Cerberus Capital Management is putting up for sale one of the UK’s most notorious problem assets, the 756,000 sq ft Maxim office park in Lanarkshire, after seven years of ownership.
The private equity firm took control of the asset at the bottom of the market in 2011 when it was just over 90% vacant and 74% of the space, totalling nearly 560,000 sq ft, still remains empty.
However, it is understood that advanced discussions with a call centre operator to take one of the 10 buildings measuring around 60,000 sq ft, could see the vacancy rate reduce to 66%.
Cerberus has appointed Cushman & Wakefield to undertake a targeted marketing campaign to a handful of investors.
An asking price of £30m, reflecting a net initial yield of 9.79% had been drafted but the prospect of the new letting and increased rental income will likely push this figure notably higher. A sale at the drafted asking price would reflect an overall capital value of £40 per sq ft.
The park’s current total net operating income is £1.3m while its total contracted rent income stands at £2.7m.
Situated on the M8 motorway that links Glasgow and Edinburgh, Maxim sits alongside 250,000 sq ft of industrial space, which is not part of the sale, known as Centralpoint Distribution Park.
Cerberus paid around £30m for debt held against the park and in 2014 it recouped some of its investment through the sale of adjoining industrial buildings.
Since Cerberus took control of Maxim lettings have been secured to 20 occupiers across its 10 buildings, including Balfour Beatty, which took 43,500 sq ft in March last year, biotech firm TC BioPharm and heating technology manufacturer Vaillant Group UK.
The initial purchase by Cerberus – its first in the UK – consequently unlocked the park’s first major letting, totalling nearly 60,000 sq ft, to the Scottish Environment Protection Agency.
The prospective sale marks the latest instalment in the scheme’s colourful history. When Cerberus acquired the £95m of bank debt from Lloyds Banking Group for £30m it rescued the park from the possibility of administration.
Maxim had been teetering on the brink after its owner, Tritax Eurocentral EZ Unit Trust, breached its loan-to-value covenants in 2010 on the development that was initially labelled as having a £330m end value.
Speculatively developed in one phase, Maxim sits within an enterprise zone. As a result of its enterprise zone status the initial 1,500 retail investors into the unit trust were given tax breaks on their investments but were the scheme to have gone into administration the tax breaks would have been lost. The sale to Cerberus gave the private equity firm control and any upside to the investment in exchange for ensuring there were no insolvency measures enforced and the tax breaks protected.
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