Seneca Property off-market investment – Manchester
An exclusive opportunity for Wealth Club investors to co-invest with Seneca Property in Grade-A office in Manchester, with terms secured off-market. The property is fully let on a long-term basis with two corporate tenants. The opportunity offers the potential for both income and capital growth with good downside protection.
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- Aims for income and capital growth
- Target income distribution 7.5% p.a. paid quarterly – not guaranteed
- Projected upside total return of 1.61x (downside 1.07x) – not guaranteed
- Grade-A, institutionally acceptable modern office building with existing tenants
- Attractive off-market purchase price with good downside protection
- Demand for office space in Manchester currently outstrips supply
- Proven and professional team with significant knowledge and contacts
- Exclusive opportunity to invest alongside Seneca
- Exit targeted from year four
- Minimum investment – £10,000
Seneca Property has acquired a modern, Grade-A office in Trafford Park, Manchester, with terms secured off-market. The property is in a prime location, with easy access to the M60 and other transport links, in an area that suffers from a chronic shortage of Grade-A office space.
To move quickly and secure the off-market price, Seneca used its own equity to fund the purchase. The purchase was completed on 29 November 2017. Now Seneca seeks to refinance the acquisition with a mix of bank debt (max LTV of 60%) and £1.55 million of new investor capital.
The property is currently let to two corporate tenants on 10-year leases. Both tenants are part of multi-million international companies and currently pay annual rent of £265k. Seneca believes there is scope for significant rent increase, which it will aim to negotiate at the next rent review due in four years.
Seneca has looked at three scenarios: upside, business plan and downside case. All three assume an exit in year four and an annual coupon on 7.5% paid to investors quarterly. None of the returns are guaranteed: capital is at risk.
The upside case assumes the property is sold on a net exit yield of 7% to achieve sales proceeds of £4 million. If achieved, this will generate an investor cash return of 1.61x.
The business plan case assumes Seneca sells the property on a net exit yield of 7.5% to achieve sale proceeds of £3.68 million. If achieved, this will generate an investor cash return of 1.5x.
The downside scenario allows for Seneca having to sell the building on vacant possession (should the tenants leave and Seneca fail to let the property again). The building has been valued at £2.75 million vacant possession (just £200k less than what Seneca is paying). This is an extreme situation, however even in this case the deal should deliver a positive return to investors of 1.07x.
For the business and upside case the target return for capital growth per £25,000 invested ranges from £37,500 to £40,250 in four years.
The business plan anticipates an exit in year four. A sale to an institution or a private property company is likely – albeit not guaranteed – due to the strong property fundamentals.
This is an illiquid investment and capital is at risk. Property values could fall for any number of reasons. Investors should not invest money they cannot afford to lose. Before investing please carefully read the Investment Memorandum to satisfy yourself you are comfortable with the risks.
We believe this is an attractive commercial property offer. The deal offers quarterly income and capital returns with good downside protection. Seneca is a highly experienced asset manager and this is not a complicated operation for the team. The property benefits from certainty of rental income from high-quality tenants and favourable market conditions in Manchester, making the business plan achievable, in our view.
Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination. 30.11.2017
- Off-market commercial property investment
- Target raise
- £1.55 million
- Target return
- 1.07x (downside case) – 1.61x (upside case)
- Target income
- 7.5% p.a.
- Target exit
- 4 years
- Minimum investment
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