It’s always reassuring when someone else spots the same deal as you. In this situation it was a commercial property in Didcot, in commuter belt town, only 40 minutes to Paddington. But you’ll live longer if you live in Didcot and not in Paddington. I know this as a statistical fact having studied mortality at university. Your insurance premium will be less in Didcot because you will live longer.
The property was a vacant retail freehold unit in an upmarket shopping parade. It consisted of two floors and a large V shaped roof.
The angle was to convert the downstairs into residential, and the upstairs as well, under the soon to expire permitted development route.
This route circumvents the often subjective and whimsical route of gaining planning permission.
What was interesting about this lot was the downstairs was listed as about 980 sq. ft. but the upstairs was listed as 623 sq. ft.
However, the building was a square from the outside, top and bottom. The reason for this discrepancy was this measurement was done using the Net Internal Area.
This way of measurement discounts areas like the toilets and storerooms.
For redeveloping into residential this discount is irrelevant as you would be using this space.
Therefore, if you take the numbers at first glance you would lose about 15% of profit instantly. If you take the time to peer underneath the bonnet all would have become clear.
The lot was due to come in auction, however, it was also listed with an agent. What seems to have happened was the original buyer may have been dragging his feet, the vendor then decided he’d had enough and put the property in auction. This then gave the original buyer the kick up his backside he needed, and he quickly moved to complete the deal.
The deal was guided at a mere £245K but the GDV was a conservative £700K!
You can see why both myself and another colleague in the industry had spotted it.
There was further potential in the roof space, though this would need to go through a non-contentious planning application.
There was a difference in opinion in regards to the ground floor; I assumed at first glance a conversion to residential, however, due to the foot flow and the locality, the ground floor would be suited to commercial, but smaller units. The floor would divide well into two, with generous height windows on the front and sides, allowing plenty of natural daylight through.
Even in this environment, the comparables show that small types of commercial unit would rent extremely well. I would have to concur with this conclusion. The added benefit you have with the commercial tenant is that you don’t have the potential void period every 6 months, no maintenance calls and costs, and the eviction is straight forward and quick.
As it happened neither of us got the deal, as it exchanged prior to auction; with the original buyer.