ST LUKE’S HALLS, BALLATER STREET, GLASGOWSTUDENT ACCOMMODATION INVESTMENT OPPORTUNITY

The City of Glasgow College

Premier Inn

City of Glasgow College, Riverside

Campus

St Enoch Shopping Centre

Glasgow Central Station

St Luke’s Halls

INVESTMENT SUMMARY

» 204 purpose built student bedrooms let until 2035 to the Board of Management of City of Glasgow College

» Primary rent equates to only £3,126 per bedroom and is indexed annually to RPI or 2% whichever is the higher

» Bedrooms are occupied solely by students from City of Glasgow College which is in the process of redeveloping their adjacent Riverside Campus, due for completion in August 2015

» Offers sought over £5.45m which shows an attractive initial yield of 7.08% with an immediate projected reversion to 9.08% in the 2015/2016 academic year

» Rolling mutual break option (five years notice), enables the owner to secure vacant possession at a future date further improving the reversionary potential of this asset

» Price of £26,715 per bedroom is significantly less than replacement cost and is also underpinned by conversion to alternate uses

» Secondary rental income from additional room week lettings to the College and third party summer lettings

CITY OF GLASGOW COLLEGE

The City of Glasgow College, was formed in 2012 through the merger of Glasgow’s three main further education colleges; Central College Glasgow, Glasgow Metropolitan College and Glasgow College of Nautical Studies. The City of Glasgow College is one of Scotland’s largest colleges, with around 32,500 students from 135 different countries.

City of Glasgow College has recently invested £228m in consolidating and redeveloping their estate into two new campuses, the City Centre campus and the Riverside campus. The new college buildings are due for practical completion in August 2015.

The Riverside campus is situated on Thistle Street, directly to the north of St Luke’s Hall. The new Riverside campus comprises c14,500m2, 7 storey, ‘BREEAM excellent’ teaching facility and engineering block catering for the curriculum areas of Engineering, Energy & Science, and Nautical Studies. The campus will be integrated with and complement the existing marine skills centre facility, which was recently completed at a cost of £5.6m.

The Faculty of Nautical Studies is the only maritime training college in Scotland and one of the four in the UK. The Faculty works closely with, and provides training for, a number of organisations including Clyde Marine Training which recruits approximately 50% of the annual Trainee Officer intake for the British Merchant Navy. Other companies include; Northern Marine Ship Management, Sonangol USA, Bibby Ship Management Ltd, Maersk Crewing and Carnival Cruises. A large percentage of the Faculty’s intake are international students.

LOCATION

St Luke’s Halls are situated close to the junction of Ballater Street (A74) and Laurieston Road (A728), to the south of the River Clyde, within easy walking distance of the main business, shopping and leisure areas of the City Centre. Whilst the halls are currently occupied solely by students attending the City of Glasgow College, the city centre campuses of Strathclyde and Caledonian Universities and City of Glasgow College are a short walk to the north.

The east and south east conurbation of Glasgow city centre has changed dramatically over the last five years assisted by the completion of the M74 extension and St Luke’s Hall enjoys close proximity to both Junction 1 and Junction 1A. Key regeneration initiatives such as Laurieston, Clyde Gateway and Crown Street initiatives in the immediate vicinity have seen substantial numbers of residential properties being built along with additional commercial development. To the east, the Emirates Arena and Sir Chris Hoy Velodrome provided sports facilities for the Commonwealth Games and the Davis Cup.

Glasgow Central Railway Station, Glasgow Queen Street Railway Station and Buchanan Bus Station, are all a short walk from the property as is the low level train station at Argyle Street. Bridge Street Subway Station is situated a fifteen minute walk to the west.

ST LUKE’S HALLS

Glasgow Central Station

Bridge StreetSubway

Glasgow University

Glasgow Queen St Station

City of Glasgow College City

Centre Campus

City of Glasgow College Riverside

Campus

University of Strathclyde

BuchananQuarter

Argyle Street

Station

A728

M8

< M8

St Enoch Shopping Centre

HIGHER EDUCATION IN GLASGOW – UNIVERSITIES

In addition to City of Glasgow College, there are three main universities in Glasgow; Strathclyde, Glasgow and Caledonian all of whom feature in The Times Good University Guide and have significant full time student populations. Each of these universities are investing heavily in their campuses as student numbers increase and greater emphasis is placed on the quality of courses and the overall student experience.

Founded in 1451, the University of Glasgow is the fourth oldest in the English speaking world and was ranked 55th in the QS World Rankings 2014/15 and was awarded the The UK Outstanding Contribution to Innovation and Technology – Highly Commended in 2014. In recent years, the University has worked hard to build its international reputation which is reflected in their overseas recruitment numbers. The University recently purchased a neighbouring landholding for potential future expansion of their campus.

The University of Strathclyde was established in 1796 during the Scottish Enlightenment and has maintained a strong focus on Technology. The University won the The UK University of the Year 2012 and UK Entrepreneurial University of the Year 2014.

The University of Strathclyde has been working in conjunction with Scottish Enterprise to complete their £350m Technology & Innovation Centre, creating a globally recognised hub for world-leading research. The development has transformed the way academics, businesses, industry specialists and the public sector work in partnership, warranting Strathclyde University as an internationally recognised research institution.

Glasgow Caledonian University has a strong international presence with campuses in London, New York and Bangladesh and partnerships in China, India, South America and Oman. They have invested heavily in facilities and teaching spaces at the Glasgow campus which is located in the town centre and have attendees from over 100 countries currently studying in Glasgow.

The Glasgow School of Art, is one of the few remaining independent art schools in the UK. The School has produced 30% of Turner Prize nominees since 2005, including 4 winners and is listed within the top 5 UK architecture schools. The School are also expanding, having concluded a new 95 year lease on the McLellan Galleries on Sauchiehall Street, student intake is expected to rise in 2015.

The Scottish Government considers higher education as a top priority. They have abolished tuition fees for all undergraduate students from Scotland and the EU who study at Scottish universities, boosting the application numbers from EU students. In addition, from the 2015/16 session, a further £4,500 living allowance from the Scottish Government will be available to qualifying Scottish domicile postgraduate students, which is expected to further enhance postgraduate numbers.

There are circa 12,300 purpose built student accommodation bedrooms in Glasgow, including both University owned and privately built stock. With over 53 ,000 full time students attending full time higher education, there is only one bed for every 4.30 students against a national average of 3.4 students (excluding the 32,500 students who study at City of Glasgow College). There is therefore a significant undersupply of purpose built bedrooms with only 22% of full time students having access to a purpose built student bedroom.

Glasgow is listed in the top ten in the Savills UK University Town ranking, of over 80 locations across the UK. The ranking reflects a number of factors including current supply and demand, the private rented sector, and future supply and demand.

Postgraduates Undergraduates

HE provider Total HE students Full-Time Part-Time Full-Time Part-Time

Glasgow Caledonian University 16,750 1,740 1,180 11,325 2,505

Glasgow School of Art 1,825 370 55 1,350 55

The University of Glasgow 27,390 5,750 1,790 16,810 3,040

Royal Conservatoire of Scotland 925 150 10 765 0

The University of Strathclyde 19,970 3,465 2,455 11,770 2,280

Total 66,860 11,475 5,490 42,020 7,880

ST LUKE’S ACCOMMODATION SUMMARY

The accommodation at St Luke’s can be summarised as follows:

» Concrete frame construction with brick elevations under a slated roof

» Built in 2000 and substantial rolling refurbishment 2010-2014

» 204 en-suite student rooms comprising 39 standard cluster flats of 3, 5 and 6 units

» Warden’s office

» Two bedroom wardens flat

» Laundry room

» Communal kitchen and living room in each flat

» 44 parking spaces

» Cycle storage

» Site area of 2.1 acres (0.85 hectares).

LEASE SUMMARY

The City of Glasgow College has an occupational lease over the premises for a 35 year term, the details of which are summarised below.

Tenant

The CIty of Glasgow College.

Term

35 year lease from 3rd Sept 2000.

Break

Mutual rolling break upon giving five years notice.

Primary rent for 2014/2015

£637,855 pa. derived from term time lettings of 170 beds for 38 weeks and during non term time, 20 beds for 14 weeks.

Rental increases

Primary rent is increased annually to higher of RPI or 2% annual uplifts.

Secondary rent

Additional secondary income receivable from additional room week lettings to the college and third party summer lettings.

Secondary income in 2014 / 2015

Forecast to be £205,661 (2013/2014 – £237,471).

Repair

Landlord responsible for management, repair/maintenance and utility costs.

Total bedrooms: 204

Standard en-suite 139

Double en-suite 57

Twin en-suite 5

Disabled en-suite 3

INCOME

The table below illustrates the projected total gross and net income receivable from the property over the next five years.

Primary income rises steadily over the lease period with regular increases as dictated by the lease agreement. Secondary income is a combination of term time lettings in excess of 170 rooms, non-term time lettings in excess of 20 rooms and third party summer lets.

The latest figures for 2014/2015 show primary income of £637,855 and secondary estimated income of £205,661 producing a total income for the year of £843,516.

The primary income is due for it’s annual review on 3rd September 2015 to the greater of RPI or 2%. The projected income shown reflects the minimum 2% annual uplifts with £690,435 being the minimum primary rental income by 2018/2019.

The maintenance and letting of St Luke’s is currently managed by the College however under the terms of the lease there is an opportunity for the landlord to work more closely and proactively with the College to improve the secondary income and manage costs.

2014/15 2015/16 2016/17 2017/18 2018/19

Primary Rental Income £637,855 £650,612* £663,624* £676,897* £690,435*

Secondary Rental Income £205,661 £209,774 £213,969 £218,249 £222,614

Total Rental Income £843,516 £860,386 £877,594 £895,145 £913,048

Management/Opex Costs -£434,354 -£335,586** -£342,298** -£349,144** -£356,127**

Net Rental Cash flow £409,162 £524,800 £535,296 £546,002 £556,922

POTENTIAL FOR IMPROVING THE NET INCOME POSITION

The primary income equates to a rate of £3,126 per annum. This is significantly below the rates that the College charges students of £108 per week. Therefore, if the mutual break is operated by the owner, there is the potential for additional revenue through direct letting to the students.

The operating costs are currently running at the rate of £2,074 per bedroom. This is considered to be high relative to other student accommodation schemes nationally. An independent report has been commissioned which has reviewed the management, operation costs and condition of the building fabric. The report concludes that there is the potential to reduce the operational cost per bedroom to £1,650 per annum.

Copies of this report can be made available to seriously interested parties.

ADDING VALUE

In addition to approving the net incoming receivable through management of the gross revenue and reduction in operational cost, there is the potential to consider the following:

1. Potential to add more bedrooms within the existing envelope subject to receiving the necessary consents.

2. Conversion to hotel use given the 114 bedroom Premier Inn adjacent is in effect a “sister” building constructed at the same time and this area has significantly improved connectivity given the M74 extension.

3. Potential for conversion to residential use with 1-3 bedroom flats in this area selling for between £80,000-£160,000. The scheme is currently constructed as 39 standard student flats of 3-6 bedrooms.

*Straight line 2% minimum annual uplifts **Revised £1,645 per bed inclusive of VAT

TENURE

Heritable interest (Scottish equivalent of English Freehold).

PRICING

Our client is seeking offers in excess of £5.45 million which reflects a Net Initial Yield of 7.08% based on costs of 6.1%. Assuming the recommendations of the independent report are implemented then the reversionary yield in the academic year 2015 / 2016 is projected to be 9.08%.

MULTIPLE DWELLING RELIEF

Please note that multiple dwelling relief may apply and purchasers should make their own query in this respect.

VAT

The property has not been elected for VAT and VAT will not be payable on the purchase price.

Ian Dougherty Telehpone: 0141 270 3163 Email: ian.dougherty@ryden.co.uk

VIEWINGS & ENQUIRIES

Viewings are available strictly by appointment with the joint agents:

Bruce Patrick Telephone: 0141 222 5873 Email: BPatrick@savills.com

Ebba Mowat Telephone: 0141 222 4130 Email: EMowat@savills.com

TRADESTONIND EST

BROOMIELAW

M8

M8

M8M8

CENTRALSTATION

QUEEN STSTATION

A81

A89

A74

A82

A74

A77

A730

A749

A803

A814

A804

A8

A8

J18

J19

J15

J16J17

A814

J20

A728

A8

GO

RBA

LS S

T

NORFOLK ST

COOK ST

NELSON ST

EGLI

NTO

N S

T

POLL

OKS

HAWS

RD

SCOTLAND ST

VIC

TOR

IA R

D

CO

MM

ERC

E ST

A77

A72

8

PAISLEY RD

KILBIRNIE ST

KILBIRNIEPLACE

WES

T ST ST LUKE’S

HALLS

The Agents for themselves and for the vendors or lessors of this property whose agents they are give notice that: (i) the particulars are set out as a general outline only for the guidance of the intended purchasers or lessees and do not constitute, nor constitute part of, an offer or contract; (ii) all descriptions, dimensions, reference to condition and necessary permissions for use and occupation, and other details are given without responsibility and any intending purchasers or tenants should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to the correctness of each of them; (iii) no person in the employment of the Agents has any authority to make or give any representations or warranty whatever in relation to this property. ils prepared : March 2015 / Photographs dated: March 2015