Ashville Road Industrial Estate, Gloucester

Ashville Road, Gloucester comprised a 71,461 sq ft (6,639 sq m) vacant and dilapidated warehouse unit occupying a site area of 5.39 acres (2.18 ha). The property was held on a full repairing lease to the Co-operative Group Ltd with 54 years unexpired at £218,502 pax with no breaks. The Co-op had an IAS37 provision of £2.52m which included £850k of remedial costs to make the property fit for occupation and annual vacant holding costs of £450k pa.

When the investment was brought to the market, the Co-op acquired the freehold for £4.53m reflecting a net yield of 4.56% due to the long-term secure revenue stream. This was achieved with a back-to-back onward sale of the freehold with vacant possession to the adjacent owner / occupier for £2.5m, and a pro-rata apportionment of the SDLT cost. With purchaser’s costs, the onerous lease liability was crystallised at a net cost £2.15m, reflecting a 4.5 x multiple of the total annual holding cost. With 54 years unexpired and a dilapidated and obsolete building, the transaction offered certainty and allowed the Co-op to release £400k back to P&L from the IAS37 provision.