Tom Bodley Scott
The capital value of any income deriving asset will be based on the return that asset provides over its lifetime, and have due regard to the strength of the tenant’s covenant and the associated income risk. It takes into account the net return and any possible future increases (or reductions) that may arise, for instance from a review or renewal. With capital values so closely linked to rents, the impact caused by the new Code has a knock on effect to the capital value of your asset.
Prior to the new Code being enacted, rents for Greenfield sites could typically be between £5,000pa and £7,000pa or more when the site was shared by other operators. Roof Top sites would have been about £12,000pa in provincial towns across the UK or well over £20,000pa in major cities.
With the advent of the new Code and the dip in rent caused by the introduction of the ‘No Scheme’ assumption in assessing rents, rental values have fallen significantly with the Upper Tribunal awarding rents for Greenfield sites between £750pa and £3,500pa (and higher at £5,750pa, in the case of Hanover). Similarly, the Upper Tribunal is awarding rents for Roof Top sites between £3,300pa (for a Water Tower, where the costs are shared) and £5,000pa (for a block of flats). Fortunately, the Courts acknowledge that realistically additional commercial payments are made by the operators to account for the desire of both parties to reach a consensual agreement and avoid the cost and delay of litigation.
Equipped with a database of well over 12,000 transactions, Batcheller Monkhouse can analyse and provide evidence of comparable transactions to help justify rents and valuations within the market. This is particularly useful in the many rent reviews and lease renewals we have previously been asked to handle. Likewise, with the growing market of investors paying a lease premium for a site, we find it is vital to have a full understanding of this fast moving market.