Our Projects
The Haunting of Fishwick Street A Property Exorcism.
"You will never convince the girls who run this branch that it’s not haunted. Never!"
Rochdale, like most northern towns, is a bit unfashionable and is striving to reinvent itself from the decline of its industrial heritage. ‘Industry’ is less prominent that it was and industrial space tends to be distribution ‘boxes’ or trade counters; the engineering works and textile mills are almost gone.
Our clients holding on Fishwick Street is modest. Its only 104,000 sq.ft and has 7 tenants across 13 units. Part of it is a ‘refaced’ former engineering works and the rest dates to the late 70’s / early 80’s – so newer, but not new.
Our client didn’t immediately appoint us here. The estate was fully let and they felt ‘covered’ by the property manager. In fairness, it was fully let and chugging along with only trivial day to day issues to deal with, but there were problem lease renewals looming and the average unexpired lease term was falling. On appointment, it was about to dip under 2 years. In other words, if we did nothing and all the tenants left at their first opportunity, the estate would be entirely empty in 2 years. To some, this is true property horror! The apparition of short income, heavy cap ex and the corresponding risks to void rate and rental growth were very real.
When we engaged with the tenants it became obvious that many of the usual multi-let estate gripes were longstanding and this was motivating them to do nothing with their lease. These gripes included:
- Leaking roofs / gutters
- Security concerns
- Service charge – ‘what do we actually get for this?’
- Parking and circulation disputes
- Life-end elements of the building fabric
- Poor and inaccurate signage
- Utility sub meter billing issues
There was an undercurrent of apathy. There wasn’t anything ‘really wrong,’ but nothing was being done to make things ‘really right!’ They just wanted landlord time, to be listened to and see some quick wins put in place. Queue…
- Security review
- 2 year service charge plan forward funded by the landlord to deal with potholes, entrance gates and CCTV
- Clocktower repairs
- A simple rebrand
- The introduction of smart meters
…which in turn paved the way for multiple reversionary leases and better rent review settlements. All of a sudden the landlord was bothered so, the tenants were too.
The biggest tenant (by rent and floor area) occupied the worst building in terms of repair. The Fishwick Street space comprised of 3 bays and the middle bay was difficult to access. This bay was supported by the original timber trusses and the metal roof was bright red and rusting away. Knackered wouldn’t be a strong enough term…
Now this is not ‘Costa del Rochdale’ where the sun always shines and the soft breeze flutters your sun umbrella…its ‘proper up north’ so it’s always windy, often raining and usually cold. Taking off a roof from the inside, removing the old structural elements and replacing them with modern steel equivalents was a bold call, especially with multiple tenants in close occupation….but we were bold. Yes, it was a long project and yes, there were lots of unforeseen issues – such as hidden lift shafts to remove, crumbling high level walls which needed rebuilding, rainwater flowing into adjoining units and high level gutters draining into cavity walls – but we got there. In the end we completed a substantial lease to a solid covenant which included an overriding lease on part of the building to create a subtenancy…meaning the better covenant was locked in across more space over a much longer term that would have otherwise been available.
Zoom forward 21 months from our appointment and the exorcism is complete:
- The average unexpired lease term was 10.17 years which is 5 times greater than it was.
- The net income increased by 53%.
- The net income is currently 64.7% more than it was on the date of appointment.
Amen to that!
The ghoulish specter of short income and heavy cap-ex projects often haunt investors, especially when dealing with older properties and local covenants. Sometimes they deal with it by selling, others accept a lower rental tone which can harm capital value; but if you can exercise these ghosts then quite often, the estate you end up with carries excellent the investment credentials you didn’t think were achievable.
Yoke didn’t have a ‘holy hand grenade’ here. We simply gave the estate the strategic time it needed and implemented some easy quick wins to change occupier sentiment. The deals followed on when the tenants believed in and then witnessed positive change. Today, this estate remains fully let and Howdens have come to love their ghost; they’ve even refitted their store and regeared their lease – with the appropriate alienation provisions of course.
