disposal

Objective

Cable & Wireless sought to reduce its headcount by 2,700 in the UK by the end of June 2001, thereby releasing surplus offices for disposal. This included the disposal of its UK headquarters in 26 Red Lion Square, WC1 and its global headquarters in 124 Theobald’s Road, WC1. Property values in The City of London were at that time the highest across the entire London office market.

Nick managed and implemented the successful disposal of nine office buildings in central London, encompassing in excess of 300,000 sq ft and including both 26 Red Lion Square and 124 Theobalds Road. These disposals resulted in a more efficient use of premises within Cable & Wireless’s existing portfolio and allowed for the acquisition of a new 18,000 sq ft office in Paddington housing the Group executive to support the re-engineering of the overall business.

 

Services Provided

  • Inspection of all relevant properties and supporting lease documents
  • Preparation of initial high-level report outlining the likelihood and cost of disposal
  • Production of bespoke marketing reports for each individual property containing a analysis of the best method of disposal, route to market and likely timetable to exit
  • Marketing action plan comprising indicative strategy, budget and methodology
  • Generation of DCFs to support the business case for disposal

 

Result

The disposal of 42,000 sq ft in 26 Red Lion Square to The Economist Group helped release funds for the business at a time when they were most needed. Shortly thereafter, Cable & Wireless vacated 124 Theobald’s Road. Acting on Nick’s advice, the company embarked on a significant upgrade of its surplus accommodation with a view to seeking a single occupier for the whole building. Five months after completion of the upgrade, Nick let the entire building to MediaCom, a subsidiary of WPP.

The acquisition of 18,000 sq ft in The Point, Paddington Basin, W2 heralded a move away from Cable & Wireless’s historic Holborn location and provided the lynchpin for issuing a new policy directive requiring all new premises acquired be held on shorter-term leases.

Background

Cazenove Capital Management occupied c. 34,000 sq ft at 12 Moorgate, EC2 under a 25-year lease dating from 1998. Prior to selling the freehold in the property, landlord New Star Property Asset Management sought an increase in the annual rent passing at review from the existing £47.00 per sq ft office rent to a new rent based on a highly optimistic £60.00 per sq ft headline rent.

 

Objective

McCalmont-Woods was referred by its existing client JP Morgan Cazenove and was subsequently instructed by Cazenove Capital Management to negotiate the upward only rent review and mitigate any increase in rent payable as at the 24th June 2008 review date.

 

Services Provided

  • Consideration of existing lease contract and provisions for rent review
  • Analysis of City offices market encompassing thorough study of any relevant comparable evidence as at the valuation date
  • Preparation of initial report to client outlining McCalmont-Woods’ recommended strategy
  • Inspection of suitable premises and relevant comparables>
  • Negotiations with landlord’s agent to include submission of a ‘Calderbank’ offer

 

Result

McCalmont-Woods negotiated an 83% saving for Cazenove Capital Management on the increase proposed by the landlord, resulting in a minimal uplift of 1.5% on the rent passing. The settlement was reached by negotiation between the parties without the need for independent arbitration.

canada-square

Objective

SunGard needed to consolidate its operations into a single new facility based in the capital’s financial district. Nick’s starting brief was to report on the state of the office market in The City and Canary Wharf and to investigate SunGard’s strategic options. The company operated from nine central London locations and also occupied premises in Paris, Frankfurt and Zurich. The optimal solution was the acquisition of a single new site of 84,000 sq ft in the heart of London’s financial district.

 

Services Provided

An initial strategy paper was prepared for SunGard that addressed:

  • an overview of its central London portfolio
  • the opportunities for the acquisition of new space within the determined timescale
  • the disposition of existing leased space
  • the restructuring of existing lease liabilities on its core property holdings
  • provision of dilapidations and reinstatement advice
  • advice on forthcoming lease events, e.g. rent reviews, that might impact upon the disposition of existing offices

Nick’s key strength in this exercise was his robust and informed understanding of the dynamics of the central London property market, specifically in relation SunGard’s requirement for lease flexibility matched to its financial needs. These included a recognition of the implications to the business of adopting both IFRS and US GAAP accounting standards, made more complex by a need to reflect in any transaction SunGard’s own internal lease levelling issues.

The acquisition strategy included:

  • formulation of accommodation strategy and occupational brief
  • research into size, suitability and timing of available premises in both The City and Canary Wharf
  • arranging site inspections and presentations with potential landlords
  • drafting of RFPs and generation of DCF appraisals to illustrate total occupational costs for each shortlisted option
  • twin-track negotiation to leverage best market terms
  • advice on building specification and impact on reinstatement at lease termination
  • advice on future expansion and determination options
  • advice on level of tenant incentives
  • advice on turnkey solutions for fitting out the premises
  • advice on drafting of alienation provisions
  • drafting and negotiation of heads of terms

 

Result

Working closely with SunGard’s representatives, principally the Group CFO and the Group Facilities Manager for SunGard Europe, Nick acquired a total of 84,000 sq ft offices from Citigroup in 25 Canada Square, Canary Wharf under four separate leases. This structure afforded SunGard the flexibility it required to draw down and exit space on pre-determined dates under rental and rent-free terms that were significantly more favourable than could be expected in the open market at the time.

jp-morgan

Background

JP Morgan Cazenove occupies c. 16,000 sq ft on the 3rd floor of 1 Exchange Tower, E14 under two separate leases expiring in March 2015.
The 16 storey office tower at 1&2 Harbour Exchange was originally acquired by Hammerson in 1999 for £77m but was then sold in September 2010 to MGPA Europe Fund III for c. £134.6m – an 8.1% yield. The building comprises 485,000 sq ft of office space let to a range of tenants.
The new landlord, MGP Harbour Exchange II S.a.r.l. sought an increase in the annual rent passing at review from the existing £21.00 per sq ft office rent to a new rent based on a highly optimistic £32.50 per sq ft headline rent.

 

Objective

McCalmont-Woods was instructed by JP Morgan Cazenove to negotiate the upward only rent review and mitigate any increase in rent payable as at the 29th September 2009 review date.

 

Services provided

  • Consideration of existing lease contract and provisions for rent review
  • Comprehensive research into, and analysis of, comparable evidence in the Docklands offices sub-market as at the valuation date
  • Preparation of initial report to client outlining McCalmont-Woods’ recommended strategy
  • Negotiations with landlord’s agent to include submission of a ‘Calderbank’ offer
  • Preparation of Statement of Agreed Facts and Statement of Agreed Evidence as a prelude to a full Arbitration

 

Result

McCalmont-Woods negotiated a saving for JP Morgan Cazenove on the increase proposed by the landlord, equivalent to almost £1m in rent over the 5 year lease term remaining.

8lloyds

Objective

Leading specialist liability insurance provider Marketform identified the need to relocate from its existing premises in Lime Street, EC3 to larger, higher-specification premises to support the burgeoning needs of the business.

Marketform’s objective was to occupy a single floor of 12-15,000 sq ft within the ‘Lloyds Triangle’. The premises needed to be of a regular configuration and capable of accommodating a minimum of 50 staff, with provision for 25% headcount expansion over the next 4-5 years.

 

Services Provided

A realistic budget was determined and after an extensive market search, a larger, self-contained building providing 20,000 sq ft was identified as a potential suitable option. Nick established that the building’s owner, Capital & Counties plc, wanted to sell its freehold interest in the property and that in order to maximise investment value, it needed first to secure a letting. This provided the opportunity for Nick to leverage a highly favourable transaction for Marketform.

 

Result

Nick was able to negotiate a new 10-year lease on the property at a low initial rent that would rise each year up to the rent review in five years time. Also at this time the tenant would benefit from an option to determine the lease. In the event that the tenant elected to retain occupancy, no rent would be payable in year six — effectively allowing Marketform to benefit from an 80% gearing after the reviewed rent had been determined.

The ground floor was sub-let on a short-term lease to reduce Marketform’s exposure to property costs while affording the future flexibility needed to expand its operations in the building.