The importance of a strong covenant to investors was underlined at Chesterton’s commercial auction last week, with high prices being achieved on several well-let properties.
By the close of proceedings, the firm had sold just 46% of its 35-lot catalogue. But strong demand for the better properties pushed the total revenue up to nearly £4.5m.
A freehold showroom and office investment – let to World of Leather and Royal London Mutual Insurance Society – fell under the gavel at £975,000 for the top price on the day.
The price shows a 10% net initial yield, based on rental income of £99,000 pa, for the 13,730-sq ft property on Eastern Avenue, Ilford, Essex.
Covenant strength generated brisk bidding on several of the 12 lots which auctioneer Cliff Krieger sold in the room – notably two bars let to European Leisure.
Krieger knocked down the freehold investments in Newcastle upon Tyne, which currently produce £100,000 pa and £88,000 pa, for £750,000 and £575,000 respectively.
The firm also did well with ground rent investments. A car showroom plus industrial space producing £37,500 pa at The Pentagon, Nottingham Road, Derby, raised £570,000.
The price reflects a net initial yield of 6.25%, and three other ground rents sold off similar yields.
Sales after the auction have already increased revenue to more than £6m, and Krieger is confident of raising the total to as high as £7.5m.
“The importance of post-auction activity has been far greater than before, but it doesn’t denigrate from the modus operandi of auctions,” he said.
