commercial property 33
Lease re-gears – it’s not too late
At a time of uncertainty in the property market, landlords and tenants should consider re-gearing, writes Mark Pooley of Penningtons Solicitors LLP
It has been well documented that the occupational property market has seen difficult times over the past three years and although there are initial signs of recovery, it is widely anticipated that these difficult times will continue into 2012.
However, there are opportunities for landlords and tenants to benefit from the current market conditions by being proactive and committing to longer leases well before a lease event ie a break option or lease expiry.
If the lease can be extended or a break option removed, the landlord will benefit from rental income over a longer period and, with it, an increase in the value of the property asset.
If the tenant believes the property will continue to meet its requirements, bearing in mind any plans to expand or contract, then it should consider entering into a longer-term commitment by either removing a break option or extending the lease period. In exchange for such a commitment, the landlord will typically provide an incentive in the form of
a rent-free period. The level of incentive will depend on the following factors – the length of time before the lease expiry, the current level of rent compared to the market rent, the proposed extension to the lease period and the occupancy rate on the landlord’s estate or within the landlord’s building.
An example of a simple lease re-gearing which benefits both the landlord and the tenant is as follows – the tenant occupies an office building on a 10-year lease expiring on December 31, 2012. In return for the tenant entering into a reversionary lease starting on the expiry of the current lease and expiring on December 31, 2017, the landlord will grant the tenant a nine month rent free period to take effect from the completion of the legal documents. The landlord is guaranteed a further five years worth of rent and the tenant receives nine months rent free and certainty of its occupation for an additional five years.
It is important for a tenant to plan ahead. Before entering into negotiations it should
Deal is region’s largest in 18 months
Acting on behalf of Greenhills, the south coast team of Lambert Smith Hampton (LSH), has completed the largest office deal in the region in 18 months, with Cobham taking offices at Fusion on the Solent Business Park at Whiteley (pictured below).
Cobham is an international company engaged in the development, delivery and support of leading-edge aerospace and defence technology and systems. The Solent facility will house a number of the group’s existing surveillance businesses currently situated
on three smaller sites – Hartley Wintney, Segensworth and Waterlooville – which will close.
As a world-leader in its field, it provides products and integrated surveillance solutions for law enforcement and public safety, counter- terrorism and intelligence, border surveillance, military and force protection, critical infrastructure protection, unmanned systems and broadcast applications.
The company has signed for Fusion 2, a 43,000 sq ft office building within Greenhills’ 150,000
sq ft Fusion development. The quoting rent of £18.25 was agreed, on a new 10-year lease. A complete fitout of the brand new space is currently underway, with Cobham due to take occupation this month.
Paul McCarter, general manager – surveillance, Cobham tactical communications and surveillance, said: “The Fusion site was chosen for its modern, open plan environment which is designed to the latest environmental standards. Integrating our sites will help to strengthen, standardise and streamline our operations, enabling us to focus even more on the customer and help secure a world-class reputation for our performance as well as our technology.
“The site will become a showcase for cutting- edge integrated surveillance solutions, receiving significant investment in world-class systems, infrastructure and training.“
Added Steve Williams, associate director at LSH’s south coast office agency team: “Within Cobham’s international operations, Fusion will be a showcase of its modern working practices and collaborative office space.
“Furthermore, as we are finding with all large occupiers, the green agenda has played a major role in Cobham’s decision to relocate. Matching Cobham’s wish-list to Fusion, a scheme renowned for its energy-efficiency credentials, together with Greenhills’ hands-on ability to deliver completion of both the Cat A and Cat B fit-out works, ultimately drove the deal.“
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2011
www.businessmag.co.uk
consider whether there are any suitable alternative properties available to let. The terms of the lease should be checked and the tenant should be familiar with any break dates and the lease expiry date. The tenant should know whether or not it will have security of tenure under the Landlord & Tenant Act 1954.
Details: Mark Pooley 01256-407100
mark.pooley@penningtons.co.uk www.penningtons.co.uk
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