Addington Capital (“Addington”) and BauMont Real Estate Capital (“BauMont”) have completed the purchase of Old Change House, 128 Queen Victoria Street, EC4 for around £23 million, showing a yield on contracted income of 6.55%. The vendor was Coal Pensions Limited advised by Delancey.

Old Change House is a 56,814 sq. ft detached office building with basement, ground and five upper floors including 3,732 sq. ft of ground floor retail. The building is currently 61% occupied, with existing office tenants including Walker Crips plc, GB Group plc, EZE Software EMEA Ltd and the Monetary Authority of Singapore. Retail tenants are Pret a Manger and Pen and Brush Limited (trading as Nusa Kitchen).

The building was originally constructed by Japanese developer, Nissho Iwai in 1997, before being acquired by Coal Pensions Limited in 2000. It was partly refurbished in 2018, including new end of trip facilities. It has been sold to BauMont and Addington with two vacant office floors totalling 18,600 sq. ft. Further leases expire in 2025 and 2027.

BauMont and Addington believe the purchase provides an outstanding opportunity to complete the refurbishment of the building to create “best in class” Cat A specified offices, with enhanced ESG credentials. The refurbishment is well timed to take advantage of a shortage in top quality offices in the City, which they believe will provide the potential for higher rental levels being achieved in the building, whilst re-establishing its institutional credentials.

Martin Roberts, Principal of Addington Capital said, “The opportunity to undertake a rolling refurbishment programme of an income producing asset like Old Change House offers attractive risk adjusted returns. We are actively pursuing similar “brown to green” projects across Central London, allowing us to upgrade buildings with strong fundamentals to create the high quality, ESG-compliant space, sought after by today’s occupiers. We believe that there will be other similar opportunities over the coming months.”

He added, “ We are delighted to extend our working relationship with BauMont, with whom we have worked on three residential projects* in the London area. This is our first venture together into the commercial property markets.

Delancey was advised by Knight Frank and Addington Capital by Savills.

*Including the acquisition of the Brymore portfolio of 182 houses and apartments in South London in 2019, the acquisition of the Skye portfolio of 114 houses and apartments in East London in 2021 and the acquisition of the Keys portfolio of 204 houses and apartments in East London in 2022.

Posted in news on 16th April, 2024

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Addington Capital, the property investment and asset management specialist has signed a further deal with Mott Macdonald, existing tenants at 10 Fleet Place in London, whereby Mott Macdonald commits to a further 20,000 sq. ft on the fourth floor of the building.

Mott MacDonald, the global engineering consultancy has been a longstanding tenant at 10 Fleet Place since 2011. Last year it took 19,884 sq. ft on the first floor of 10 Fleet Place on a lease until 30 April 2040 and re-geared its lease on the second floor where it had 19,888 sq. ft, to run to the same date. The first and second floors are now newly refurbished. Mott MacDonald has now decided to take a new lease on the fourth floor (19,811 sq. ft), which will also now be refurbished in keeping with the 1st and 2nd floors. Mott MacDonald will be paying a headline rent of £68.50 per sq. ft.  Overall, the global consultancy will have space totalling circa 60,000 sq. ft in the building, on leases running to 2040.

10 Fleet Place is a landmark 186,000 sq. ft office building in prime Mid-Town. Addington Capital is the asset manager for the property acting on behalf of the ‘The Crosby Group’ from Hong Kong who acquired it in 2015.

Other blue-chip tenants at 10 Fleet Place include Interpath Advisory, the independent financial advisory business spun out of KPMG, CNBC, now acquired by Comcast and global top ten law firm Hogan Lovells.

Mott Macdonald’s commitment to 10 Fleet Place follows the substantial phased refurbishment programme at the building including new end of trip facilities, reception upgrade and new external signage.

The building also benefits from great transport links including the Elizabeth line at Farringdon.

David Dalrymple, Partner at Addington Capital said, “ We are delighted Mott MacDonald has increased its footprint and long-term commitment to 10 Fleet Place and will now occupy around 60,000 sq. ft on long leases.

The ongoing success at 10 Fleet Place is down to the demand for high quality space in Midtown and the City, particularly as businesses try to recruit and retain the best staff.  We have invested heavily during the past three years to vastly improve the buildings environmental credentials,  internal finishes and wider facilities of the building to make it significantly more attractive.

Following the completion of this lease the building is now 96% let and the remaining office/retail space is all under offer. We have a list of blue chip and respected tenants, all on favourable lease terms.”

Posted in news on 11th April, 2024

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Addington Capital, the property investment and asset management specialist and its investor partner ICG have started work on the final phase of their Headingley Park residential scheme. An additional 70 new residential units to rent will be created at Stockdale House; the fifth and largest building on the site.

Headingley Park is an office to residential conversion scheme in which four office buildings have already been converted to create 152 residential units. This final phase of 70 units at the fifth building, Stockdale House, will take the overall development to 222 units. Work has started following the NHS vacating the offices in the building.

Stockdale House is being converted under the last PD Prior Approval issued in Leeds and the new units will be provided over ground and five upper floors. The scheme is designed to meet current space standards and will be completed in Q3 2024.

The Headingley Park development has proved attractive to young professionals and post graduate students renting in Leeds, due to being close to the City Centre and the University, in a large 6.5-acre parkland setting. Individual buildings provide 30 to 40 units which are predominantly studio, one and two-bedroom apartments. The scheme is managed by AddLiving and has been well received by renters to date, with the completed phases being 100% let and achieving rents of £900 and £1,275 pcm for one- and two-bedroom apartments.

Headingley Park is currently ranked “the best place to live in Leeds” by HomeViews. The scheme has a residents’ lounge, co working area and large landscaped gardens.

Martin Roberts Principal of Addington Capital said, “We are delighted to be underway with the conversion of Stockdale House. The 70 high quality apartments will have spectacular views across the City and meet the growing need of today’s renters in Leeds.”

“The Stockdale House development completes the conversion of Headingley Park from an in-town office park to a 100% residential development. We believe that this is an exemplar for Permitted Development conversion of offices to residential and a road map for future schemes.”

He continued, “Given the falling demand for offices and the increased costs of making those properties energy efficient, we believe a relaxation of the size limit of new PD conversion, (currently up to 1,500 sq. m), would be a fast way to increase the supply of much needed residential from brownfield sites, with a low embedded carbon solution.”

Posted in news on 27th October, 2023

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Matthew Allen of Addington Capital outlines the frustrations and obstacles facing landlords trying to refurbish old apartment blocks to meet increasingly stringent building safety and energy efficiency standards.

Despite recent planning decisions, new legislation and claims that environmental issues are high on the agenda, the government appears to be doing little to support those trying to invest and upgrade our old apartment blocks – providing lots of sticks but few carrots.

This is a serious issue. A majority of the c.27m homes in the UK were built over 60 years ago. Approximately 3.1m of these older properties are made up of apartments (source: BRE Trust “Housing Stock of the UK”). If current and soon to be introduced building compliance standards were applied to most of these apartment blocks, they would probably fail.

Encouraging and incentivising investment in our existing housing stock should surely therefore be a priority?

Yet the current costs to upgrade are becoming prohibitive. The DLUHC (Dept of Levelling Up, Housing & Communities) last week has suggested higher risk buildings will cost up to £2.9bn to meet new building safety standards -and this is just the tip of the iceberg.

The Building Safety Act, which came into effect this April, continues to raise the bar on building compliance for existing blocks of apartments and EPC minimum standards are increasing in 2025 and again in 2028. In 18 months, the basis for calculating an EPC (SAPs calcs) is being overhauled.

Meanwhile, the chronic shortage of housing for rent, means professional landlords are under no pressure to invest in this older housing stock because occupancy is high, and rents are growing. In fact, the short-term viability makes no sense. The incremental returns don’t justify the investment.

Poor financial viability is therefore working against the headwinds of new regulation which prohibits modernisation. There are several key reasons for this:

i) Much of current building compliance for many old buildings is not retrospective, with the result there has been little incentive for change to date.
ii) Modernising an old building can be time consuming and complicated. It inevitably requires pragmatism and compromise. Unlike new build we are not starting with a blank canvass.
i) SAPs calculations determine the energy performance of a building and therefore the EPC rating. But these can lead to unpredictable and counter intuitive outcomes e.g., for example replacing a gas boiler with electric heating may not increase a building’s EPC, because the SAPs rating is not always correlated with low carbon emissions.
ii) There is no recognition for embodied carbon in calculating EPCs in existing buildings.
iii) The owner of a high-density block of apartments has a relatively small footprint of roof space to floor area ratio for effectively installing wind and solar. Therefore it is often not practical to do so. Using a decarbonising national grid is realistically, a more practical and bespoke solution for old residential blocks.
iv) The application of VAT on all capital expenditure in existing buildings isn’t reclaimable like investment in commercial property or exempt with the development of new residential homes.
v) Zero rated VAT is applied to the installation of energy saving materials. Unfortunately, there’s a narrow list of items which are allowable, and the policy deliberately excludes the installation of double glazing or the removal of gas boilers and installation of electric heating.
vi) The emphasis for the SAPs calculations is “fabric first”. In other words, it prioritises insulation before sourcing heating and lighting. Yet to insulate an existing building, it needs it to be vacant and you need to remove any fixtures and fittings for its installation. This usually means removing bathrooms and/or kitchens. This isn’t acknowledged in HMRC tax guidance.

A lot of these disincentives could so easily be fixed with thoughtful, educated changes to government policy and regulation. We suggest the government:

i) Zero rates VAT on the refurbishment of old residential buildings say, >50yrs old.

ii) Incentivises the installation of energy saving materials and fire safety improvements e.g., via tax breaks/capital allowances. And removes unhelpful exclusions like double glazing or the swapping of gas boilers for electricity.

iii) Recognises the physical challenges and limitations of upgrading the energy performance of high-rise apartment blocks and tailors the SAPs calculations to encourage and support investment. In doing so, recognises the important significance of embodied carbon in existing buildings.

Current frustrations could easily be overcome with a recognition by policy makers of the importance of professional landlords investing in and upgrading our old apartment blocks. Policy frameworks should be adapted to suit.

“ This article first appeared in Co Star on 31^st August 2023”

Posted in news on 4th September, 2023

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Addington Capital, the property investment and asset management specialist and its joint venture partners have sold 34-46 Baron Road and 11-23 Herald’s Way, an unbroken town centre retail parade with vacant upper parts in South Woodham Ferrers, Essex.

The property has been acquired by a private family office for £2.75 million.

The property comprises an unbroken 1980’s triangular parade of retail and former school premises around a central service yard. There are fourteen multi let retail units extending to 9,984 sq located at ground level fronting Baron Road and Heralds Way. The first and second floor office accommodation are vacant and extend to 28,866 sq ft. The overall passing rent on the property is £181,817 per annum.

South Woodham Ferrers is a popular Essex town located 40 miles east of Central London. It has good transport connectivity with regular services to London Liverpool Street from South Woodham Ferrers Station in 52 minutes.

Jon Thorp of Addington Capital said, “Our business plan for the property has been successful and we have reached the right stage in our cycle to sell. The property has potential for redevelopment to alternative uses, including residential, flexible office space, educational & leisure accommodation, subject to obtaining the necessary consents.”

Agents for the vendors were Allsop LLP.

The scheme was acquired by Addington in 2018 as part of the Bonsai Portfolio.

Posted in news on 4th August, 2023

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