Drum Industrial Estate is next to the A1(M) in Chester-Le-Street, Durham. It’s not a fashionable location in the slightest and it’s very much a budget location. Ownerships vary within it and there are a couple of tired multi-let industrial offers. One aspect has a relatively new element to it with some office buildings but for the most part, its big distribution sheds and factories. Unremarkable is the best description of what you see here.

The subject property is less than unremarkable. ‘Tired’ is too good a description. So would ‘dated,’ as would ‘it’s a good example of its age’…it was a 270,000 sq.ft higgledy-piggledy property time bomb.

If you looked at the headline investment credentials on day 1 then you could be forgiven for thinking it’s not so bad. It was producing a decent income, the industrial element was fully let and the AWULT wasn’t that far from 3 years.

The issue was that this was never going to be sustainable without major surgery. These are the reasons why:

• Poor repair to key building and wider estate fabric – so, failing yards, security issues, water ingress and other chronic roof issues.
• There was a legacy office building with zero prospect of letting it or dealing sensibly with the associated void costs
• The product didn’t have key services within the demised areas – WC’s were in the office building. Some units had no office content or WC’s.
• There were no private, secure yards demised to the units; instead there were substantial common areas which were largely unmanageable and wide open to abuse.
• A service charge regime was ‘available’ but not implemented….the tenants ‘paid nothing and got nothing’
• There was no estate identity, branding, profile, presence or a sense of arrival.
• The unit numbering was the most bizarre we’ve experienced in 30 years. Unit identification was impossible and wayfinding was nonexistent.
• The electric submetering regime was unfathomable and the tenants distrusted it to the point the recharge function was breaking down.
• The occupations were based on ‘easy’ but ‘thin’ legal documentation such as tenancy at wills which had transitioned to periodic tenancies.
• The tenant relationships were at rock bottom as they felt abandoned and they had been ignored for a prolonged period.
• There was a substantial open storage facility wrapped round the site. The operator offered no covenant and, as it transpired, the operation was a deeply unsophisticated one. There were at least a hundred instances of sharing possession with no lease or documentation supporting alterations
• There was no history of tenant engagement which led to the best occupier operating a break notice…on the hardest unit to re-let

All of this was based on average rents which were sub £2 sq.ft and the tenants wanted to pay less, not more.

Yard space is really important to industrial users and in particular, logistics operators. Without it, you are tempering rental aspirations. If you are into logistics and distribution, which the tenants are here, then it’s crucial. To unlock the site’s potential and create a credible industrial investment we had to create yard space. This sounds simple enough but here it involved:

• Demolishing an office building but this contained the comms for every occupier.
• Providing replacement WC services for the units.
• Providing security that worked including ANPR automatic gates.
• Recladding the front aspect of the estate and better presenting the rest.
• Introducing an identity, a brand and creating some sense of arrival.
• Managing the reduced common areas so they worked for everyone.
• Implementing an immediate maintenance and repair ‘hit’.
• Implementing a major roof repair program over a 108,000 sq.ft warehouse.
• Reflecting all this in a service charge which was lower than the initial one we introduced.
• Managing this process whilst occupiers were trading.

What most case studies fail to share is the nature of the journey from where you start, to where you want to be. What were the bumps in the road? All of the above sounds fine on paper – all you need is a spec and tender exercise aligned with new lease deals plus agreements to lease exchanged and ready to go, right? Simple…..

Here is where Drum got wicked….

• Hidden asbestos in the office building stretched the delivery timescales and costs.
• More asbestos was found buried in the ground underneath the office building which further compounded cost and timescales.
• Red shale was found in the areas where new concrete was to be laid meaning it had to be excavated and removed – red shale and concrete don’t mix! This again stretched timescales.
• The roof project didn’t solve all the issues and required further remedial work.
• This took the roof project through the ‘seagull nesting season’ meaning weeks were lost during peak ‘roof work’ months. There are Seagulls at Drum, and they can be vicious!
• The occupier of the storage site was insolvent and inevitably, the decision to recover possession was taken.
• This exposed the landlord to multiple occupations of part and scores of caravan / motor home owners with no information of who owned them or on what terms they were on site.
• This caused us to find an open storage operator to run the site on an interim basis which in turn led to further evictions – let’s just say the police attended the site several times and we had to arrange manned guard security.
• Significant clean up works were needed on the storage facility to maintain a safe working environment.
• Negotiations with a liquidator were required and became protracted due to the nature of the previous business.
• The electrical submetering arrangement required a full investigative test and survey.
• Occupiers subsequently delayed payment of utility costs which the landlord had to forward fund to keep the lights on.
• Frequent lead consultancy staff changes in building surveying and property management.

Doing the right thing can be more costly than you think even if you do all the usual site investigations and surveys. Some business owners aren’t always rational or reasonable which is certainly the case here. And timescales can get shot to pieces as a consequence BUT……you have to believe in your strategy and roll with the punches.