This property was acquired in 2003 at an attractive yield due to the tenant’s relatively weak covenant as a newly established enterprise. Hallmark assessed the tenant's business outlook and strong management experience as a reasonably low risk, projecting an improvement in covenant strength and, ultimately, capital value.
From Constraint to Expansion
Hallmark was informed of an urgent challenge facing the tenant and its 1,200 staff. The overflow parking they had been using was unexpectedly closed down due to redevelopment. A significant number of staff were left without parking, jeopardising the tenant’s business operations.
Hallmark’s asset management team identified the tenant’s challenge as a mutually beneficial opportunity to develop a new car park for the property. Hallmark undertook parallel negotiations with the tenant, the landlord of an adjoining plot, and the local council with whom Hallmark applied for a grant to help fund the project.
The outcome of Hallmark’s initiative was a win for all parties. The new car park enabled the tenant to accommodate their existing staff, while allowing them to expand their operations as necessary without relocating.
The local authority, acknowledging the representation that this tenant is the largest employer in their area, agreed to provide a 50% grant to fund the car park development, with the clients’ mortgagees providing the balance. As a result, Hallmark and the tenant agreed to a co-terminus lease on the new car park, generating an even greater rental stream for clients, without requirement for any capital contribution from the client.
Rent Uplift Against the Odds
The opinion of a nationally recognised surveyor familiar with the local area was that Hallmark was unlikely to achieve an uplift at the tenant’s next rent review. Partly as a result of the above mentioned robust asset management, Hallmark negotiated directly with the tenant and achieved a rent increase of over 31%.
Case in point
These positive outcomes not only reflect Hallmark’s innovative thinking but highlight the strategic importance of working closely with tenants and other stakeholders to meet common goals.
Map data: Google, DigitalGlobe