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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Addington Capital, the property investment and asset management specialist has let the recently refurbished third floor of 10 Fleet Place, London EC4 to OB, a brokerage business.

OB is taking a total of 19,835 sq. ft., which comprises the whole of the third floor, from May 2023. The space has been let on a ten-year lease, with an upwards only rent review basis every 5th year of the term.

The agents acting on the deal were Ingleby Trice for the landlord and Kontor for the tenant.

In addition, elsewhere in the building, Addington Capital has signed new long-term leases with Mott MacDonald, the global engineering consultancy and an existing tenant in the building, to move from the fourth and second floors into what will be newly refurbished space on the first and second floors.

Mott MacDonald, who have been long term tenants at 10 Fleet Place, are taking 19,884 sq. ft on the first floor of 10 Fleet Place on a lease until 30 April 2040 and are re-gearing their lease on the second floor where they have 19,888 sq. ft, to run to the same date.

10 Fleet Place is a landmark 185,000 sq. ft office building in prime Mid-Town. Addington Capital is the asset manager for the property on behalf of the The Crosby Group from Hong Kong who acquired it in 2015.

OB will be joining other blue-chip tenants at 10 Fleet Place. Earlier this year Simon Kucher UK took a total of 19,890 sq. ft., which comprises the whole of the fifth floor from February 1^st 2023, and last year, Addington Capital let 33,000 sq. ft of space on two floors to global top ten law firm Hogan Lovells. Other tenants in the building include Interpath Advisory, the independent financial advisory business spun out of KPMG , Mott MacDonald and CNBC, acquired last year by Comcast.

This latest letting follows the substantial refurbishment and capex improvements at 10 Fleet Place including contemporary CAT A on floor finishes, new end of trip facilities, reception upgrade and new external signage.

The building also benefits from great transport links including the new Elizabeth Line at Farringdon which is now open and fully operational.

David Dalrymple, Partner at Addington Capital said, “The ongoing success at 10 Fleet Place is down to the demand for attractive, sustainable and high-quality office space in Midtown and the City. We invested heavily during the past two years to vastly improve the environmental credentials of the building and also in the wider facilities, to make it significantly more attractive to occupiers. This investment has paid off. Following these latest deals, the total amount of new leases completed in the building since October 2021 (19 months) is approximately 146,000 sq. ft. We now have a list of blue chip and respected tenants, all on favourable lease terms.

Ingleby Trice continue to market the building with around 30,000 sq. ft. of space currently available to let.

Posted in news on 9th June, 2023

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Addington Capital, the property investment and asset management specialist, and its joint venture partners, have sold 8-12 Hessel Street, London, E1 to a private family office for £2,025,000 (£617psf). This followed a competitive bidding process.

8-12 Hessel Street is a freehold block comprising of six apartments (four x 1 bed and 2 x 2 bed) and two commercial units (which had been sold off on long leases prior). The apartments are situated over the first, second and third floors and comprise a Net Internal Area of 3,282 sq. ft. All the apartments are let on ASTs but are let to historic tenants, with a current rent of £107,700 per annum.

The property is located in Aldgate East, Zone 1, well positioned for the City, 0.4 miles from Aldgate East Station (Underground) and 0.5 miles from Whitechapel Station (Overground & Crossrail). The property is also walking distance from Liverpool Street providing easy access for City workers and near to the bars, shops and restaurants of Spitalfields Market.

The property has been actively asset managed by Addington since acquisition. All the apartments are now in good condition and the communal areas have been recently refurbished, enabling Addington to increase rents in line with ERVs before selling.

Fred Verity Associate Partner of Addington Capital said, “Our business plan for 8-12 Hessel Street has been successful. The scheme has been improved and we have reached the right stage in our cycle to sell.”

Matthew Allen, Principal at Addington Capital added, “This deal shows there is still strong private investor demand for freehold residential blocks in London Zone 1.  We had competitive bidding for 8-12 Hessel Street and achieved pricing equating to c.5% on gross contracted rents.  Investors are confident that the unprecedented rental demand is going to remain for some time to come, particularly given the shortage of PRS stock in London.”

Agents for the vendors were Estate Office.

Posted in news on 3rd May, 2023

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