The Former Mariners Public House, Mortimer Road, South Shields

Location

South Shields is a coastal town at the mouth of the River Tyne, about 5 miles east downstream from Newcastle in County Durham. It has a population of approximately 75,000, being the third largest town in Tyneside after Newcastle and Gateshead.

Predominantly a commuter town, South Shields boasts a good infrastructure network with the A19 and Tyne Tunnel at Jarrow providing access into Newcastle, while the A194(M) provides direct access to the A1/A1(M).

Public transport is also well served, with the Tyne & Wear Metro running through South Shields Metro Station and serving the wider region.

The property itself holds a prominent position on the corner of Mortimer Road and Cauldwell Avenue.  The area is dominated by post war housing, Mortimer Primary School (opposite) and Mortimer Community College.

Situation

A former pub, currently owned by Admiral Taverns, this old public house is to undergo a full refurbishment by developers Midlands Assured. This unit is 3,293 Sq.ft with 19 parking spaces, which is pre-let to the Co-operative Food Group.

 

 

 

Rational for Purchase

This is another high quality investment which has a strong tenant quality and covenant in the form of the national Co-Operative Group.

This Co-op development is based on Mortimer Road which is across from a primary school and community college, and also surrounded by houses, which is an important advantage for any convenience store. Local stores are proving popular when close to residential developments which shopper using them more regularly.

This type of location is perfect for a convenience store and in previous scheme of this nature have proved very successful for both investors and tenant.

Purchase Price

The purchase price is £820,000, before purchase costs, comprising of the freehold property including all refurbishment costs.

It is intended that this syndicate will not raise borrowing, thus we are labelling it an ‘income syndicate’ because of the higher initial yield, which arises simply because there are no borrowing costs.

This does increase the initial investment subscription, but with the longer term prospects for this site, the syndicate could deliver on both income and capital growth.

Initial investment will be £45,000 to £55,000 per investor.

The Former Mariners Public House, Mortimer Road, South Shields

Tenant & Covenant Strength

Co-operative Food Group Ltd is part of The Co-operative Group, which has an annual turnover of £11bn, has 4,500 outlets in the UK and employs 87,000 people.

As the UK’s fifth biggest food retailer, with 2,800 of its outlets dedicated to food across the UK and over 74,000 employees, their stated aim is to be the country’s No 1 convenience store operator. They currently serve 14.5m customers each week.

As such and with the experience built up with the Co-operative Group, this represents a first class tenant.

Rental Income & Prospects

The pre-let provides for a rental yield after management charges, forecast at 5.35% p.a.

Total capital return for the syndicate, projects at circa 6% p.a. based upon an increase in rent at the 5-year review of CPI at 2.5% p.a.

The Former Mariners Public House, Mortimer Road, South Shields

Lettings

The single retail unit 3,293 sq. ft. is pre-let to the Co-operative Group Food Ltd (the main operating company of the National Co-operative Group) before purchase, for an unbroken period of 15 years on a Full Repairing and Insuring (CPI) basis.

The Former Mariners Public House, Mortimer Road, South Shields

The Leases

Tenant: Co-operative Food Group Ltd

Term: 15 years unbroken

Initial Rent: £50,000 p.a.

Payable: Quarterly

Reviews: Every 5 years, increasing by CPI with a minimum of 1% p.a. and maximum of 3% p.a.

The Former Mariners Public House, Mortimer Road, South Shields

Borrowing

The syndicate has had indicative approval to borrow £160,000 to facilitate the purchase from NatWest Bank plc, at an interest rate of 3.25% over Bank Base Rate, with a 1.50% arrangement fee. The loan term is 5 years, with a 15 year repayment profile, payments commence from Completion.

floor plan

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