Marlborough - rent review and arbitration on behalf of a private property company with excellent results
This case relates to a prominent retail investment in High Street, Marlborough.
In February 2010, we advised our client – a private property company – on the likely outcome of the rent review due on 25th December 2010, for the purposes of acquiring the freehold investment.
After our client acquired the investment at auction, we were subsequently instructed to handle the rent review, which proceeded to Arbitration.
- Negotiations were instigated with the tenant’s by quoting a rental of £110,000 pa compared to the rent passing of £72,175 pa.
- Following an initial meeting between the parties, it became apparent that differences of opinion existed on virtually all aspects of valuation: the Zone A rate, the basement ancillary rate, the appropriate rates (and management allowance) to be applied to the self-contained first and second floor offices, the value of the 8 car parking spaces at the rear, and whether any end allowances were appropriate, including for the assumed term.
- The ground floor and basement, whilst used for Class A3 restaurant purposes, were capable of being used for Class A1 retail and Class A2 financial services use, and therefore it was necessary to take into account a wide range of evidence from within High Street. The upper floors could be valued for office or residential use, whichever produced the highest value.
- Once negotiations had been exhausted, the parties agreed to refer the matter to Arbitration, and exchanged Calderbank offers.
- When preparing submissions and counter submissions it was necessary to compile a lengthy and detailed Statement of Agreed Facts, including all the evidence being put forward by the parties representatives. It was also necessary to draw the Arbitrator’s attention to the most relevant comparables, which were those larger High Street units with a similar overall size and configuration compared to the subject property. We rejected the tenant’s agent’s argument that a discount should be applied to reflect the assumed term.
- Prior to proceeding to Arbitration, we obtained client’s instructions to issue a final, protective Calderbank offer at £93,000 pa.
The Arbitrator made his Award at the level of £93,600 pa, thereby within 0.5% above our protective Calderbank and within 0.1% of our initial ERV at the time our client acquired the investment. Since we had clearly ‘won’ the case on behalf of our client, the tenant’s agreed to meet all of the Arbitrator’s charges together with our client’s surveyor’s fees in terms of our preparation of submissions and counter submissions.
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