Drive Thru Costa Coffee, Egstow Park, Clay Cross, Derbyshire

Location

Egstow Park lies on the main A61 Chesterfield to Derby road, 5 miles  south of Chesterfield and 1 mile from Clay Cross town center, situated midway between Junctions 28 &29 of the M1. This brownfield site is undergoing significant development and is immediately adjacent to a large residential development of 160 new homes, undertaken by St Modwen Homes, with the objective of creating a fully serviced residential community that has excellent communication links to the North and South of the area. The land allocated to retail development has a McDonald’s and Marston’s pub already operating successfully and further retail development (non-food and beverage) will shortly be coming to market.

The very busy A61 Chesterfield to Derby road, provides significant traffic flow and therefore a great opportunity for this type of drive-thru development.

Situation

LPS have been offered this development from Carnwarth Estates Ltd, headed by two very experienced property professionals who have an Agreement for Lease in place with Costa Coffee (Costa Ltd) who are ultimately owned by the global food and beverage group, Coca Cola Inc.

Carnwarth own the land on a long leasehold (250 years), with a peppercorn rent, purchased from St Modwen plc. They will provide a contract to build the unit to Costa’s specifications. LPS have Heads of Terms in place to buy the site and make stage payments during the build, therefore offering an SDLT saving which is being passed to investors, with the requirement to provide their capital ‘up front’, but with returns paid from acquisition of the land (i.e. during the build stage) and not as usually is the case, with effect from Practical Completion.

Rational for Purchase

The Drive-thru sector has and continues to enjoy significant growth as consumers shift in behaviour, changes to more frequently buying food and beverage provision ‘on the go’.

Roadside operator requirements are driven today by this more sophisticated consumer base wanting convenience, cleanliness and choice. Busier lives demand convenience and fast service, coupled with more efficient use of land and space, thus providing many opportunities in this sector. Spending in ‘quick service’ coffee outlets in the UK reached £2.1bn in 2017, out of a total of £10.1bn spending in the sector.

For investors, this means there is scope to enjoy long term inflation linked income streams, backed by strong covenants.

LPS have been looking for such opportunities for some time, to provide investors with much needed diversity and we are offering this (our first) scheme of this nature, which has been negotiated off market, with attractive terms.

Purchase Price

The agreed purchase price for the land and construction of the unit is £1.093m inclusive of purchasers’ costs. The land is to be acquired at £275,000, upon the syndicate immediately reaching its funding aim.

By providing the benefit to the developer of development funding, we have negotiated an ‘interest payment’ rebate for the amounts paid during the build period, including the cost of the land purchase, prior to Practical Completion. This enables us to make this a more attractive investment scheme than conventionally seen in this sector.

Drive Thru Costa Coffee, Egstow Park, Clay Cross, Derbyshire

Tenant & Covenant Strength

Costa Ltd are a wholly owned subsidiary of Coca Cola Inc, having been acquired from Whitbread plc in early 2019 for £3.9bn.

The Agreement for Lease is with Costa Ltd (the franchisee, not the operator) and therefore has the strongest possible financial backing for the lease commitment.

Costa itself have gross revenues of £1.29bn worldwide, to the Y/E March 2018 (last full year prior to the takeover) with Net Profit of £159m.

Coca Cola has gross worldwide revenues of $31.8bn and Gross Profit in excess of $20bn for the year ending 31.12.18. Net balance sheets assets are over $19bn.

 

Rental Income 

With the tenant secured, the rental yield after management charges and expenses is offering an immediate return of 5.35% p.a.

Based upon an increase in rent at the five-yearly review of RPI at 2.5% p.a. the returns are likely to increase to 5.50% p.a.

Drive Thru Costa Coffee, Egstow Park, Clay Cross, Derbyshire

Letting

Costa Limited have agreed to take a 15-year lease, with 5 yearly upward only rent reviews, linked to RPI and with a cap and collar of 1% p.a. min, 4% p.a. max.

The tenant has an unconditional break option after 10 years, with 6 months’ notice in writing required. The initial rent is £63,000 per annum, with a 6-month rent free period from completion, which is being reimbursed by the developer

Drive Thru Costa Coffee, Egstow Park, Clay Cross, Derbyshire

The Leases

Tenant:  Costa Coffee

Term:      15 Years with tenant only option to break at year 10

Rent:        £63,000 p.a

Payable:  From April 2020 (estimated)

Reviews:  Upward only every 5 Years

Drive Thru Costa Coffee, Egstow Park, Clay Cross, Derbyshire

Borrowing

The syndicate do not intend to raise borrowing on this scheme.

floor plan

map

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Location

Egstow Park lies on the main A61 Chesterfield to Derby road, 5 miles  south of Chesterfield and 1 mile from Clay Cross town center, situated midway between Junctions 28 &29 of the M1. This brownfield site is undergoing significant development and is immediately adjacent to a large residential development of 160 new homes, undertaken by St Modwen Homes, with the objective of creating a fully serviced residential community that has excellent communication links to the North and South of the area. The land allocated to retail development has a McDonald’s and Marston’s pub already operating successfully and further retail development (non-food and beverage) will shortly be coming to market.

The very busy A61 Chesterfield to Derby road, provides significant traffic flow and therefore a great opportunity for this type of drive-thru development.

Situation

LPS have been offered this development from Carnwarth Estates Ltd, headed by two very experienced property professionals who have an Agreement for Lease in place with Costa Coffee (Costa Ltd) who are ultimately owned by the global food and beverage group, Coca Cola Inc.

Carnwarth own the land on a long leasehold (250 years), with a peppercorn rent, purchased from St Modwen plc. They will provide a contract to build the unit to Costa’s specifications. LPS have Heads of Terms in place to buy the site and make stage payments during the build, therefore offering an SDLT saving which is being passed to investors, with the requirement to provide their capital ‘up front’, but with returns paid from acquisition of the land (i.e. during the build stage) and not as usually is the case, with effect from Practical Completion.

Rational for Purchase

The Drive-thru sector has and continues to enjoy significant growth as consumers shift in behaviour, changes to more frequently buying food and beverage provision ‘on the go’.

Roadside operator requirements are driven today by this more sophisticated consumer base wanting convenience, cleanliness and choice. Busier lives demand convenience and fast service, coupled with more efficient use of land and space, thus providing many opportunities in this sector. Spending in ‘quick service’ coffee outlets in the UK reached £2.1bn in 2017, out of a total of £10.1bn spending in the sector.

For investors, this means there is scope to enjoy long term inflation linked income streams, backed by strong covenants.

LPS have been looking for such opportunities for some time, to provide investors with much needed diversity and we are offering this (our first) scheme of this nature, which has been negotiated off market, with attractive terms.

Purchase Price

The agreed purchase price for the land and construction of the unit is £1.093m inclusive of purchasers’ costs. The land is to be acquired at £275,000, upon the syndicate immediately reaching its funding aim.

By providing the benefit to the developer of development funding, we have negotiated an ‘interest payment’ rebate for the amounts paid during the build period, including the cost of the land purchase, prior to Practical Completion. This enables us to make this a more attractive investment scheme than conventionally seen in this sector.

Privacy Overview
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Analytical Cookies
Privacy Policy