Prime City Centre Office Investment - Capital Quarter Cardiff | CF10 4BZ - Fastly
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Capital Quarter
Cardiff | CF10 4BZ
Prime City Centre Office Investment
Investment Summary Opportunity to acquire a modern multi-let office investment in the heart of Cardiff city centre within close proximity to Cardiff Central Station and the prime retail core. Cardiff is Wales’ capital city and one of the major regional centres in the UK. Capital Quarter is a mixed use development located in the heart of the Cardiff Central Enterprise Zone within close proximity to Central Square and Callaghan Square, which together forms Cardiff’s prime office core. No 2 Capital Quarter, on the adjacent plot, is already under construction with 80% let and completion targeted for Spring 2016. No 1 Capital Quarter is Freehold, providing Grade A offices developed in 2014 to a high standard. Comprises 77,992 sq. ft. (7,245 sq. m) over 9 storeys with open plan, flexible floor plates and 46 car parking spaces on site and a new multi-storey (296 spaces) opposite. Multi let with 6 occupational tenants including Home Office, WSP, Network Rail and Finance Wales with a WAULT of 10.43 years to lease expiries (6.02 to break options). Current rent of £1,489,966 per annum which equates to an average rent of £19.11 per sq. ft. Strong prospect for rental growth with £19.50 per sq ft already acheived in the building and prime rent of £22 per sq ft set to grow in 2016. We are instructed to seek offers in excess of £20,870,000 (Twenty Million Eight Hundred and Seventy Thousand Pounds), which represents an attractive Net Initial Yield of 6.75%, after deducting standard purchaser’s costs of 5.8%, and a low Capital Value of £268 per sq ft. Subject to Contract & Exclusive of VAT
A4232 TO M4 J 33
CARDIFF CITY FOOTBALL GROUND
SWALEC CRICKET GROUND
ROYAL WELSH COLLEGE
OF MUSIC & DRAMA
PRINCIPALITY STADIUM
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Capital Quarter
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Cardiff | CF10 4BZ
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Capital Quarter Briga
Cardiff | CF10 4BZ
Bute East
Situation
Capital Quarter is situated on Tyndall Street in the heart of Cardiff city centre and forms part of the Cardiff Following the letting success of No.1 Capital Quarter, developers JR Smart are now in the process of
Central Enterprise Zone. It comprises an exciting 8 acre mixed use development including Grade A offices, speculatively developing No. 2 Capital Quarter on the adjacent plot. This will comprise a new 85,000 sq ft
hotels, student housing and education uses. Grade A office building with practical completion forecasted for Spring 2016. Almost 80% of the offices have
already been let. JR Smart have detailed planning permission to develop No. 3 Capital Quarter on the site
It is strategically located within easy walking distance of Cardiff Central Railway Station, the main transport hub opposite to No. 2, which will comprise a further 75,000 sq ft of offices and intend to commence development
in Cardiff. In addition the prime retail core and other city centre amenities are just a few minutes walk away, in Spring 2016. This development will further establish the location and drive rental growth.
accessed via the new £2.5m Smart Bridge which crosses the main railway line. The Smart Bridge enhances the
accessability of the Capital Quarter to Queen Street station and the Valley Lines network. In addition Viridis are also on site having commenced the construction of their high quality 600 bed student
housing scheme to the rear of the subject property. This is expected to be delivered in September 2016.
Capital Quarter has quickly established itself as one of the premier office addresses in the city and forms part of
the prime office core with both Callaghan Square and Central Square within close proximity. Nearby occupiers
include Eversheds, HSBC, Capital Law, Admiral, Equiniti, Deloitte and Brookfield Utilities UK.
SMART BRIDGE
Capital Quarter Master Plan
Multi Storey STREET
Car Park M ARY
N SE
RO
Viridis Viridis
Students Students
Eastern Equiniti
Future
NORTH SOUTH PEDESTRIAN ROUTE
Courtyard
Development Western
Courtyard
EAST WEST PEDESTRIAN ROUTE
CANA L
Viridis Viridis Brookfield
ACCESS ROAD
Students Students Utilities UK
Future
ELLEN
Development
80% u/o
Herbert Street
Development
STRE ET
Atlantic
University of House Capital
South Wales Law
HE RB ER T ST
TY ND AL L ST RE ET
Etap Hotel
Novotel Hotel
Atlantic Wharf
Cardiff City Centre Infrastructure Initiative Building which forms the centre of this regeneration area under International Convention Centre & Arena – Plans have been
Cardiff City Council and Welsh Government have acknowledged that the construction with occupation targeted by 2019. submitted for a new Convention Centre to be located at Celtic Manor
future growth of the Welsh economy is dependent on a strong and vibrant Resort at Newport. In addition sites in Cardiff have been earmarked as
Electrification of the main intercity rail line - This will
Capital City. The Enterprise Zone is just one of numerous initiatives which a potential location for a new state of the art arena with a capacity of
improve Cardiff’s connectivity via faster journey times to London
form part of a detailed Master Plan for the city which will vastly improve the 10,000+.
with the work scheduled to be completed by 2019.
infrastructure and boost the economic profile of Cardiff to firmly consolidate
Academic Profile – Cardiff University, which is already within the Russell
its position as one on the major regional centres in UK. These initiatives Investment in Cardiff Central Railway station - Plans to
Group, continues to grow and raise its global academic profile. Increasingly
include: create new civic scaled public squares to the north and south of the
secondary office buildings in the city centre are being converted to student
station as high quality arrival spaces and “gateways” to the city. Work
Cardiff Central Enterprise Zone - The recently established Cardiff housing to accommodate the increasing number of students and the
has already been completed at the south side of the station.
Central Enterprise Zone is centred on the Cardiff Central Railway Station increase in demand for this sector from investors. The city has a resident
and is the only Enterprise Zone in the UK dedicated to attracting and Improved connectivity between the city centre and Cardiff population of approximately 350,000, which is swelled by over 75,000
growing the financial and professional services sector. Bay - One of the proposals is for a new tram link along the south full-time students from the city’s expanding higher education sector, to
side of Callaghan Square. include Cardiff University, Cardiff Metropolitan University and the Royal
Central Square – The commitment from Legal & General to the Central Welsh College of Music and Drama.
Square regeneration scheme reflects the improving confidence in Cardiff as Welsh Governments Acquisition of Cardiff Airport - Welsh
a centre of growth and opportunity. The scheme will have a potential capital Government have acquired the airport in order to boost its profile
value in the order of £400 million when fully completed. The first phase of and increase the number of airlines and routes around Europe and
office development, No 1 Central Square is expected to complete in Q1 internationally to further improve Cardiff’s domestic and global
2016 while the BBC Wales relocation of its 165,000 sq. ft. Headquarters connectivity.
Description No 1 Capital Quarter was completed in 2014 and comprises a 77,992 sq. ft. 9 storey, high specification, Grade A office building. The building offers open plan, flexible floor plates ensuring the building could be single or multi let plus an impressive ground floor reception. Specification includes:- • BREEAM Very Good • VRF air conditioning heating & cooling system & mechanical ventilation to all office areas • 2 x10 person lifts and 1x13 person lift • 2.7m floor to ceiling height • Full accessed raised floors • Suspended ceilings • Male/female and disable toilet facilities on each floor • Shower facilities within the building • 46 onsite car parking spaces plus 48 cycle spaces (ratio of 1:1695 sq ft) • DDA Compliant • LG7 lighting throughout • Ground Floor Coffee Shop
Accommodation The offices have been measured in accordance with the RICS Code of Measuring Practise (6th Edition) and comprise the following Net Internal Areas: Demise Description Sq ft Sq m Ground Floor Coffee Shop 1,400 130.06 Ground Floor Office 4,977 462.36 Floor 1 Office 9,744 905.22 Floor 2 Office 10,040 932.71 Floor 3 Office 9,829 913.11 Floor 4 Office 9,829 913.11 Floor 5 Office 9,849 914.97 Floor 6 Office 9,849 914.97 Floor 7 Office 6,200 575.98 Floor 8 Office 6,275 582.95 Total 77,992 7,245.44 Typical Floor layout
Tenure Service and Estates Charge
Freehold. The service and estates charge for No 1 Capital Quarter in 2014/15 totalled £222,897 reflecting £2.86 per
sq ft. The budget for 2015/2016 is £268,150 reflecting £3.43 per sq ft.
Tenancy
Service charge caps are agreed for the first five years only, increasing by RPI on:-
The property is fully let and multi tenanted on full repairing and insuring terms as set out in the tenancy schedule • Home Office: £4.00 per sq ft.
below. The total rent is £1,489,966 per annum, reflecting an average rent of £19.11 per sq ft, with a Weighted • Alert Logic: £3.50 per sq ft.
Average Unexpired Lease Term (WAULT) to lease expiries of 10.43 years and 6.02 years to break options. • WSP: £4.00 per sq ft.
Vendor to top up all current rent free incentive, but not any future rent fee payments that become payable. • Finance Wales: £3.00 per sq ft.
Tenancy Schedule
Floor Tenant Area Lease Start Lease Expiry Term Break Options Rent per annum Rent per Sq ft Comments
yrs
12 months rent free taken as half rent for 2 years.
Ground Floor Coffi Glo 1,400 06.11.2015 05.11.2030 15 06.11.2025 £35,000 £25.00 B/O - 6 months notice.
10 months rent free. B/O end of 5th year subject to 9 months notice.
Ground Floor Home Office 4,977 19.02.2016 18.02.2026 10 18.02.2021 £96,700 £19.50 Annual thereafter subject to 6 mths notice
First Floor Network Rail 9,744 24.06.2015 23.06.2025 10 23.06.2020 £184,700 £18.95 15 months rent free. B/O 12 months notice plus 3 months rent penalty.
15 months rent free plus additional 3 months of start of 6th year if B/O
Second Floor Alert Logic 10,040 16.11.2015 15.11.2015 10 15.11.2020 £195,800 £19.50 not enforced. If B/O enforced 5 months penalty to pay.
Third and Fourth Floor WSP Management Limited 19,658 31.01.2016 30.01.2026 10 31.01.2021 £378,416 £19.25 Stepped rent of £13.28 for years 1 to 4, equivalent to just under 15
Guarantor WSP UK Limited months rent free. B/O 9 months notice and 6 months penalty.
Fifth Floor Alert Logic 9,849 17.07.2014 15.11.2020 6.45 - £176,319 £17.95
24 months incentive: stepped rent yrs 1 & 2 - £9.47 psf, yrs 3 & 4 -
Sixth Floor Finance Wales 9,849 12.08.2014 11.08.2029 15 11.08.2024 £186,630 £18.95 £9.48 psf. B/O 6 months notice.
24 months incentive: stepped rent yrs 1 & 2 - £9.47 psf, yrs 3 & 4 -
Seventh Floor Finance Wales 6,200 12.08.2014 12.08.2029 15 11.08.2024 £117,490 £18.95 £9.48 psf. B/O 6 months notice.
24 months incentive: stepped rent yrs 1 & 2 - £9.47 psf, yrs 3 & 4 -
Eighth Floor Finance Wales 6,275 12.08.2014 11.08.2029 15 11.08.2024 £118,911 £18.95 £9.48 psf. B/O 6 months notice.
Total 77,992 1,489,966
Covenant Profile
WSP Network Rail
WSP and Parsons Brinckerhoff have combined and are now one of the Worlds leading engineering Network Rail is the owner and infrastructure manager of most of the rail network in England, Scotland and
professional services consulting firms. Specialities include construction management, design & engineering, Wales, Network Rail is a ‘not for dividend’ company limited by guarantee with no shareholders which applies
payroll management, operations and maintenance. Guarantee provided by WSP UK Limited. its income to its own purposes.
WSP UK Limited has a Dun & Bradstreet rating of 2A1 and showed the following published accounts for Dun & Bradstreet rating of 5A1 and showed the following published accounts for the last 3 years.
the last 3 years.
Fiscal Fiscal Fiscal
Fiscal Fiscal Fiscal Consolidated Consolidated Consolidated
Consolidated Consolidated Consolidated GBP GBP GBP
GBP GBP GBP 31 Mar 2014 31 Mar 2013 31 Mar 2012
31 Dec 2014 31 Dec 2013 31 Dec 2012 (000’s) (000’s) (000’s)
(000’s) (000’s) (000’s) Sales Turnover 6,333,000 6,197,000 6,004,000
Sales Turnover 232,272 191,872 167,490 Profit / (Loss) Before Taxes 1,035,000 775,000 475,000
Profit / (Loss) Before Taxes 10,827 5,971 3,027 Tangible Net Worth 10,782,000 10,468,000 10,315,000
Tangible Net Worth 6,980 9,766 5,187 Net Current Assets (Liabilities) (4,655,000) (2,839,000) (1,592,000)
Net Current Assets (Liabilities) 6,898 9,876 5,267 For further information please see their website: www.networkrail.co.uk
For further information please see their website: www.wsp-pb.com
Finance Wales
Home Office The Finance Wales Group is one of the UK’s largest regional SME investment companies and provides
The Home Office leads on immigration and passports, drugs policy, crime policy and growth capital for small and medium-sized businesses in the UK. A subsiduary of the Welsh Government,
counter-terrorism and works to ensure visible, responsive and accountable policing in Finance Wales has funds of £335 million under management and invest in SMEs as well as xénos, a business
the UK. angel network. The Group has invested more than £183 million through 2,500 investments in Wales-based
businesses. Finance Wales’ investments have leveraged an additional investment of £378 million.
Home Office is a Government department, supported by 29 agencies and public bodies.
For further information please see their website: www.gov.uk/homeoffice Finance Wales has offices throughout Wales, with headquarters in Cardiff.
For further information please see their website: www.financewales.co.uk
Alert Logic
Fiscal
Alert Logic is a Non consolidated
provider of managed cloud security and GBP
compliance solutions delivered in a Software- 31 Dec 2014
as-a-Service model. The company was Sales Turnover 2,465,677
founded in 2002 and is headquartered in
Houston, Texas with offices in Seattle, Cardiff Profit / (Loss) Before Taxes (3,317,812)
and London. Cardiff is Alert Logic’s European
Tangible Net Worth (3,317,712)
Headquarters and their business plan
objective is to expand their security model Net Current Assets (Liabilities) (4,705,574)
across Europe, which is already happening.
For further information please see their website: www.alertlogic.com
Coffi Glo.
Welsh artisan coffee shop and eatery which has now opened two retail outlets in Cardiff. Recently changed its
name to Kin & Olk but at present no accounts available.Regional Investment Comparables
Property Area Price Net Capital WAULT Tenant Purchaser Date Grade A Supply Headline Rents and Forecast
(sq ft) (£m) Initial Value (Years)
Yield (per sq ft)
900,000 Q4 14 Q4 15 Q4 16F
No 1, Kingsway Cardiff 68,372 £17,700,000 6.75% £259 4.1 Multi-let Undisclosed Under Offer
(quoting) (quoting) 800,000 Aberdeen £34.00 £32.00 £30.00
U/C Spec
3 & 4 Callaghan Square, 112,024 £32,125,000 6.13% £287 7.93 Multi-let Deutsche January 2016 700,000 Birmingham £30.00 £30.00 £33.00
Cardiff Bank Availability Q4 2015
600,000 Bristol £27.50 £28.50 £29.50
Wellbar Central, 117,679 40,000,000 6.00% £340 5.38 Multi-let Orchard January 2016 500,000
Newcastle Street Cardiff £22.00 £22.00 £25.00
400,000
Central Square North, 73,183 £21,580,000 6.42% £295 8.04 Multi-let Standard December 2015 Edinburgh £28.00 £31.00 £32.00
Newcastle Life 300,000
200,000
Glasgow £28.50 £29.50 £30.00
Meridian Court, 65,822 £23,850,000 6.01% £362 8 Scottish Private December 2015 Leeds £26.00 £26.50 £28.00
Glasgow Ministers Overseas 100,000
- Manchester £31.00 £34.00 £34.00
Citypoint, Edinburgh 41,955 £14,475,000 5.76% £345 6.3 Multi-let CBRE Global August 2015
Investors Newcastle £21.50 £22.00 £23.00
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66 Queen Square, Bristol 61,497 £32,780,000 4.94% £533 13 Multi-let Aviva July 2015
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10 Templeback, 124,198 £58,500,000 5.34% £471 4 Multi-let Orchard June 2015 Source: Knight Frank Research
Bristol Street
Helmont House, Cardiff 166,705 £34,600,000 6.08% £207 12.31 Multi-let KFI May 2015
Cardiff Office Market
Cardiff is the principal office market within Wales, and one of the major regional centres in the UK, with an This lack of supply and decreasing incentives is driving rental growth. Cardiff was the only major regional UK
estimated office stock of approximately 11 million sq. ft. office market to see growth in headline rents during the downturn with rents rising in 2009 to £21.00 per sq ft
In recent years, the Central Business District (CBD) has migrated from the eastern side of the city and is now and £22.00 per sq ft in 2012. This is expected to grow in 2016 to £25.00 per sq ft but it is important to note
focused on the areas surrounding Cardiff Central Railway Station which includes Central Square, Callaghan the rental discount to nearby Bristol where city rents are at circa £28.00 per sq. ft. and Birmingham at £30.00
Square and Capital Quarter. This movement in the CBD has been a major catalyst in the conception of Capital per sq ft. This is a significant discount and is a key driver in attracting new occupiers to Cardiff, Wales’ capital city.
Quarter which lies at the heart of the CBD and Cardiff’s Enterprise Zone.
Cardiff & Regional Investment market
Currently, the City Centre office market is focused around Callaghan Square and Capital Quarter which together The regional investment market has seen a surge in demand by investors who view it as good value compared
extends to circa 500,000 sq ft of grade A office accommodation. Callaghan Square provides five buildings let to to Central London and South East markets. In a stock starved market an increasing weight of money is chasing
tenants such as Eversheds, ING, Allied Irish, Centrica and Deloitte while Capital Quarter consist over 200,000 modern, well located offices situated in core locations in the major regional centres. As the capital of Wales,
sq. ft. within No 1 & 2 as well as Driscoll Buildings. Cardiff is regarded as one of the major centres in the UK and is the focus for investor demand for offices.
In addition Central Square is also now being developed by Rightacres and Cardiff Council and funded by Legal & Investors are being increasingly attracted to Cardiff by the infrastructure improvements and the major
General. This scheme will have a potential Capital Value in the order of £400m, when fully completed. The first developments/regeneration projects which are under way. The drive by the public sector to attract more
phase of office development, No. 1 Central Square is expected to be completed in 2016 and is anticipated to be occupiers and the attractive demand/supply dynamics which is driving rental growth will all have a positive
fully let with rents ranging between £21.00 per sq ft and £25.00 per sq ft. In addition BBC have committed to impact on the Cardiff office and investment market.
occupying a new 165,000 sq ft Foster & Partners designed office building with completion due in 2018, by 2019.
This demand was particularly evident with the sale of Helmont House which attracted fierce bidding from a
With the current lack of Grade A supply there is emerging evidence showing a decrease in the level of incentives diverse range of investors, including Pension Funds, Opportunity Funds and Overseas Funds, while the recent
required to secure Grade A lettings. For example British Gas recently acquired space in No 3 Callaghan Square sale of No 3 & 4 Callaghan Square secured strong interest from international investors.
on a 10 year lease with 5 year break option at £21.00 per sq ft with only 9 months rent free, while Blake
Morgan took 28,000 sq ft of No. 1 Central Square with 18 months rent free on a 16 year lease term. Capital Allowances
This trend along with the current initiatives being undertaken to improve the economic profile and infrastructure Information to be provided on request.
of Cardiff, and the discount between it and other major regional centres, should help drive rental growth in
Cardiff going forward. VAT
The property is elected for VAT. It’s anticipated the transaction will be treated as a Transfer of a Going
Despite these new developments current Grade A supply is at a low level in the city at around 100,000 sq ft
Concern (TOGC).
with just over 28,000 sq ft in the City Centre. The lack of Grade A supply has encouraged further development
in the city with 1 Central Square, a 135,000 sq ft speculative Grade A development to the north of Cardiff EPC
Central Station, and No 2 Capital Quarter, a new 85,000 sq ft speculative Grade A office development in Capital No 1 Capitial Quarter has an EPC rating of B38. A copy of the report is available on request.
Quarter, both under construction and expected to be fully let by practical completion.Investment Considerations • Cardiff is the capital city of Wales and one of the major regional centres in the UK. • Freehold. • Located in the heart of the city centre within close proximity to Cardiff Central Station, the prime retail core and the flagship John Lewis department store. • Located in the established Cardiff Central Enterprise Zone - the only Enterprise Zone in the UK dedicated to growing and attracting the financial and professional service sectors. • Capital Quarter is fully established as one of the premier business addresses in Cardiff. • Recently developed offices built to a high specification and benefiting from open plan flexible floor plates. • Current rent of £1,489,966 per annum reflects an average rate of £19.11 per sq ft which looks low when compared to the headline rent for Cardiff offices. • Prime Cardiff headline rents of £22.00 per sq. ft. are set to grow in Capital Quarter in the short term with deals at £24 and £25 per sq ft. under offer and expected to complete in early 2016. • Rents at Capital Quarter have already reached £20 per sq. ft. and are set to grow further as future phases of the Capital Quarter development take place. • Tenants are well established in the Building and have already taken additional space as well as extending their lease terms demonstrating a clear commitment to the building. • Significant infrastructure improvements currently underway or in the pipeline which will enhance Cardiff’s domestic and international profile and connectivity, creating a positive impact on the economy and office market in Cardiff and the region. • In a market characterised by a shortage of prime office investments this represents an excellent opportunity to acquire a modern Grade A office building in a major regional centre, offering opportunities for proactive asset management and rental growth. • No 2 Capital Quarter on the adjacent plot comprises 85,000 sq ft and is already 80% let, with completion not until Spring 2016.
CITY MEETS CENTRE
Proposal Capital Quarter
Cardiff | CF10 4BZ
We are instructed to seek offers in excess of £20,870,000
(Twenty Million Eight Hundred and Seventy Thousand
Pounds), which represents an attractive Net Initial Yield of
6.75%, after deducting standard purchaser’s costs of 5.8%,
and a low Capital Value of £268 per sq ft.
For further information or Rob Jones Legal Advisors on sale:
to arrange an inspection Tel: 029 2044 0128
please contact the following: rob.jones@knightfrank.com Important Notice
1. Particulars: These particulars are not an offer or contract, nor part of one. You should not rely on statements by Knight Frank LLP in the particulars or by word of mouth or in writing (“information”) as
being factually accurate about the property, its condition or its value. Neither Knight Frank LLP nor any joint agent has any authority to make any representations about the property, and accordingly any
Gareth Lloyd information given is entirely without responsibility on the part of the agents, seller(s) or lessor(s).
Tel: 029 2044 0141 2. Photos etc: The photographs show only certain parts of the property as they appeared at the time they were taken. Areas, measurements and distances given are approximate only.
3. Regulations etc: Any reference to alterations to, or use of, any part of the property does not mean that any necessary planning, building regulations or other consent has been obtained. A buyer or lessee
gareth.lloyd@knightfrank.com must find out by inspection or in other ways that these matters have been properly dealt with and that all information is correct.
4. VAT: The VAT position relating to the property may change without notice.
Simon Rickards Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London W1U 8AN, where you may look at a list of
members’ names.
Tel: 020 7861 1158
simon.rickards@knightfrank.com Subject to contact Design by Martin Hopkins Partnership, Cardiff. Tel: 029 2046 1233 www.martinhopkins.co.uk March 2016
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