Finalised refurbishment of common parts and entrances to reposition the office building and present a contemporary environment
- Established a new business plan to include proposals for further phased refurbishment and capital expenditure works
- Proposals for replacement windows and refurbished WCs currently being considered
- Programme of works for lift replacement, roof repair and external decorations implemented
- Agreed letting of 6,000 sq ft of vacant space to new occupier
- Designed new marketing strategy, including brochure and agent’s launch
- Potential surrender with restaurant operator in order to let space to existing night-club tenant being considered, which will reinforce income to a better covenant
- Long-term vacant retail unit to be combined with the nightclub and re-let.
Brunel House, Cardiff in LPA Receivership
In September 2009, FAM was installed as replacement asset manager of Brunel House, a prominent, well located 1960s 15 storey office building totaling some 225,00 sq ft.
Principal challenge
Building obsolescence, short term and declining income stream and high vacancy level.
Objectives
- Negotiate lease renewals with main tenants
- Consider refurbishment of common parts, reception and vacant office suites
- New marketing strategy
- Manage and oversee capital expenditure on vacant space
- Examine strategies to secure current income levels and ensure the building’s future relevance in Cardiff’s office market.
- Modernise/contemperise the building to enable it to be at the forefront of the secondary Cardiff office market.
Results so far….
- Asset management business plan presented
- Outstanding service charge liabilities (since 2006) rationalised with major tenants in order to gain trust and encourage longer leases
- Re-negotiated leases with the three largest occupiers to secure income within the building for the present
- New letting agreed to an existing tenant to take space previously becoming vacant.
Queen’s Square Shopping Centre, West Bromwich in LPA Receivership
In January 2010 FAM was appointed by the LPA Receiver to asset manage Queen’s Square Shopping Centre, comprising approximately 200,000 sq ft of retail with a supermarket anchor. A high proportion of the centre is vacant or unoccupied.
Principal challenges
A highly geared leasehold with a short unexpired term
Facilitating a successful link into a proposed retail development to the rear of the centre whilst protecting and enhancing Queen’s Square
Planning and undertaking refurbishment works
Objectives
- Following years of underinvestment, to negotiate and settle the head rent arrears and freeholder’s “refurbishment” contributions required to raise the standard of the centre to a safe and acceptable level
- Plan and manage a works programme to raise the standard of the centre to the agreed level
- Furthermore; to plan and manage an extensive refurbishment programme to improve the amenity and aesthetics of the centre
- As a consequence of these works, to negotiate the re-gearing of the existing unexpired 58 year, 50% geared headlease with the freeholder to provide more favourable terms
- Negotiate the position of Queen’s Square within a large local authority sponsored proposed scheme to the rear of the centre
- Re-negotiate the proposed link agreement with the anchor of the redevelopment
- Devise a new marketing strategy and galvanise the centre’s professional teams
- Reconfigure and let vacant space
Results so far….
- Successful negotiations to retain anchor within the centre
- Agreed to combine the new link agreement with planned refurbishment works to the centre in a joint initiative with the freeholder (Local Authority)
- In negotiations with several potential anchors to improve footfall and create new income and tenant mix
- Creating new service charge regime for current and prospective tenants
- Agreed and negotiated new lettings and lease renewals
Queen Street Shopping Centre, Darlington in LPA Receivership
In January 2010 FAM was appointed by the LPA Receiver to asset manage Queen Street Shopping Centre, which comprises 100,000 sq ft of retail together with a 25,000 sq ft office building
Principal challenge
To increase footfall and re-let vacant units
To refurbish the centre in order to attract superior quality occupiers and retain current income
Objectives
- Maintain and enhance income and occupancy
- Reconfigure units
- Examine the property’s position within the wider context of the proposed Local Authority sponsored development scheme
Results so far….
- New Heads of Terms out to a number of tenants
- Several new lettings are being undertaken on a temporary to permanent basis
- Positive negotiations with one of the principle High Street retailers to surrender its lease at a premium.
- Discussions are ongoing with a national multiple to take a new 10 year lease on the above unit
- Fairacre has opened negotiations with other potential anchor occupiers
- Continuing negotiations with Local Authority and developer on the proposed large scale development to the rear of Queen Street.
