COMMENT: There has been little in the press over the past few weeks to inspire confidence for private investors, writes John Townsend, head of auction advisory services at Harold Benjamin.
The FTSE100 slumped to a six-month low in the early part of October along with the fall in global stocks as a result of Chinese trade war fears, the possibility of interest rate rises and Italy nearing the brink of a banking crisis, not to mention the farce that has now become Brexit.
The high street continues to be battered with a wave of store closures and insolvencies along with a flurry of profit warnings from embattled retailers.
If you had invested in the recent float of Aston Martin at the beginning of October, you would have seen your investment sink by almost a quarter, in just three weeks, unless of course you were a short seller.
So the timing for both Allsop and Acuitus in presenting their first auctions after the summer break could have been better, as they both offered their biggest sales of the year.
Between them they offered 360 properties, nearly 100 more than in July, selling 266 of them, with a success rate of 74%, for a combined total of £144m.
While this was £24m more than in their July sales, the October sales in 2017 saw £230m raised for about the same number of lots, 369, and a success rate of 87%.
Investors keen to compete
But the combined result this year was a good one in the current climate and investors were keen to compete for the better-located and well-let investments across the country.
The Gosling Charitable Foundation returned to undertake a large number of sales following its success in July by offering a further 48 freehold bank investments, this time split between both Allsop, with 34 properties and Acuitus with 14.
Each bank was again let to HSBC until 2023 without break and with annual RPI-linked rental uplifts and no VAT to pay.
All 48 sold for a combined total of £19.3m, an average of £402,500, returning an average gross yield overall of 8.16%. This was from an overall guide price of £17.2m and a gross return of 9.16%.
Regional differences
While the average returns look generous and even though some of the rents looked quite full, there were clearly some regional differences in yield with quite different results.
The two banks, located in Hendon and Upminster, both in London, were always going to be the most sought-after and sold for £625,000 (5.2%) and £595,000 (4.1%) respectively.
However, the branch in Westbury-on-Trym near Bristol sold for £406,000 (4.85%) and the one in Marlborough High Street, where HSBC is not currently in occupation, sold for £575,000 (5.71%).
At the other end of the country, two branches in the Lake District sold for gross yields in excess of 10%: Workington sold for £380,000 (10.38%) and Barrow-in-Furness sold for £240,000 (10.95% GIY). The branch in Windermere sold for a gross return of 5.17% at 445,000.
Allsop also offered a portfolio of nine freehold sale and leasebacks on behalf of Vision Express Opticians located across the South. To be let on new 10 year leases, without break and with modest rents ranging from £7,000 pa in Amesbury to £17,500 pa in West Byfleet. These two sold for the best gross yields with West Byfleet selling for £375,000 (4.66%) and Amesbury selling for £145,000 (4.82%).
Overall, the package realised £2m with an average return of 4.98%.
£1m-plus lots
Of all the lots on the catalogue with a price tag in excess of £1m, Allsop sold 13 under the hammer with four selling for more than £2m. Of these, the Trident Shopping Centre in Dudley was their biggest lot. Let to 34 tenants and producing a total income of £714,553 pa, this freehold investment was guided and sold at £4m, a gross return of 17.86%.
And £3.5m was realised for George Stephenson House in Stockton-on-Tees. Let to the Secretary of State until 2024 with a break in 2021 at a rent of £790,000 pa, this modern freehold investment yielded a very attractive 22.5%.
Acuitus sold eight lots under the hammer priced at more than £1m with the highest price being for lot 6, a freehold retail investment in Kilburn, NW6. Let to Palace Amusements (Kilburn) until 2030 at a rent of £95,000 pa, it sold for £1,910,000 (a gross yield of 4.97%) from a guide of £1.2m.
But while this lot had a good deal of future potential, it was lot 44 in Dumfries which, in my mind, presented the best opportunities, but with also a good deal of risk.
Located in a prime position in the pedestrianised High Street, this heritable retail investment is let to Debenhams until 2037 at a rent of £350,000 pa.
Difficulties at Debenhams
Debenhams has been in the press of late, announcing emergency measures to tackle its giant debt pile after issuing three profit warnings this year and talking about the possible closing of a raft of its 166 stores.
How times have changed.
This investment was first offered for sale by private treaty through Allsop back in March 2017 inviting offers in excess of £4.4m.
Allsop then offered it in its May 2017 sale where it failed to sell at £4m.
In July this year, Acuitus offered it in its auction with a reserve no higher than £2.5m but it again failed to sell.
So in the October sale, it was re-offered with a reserve no higher than £1m.
This time it did sell for £1.1m, providing the purchaser with a very respectable return of 31.8% and probably a few sleepless nights! If Debenhams can resolve its finances and also keep this store open, this may well have been a very clever buy.
Demand is still strong
All in all, both these auctions clearly demonstrate that demand is as strong as ever for correctly priced stock in good locations and the auction room is one of the best places to source it.
Both Allsop and Acuitus now have the challenge to keep the momentum going with about six weeks to go before their next sales in December.
