Drury House, London: Detailed Market Report and Investment Analysis

This market report provides a comprehensive analysis of Drury House, a mixed-use freehold property located in Covent Garden, London. The report includes an executive summary detailing the property's address, main use as office space, valuation date, tenure, total income, market value, and yield profit. A SWOT analysis identifies strengths such as its multi-let status and opportunities for refurbishment, while weaknesses include low passing office rent and potential risks from Brexit. The report further delves into the property description, market conditions, valuation methodology, and proactive management strategies. Key aspects covered include the property's location, situation, and detailed description of its accommodation, floor plans, and amenities. Assumptions underlying the valuation are clearly stated, and the report references various sources for data and information. The valuation considers market value, potential rental income, and asset management initiatives, providing a thorough assessment of Drury House as an investment opportunity. Students can find similar solved assignments and past papers on Desklib.

MARKET REPORT: DRURY HOUSE
MARKET REPORT: DRURY HOUSE

MARKET REPORT: DRURY HOUSE
Executive Summary
The Property
Address - Drury House, 34-43 Russell Street, Covent Garden, London, WC2
Main Use - Office
Valuation Date1 November 2018
Tenure- Freehold
Total Income- 2,040,460 pounds per annum
Market Value- 42,250,000 pounds
Yield Profit- 4.52%
SWOT Analysis
S - It is a multi-let property.
W- Office rent including the top-ups of vendor rental is low passing.
O- The 2021 block date of office gives an option for refurbishing
T- A decline in the renting of offices after Brexit is a significant issue.
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MARKET REPORT: DRURY HOUSE
Table of Contents
The Property....................................................................................................................................1
Valuation..........................................................................................................................................3
Scope of Work.................................................................................................................................3
Assumptions....................................................................................................................................6
Property Description........................................................................................................................7
Market Report................................................................................................................................11
Market Description........................................................................................................................11
Valuation........................................................................................................................................13
Pro-Active Management................................................................................................................13
Valuation Commentary..................................................................................................................13
Reference List................................................................................................................................14
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MARKET REPORT: DRURY HOUSE
Valuation
Valuation Report
The building in question, a registered and qualified RICS surveyor to understand the authenticity
of the claims made by the owners has valued Drury House. Freya Group is supposed to fund the
property, and they can go as high as 40 million pounds in any commercial property in the United
Kingdom, given that the location of the property is vital for the commercial development of the
group involved in the investment (Wang and Xie, 2015).
The purpose of the company to involve in the valuation of Drury House is to purchase a freehold
interest and invest in the multi-let building that the property is offering. The building is a mixed-
use property and simultaneously lets three tenants on different floors.
The value of the property is based on the market value that has been deduced, and it is at forty-
two million two hundred and fifty thousand pounds that depends on the type of contract that is
made and is inclusive of the VAT (Kopczuk and Munroe, 2015). The valuation date is on 1
November 2018, and the valuation is made by different assumptions, which might affect the
rating if the values assumed are wrong.
The property is as stated a multi-let building that allows offices, bakeries, as well as restaurants,
to work under the same roof but there are certain restrictions like the use of the valuation done by
any client exclusively as has been stated in the purpose.
The valuation of the property that is being used for a specific purpose may not be published
without the approval of the client or the owner. However, the strength of the building, Drury
House lies in the fact that the tenants of the building have no personal or professional conflict of
interest with one another or with the owner of the property (Small et al. 2016).
The valuation has been done according to the standards set by RICS Valuation - Global
Standards 2017 (“The Red Book”).
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MARKET REPORT: DRURY HOUSE
Scope of Work
The building provides retail kind of accommodation, which is about 4,572 sq ft or 424.7 sqm.
The first floor provides a frontage to Russell Street and the space in the internal part of the
building is divided into two units (Bellman and Öhman, 2016). These pieces of information and
the other data regarding the geography, environment, or the value of the property have been
collected from the Office for National Statistics, BNP Paribas, Pricewaterhouse-Coopers, and
Colliers, that are specific and right.
There are five floors in the building with a ground floor reception as well as a lower ground
floor, and all of them have been inspected. The tenants of the building name, Wardour
Communications, Beamly and a fashionable restaurant, which is by CHLOE work at different
floors and the four leases that have been provided are outside the Landlord & Tenant Act of 1954
(French and Sloane, 2018). There is also the Weighted Average Unexpired Lease Term of about
6.8 years to the expiry of the lease on the let space.
Figure 1: Offices in Drury House
(Source: Allsop, 2019)
The property that is being discussed here, Drury House is located in one of the most vibrant
places in London and the environment around is has good working and living conditions. The
Covent Garden Piazza is only a walk of two minutes from the property, and there have been
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MARKET REPORT: DRURY HOUSE
recent as well as drastic transformations in the Piazza. The place not only has stores like Chanel,
Apple as well as Ralph Lauren but also has an assortment of fine restaurants like The Ivy, Cafe
Murano, Henrietta, and others (Kucharska-Stasiak and Źróbek, 2015). As a location, Covent
Garden is renowned too for the entertainment amenities that it upholds and is one of the most
popular places to visit in the world. It is not only recognized as the perfect location for setting up
offices but also gives place for the creative industries to survive.
Drury House is only 6 minutes walking distance away from Holborn and 8 minutes walking
distance away from Charing Cross.
Figure 2: Amenities in Covent Garden
(Source: Allsop, 2019)
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MARKET REPORT: DRURY HOUSE
Figure 3: Communications around Drury House
(Source: Allsop, 2019)
Assumptions
The report that has been presented here is based on the market value of the property called Drury
House located in Covent Gardens, London (Kara et al. 2017). Market value has been explained
properly in the International Valuation Standards and it can be stated as an amount that has been
estimated and for it a liability or an asset has to be exchanged on the exact valuation date that has
been confirmed between the two parties involved- the buyer who is willing to buy and the seller
who is willing to sell, and the transaction is carried out at an arm's length. The transaction is
made possible only after the proper marketing of the property, and it looks over the fact, which
involves the parties to act in a prudent and knowledgeable way without the issue of compulsion
from anyone.
The assumptions are made based on firm grounds and on the trust that can be shown on the
contracts, which have been drawn regarding all commercial aspects of the property (French and
Antill, 2018). The tenants present are from different industries and do business involving
different customers. While one sells jewelry, the other is a communication company. Along with
the office units that have rented out the building, there is a bakery as well, and they all seem to
comply with the rules and regulations of the building. They all agree to the contracts made and
pay the rent at the right time along with some measures for small maintenance and service
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MARKET REPORT: DRURY HOUSE
charges. The presence of any kind of restrictive covenants is not there. Therefore, it would in no
way affect the value of the whole property.
There are no encumbrances or onerous clauses attached to the property at Russell Street, and
there are no liabilities that are attached to the rights of correct ownership on Drury House
(Suresh, 2017).
The property was constructed in the year 1980 and was made as a building of built for office
purposes. The building is still strong and needs refurbishing according to the tenants'
requirements. The electricity, as well as a supply of water, is without a problem and the services,
as well as software, have no internal defects.
Figure 4: The buildings external structure
(Source: Allsop, 2019)
The building has followed all the rules and policies that were part of their grant for construction
of the property and is only positively affected by the planning or the developmental changes of
the town.
The property is no affects the environment with the production of any kind of hazardous wastes
and there is no possibility of the archaeological residues affecting the property in any way
(Suresh, 2017). The area that the property is located in poses no danger of any natural calamities
like floods or contamination of toxic chemical substances. The building faces no risks from
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MARKET REPORT: DRURY HOUSE
earthquakes destroying it in the future as well. The property Drury House meets all the criteria’s
of sustainability as is set the construction related laws of the United Kingdom.
The value of the property remains unaffected from the influences of Brexit and there are
possibilities for further tenants to rent out the building for commercial purposes. Cost of
refurbishing is low and the low passing rent of the offices is about 60 pounds per square foot.
There is no grading of solvency, and the building has an abundance of natural air and light as
well.
Property Description
Location
Covent Garden is noted to be one of the prime locations in London. It may be mentioned in this
regards that the property in question by the Freo Group, Drury House is located in Covent
Garden, which is attributed to one of the most vibrant districts in London. Entertainment
amenities are one of the major attractions of this property, which is well-connected to the Theatre
Royal, Somerset House and the Royal Opera House (Espindola and Wang, 2015). Covent
Garden is also one of the most famous tourist destinations in London, accommodating
approximately 20 million tourists in 2017. Several offices are known to be situated in this
particular locality, including DreamWorks Animation, Google and more (Allsop, 2019). Covent
Garden lies near the Charing Cross and the British Museum. In addition to that, the exact
location of the property can be cited as the corner of Drury Lane and Russell Street.
Situation
Drury House is located at a few minutes distance from King’s Cross and Somerset House.
Situated a few minutes away from the Thames, Drury House is also a prime and convenient
location for obtaining food and beverages (Allsop, 2019). A range of eateries surrounds this
location, one of the most important of which can be cited as Balthazar Restaurant, located at the
corner of Covent Garden and Russell Street (Dowden, 2015). Figure 1 illustrates the exact
location of Drury House and the associated buildings and trademark establishments around the
location.
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MARKET REPORT: DRURY HOUSE
Figure 5: Drury House location
(Source: Google Maps, 2019)
Description
Drury House is a mixed purpose building, generally put out on a lease because of the elaborate
floor space and expensive rates for tenancy. In addition to that, the accommodation aspects have
been segregated into retail as well as for office accommodation. The entire building includes a
floor area of 3,374.4 sqm or 36,322 sq ft (Allsop, 2019). Furthermore, the arrangement of the
building has been devised over 7 floors, comprising a lower ground and ground floors, with five
additional floors above the ground floor (Mason, 2018). The property includes:
● A four-pipe fan coil air conditioning
● 2 elevators with a capacity of 10 persons each
● Fully accessible raised floor
● Bike racks
● Lockers and showers
● LG7 Compliant lighting
● Lower ground floor mini-football pitch
● Metal-tiled suspended ceilings
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MARKET REPORT: DRURY HOUSE
● Falls outside the Landlord & Tenant Act, 1954.
● Provisions for refurbishment as well as extend the accommodations
A typical floor blueprint is provided in Figure 2, which illustrates the floor plan for the 1st to the
4th floors. The floor space has been found to be approximately 556.5 sqm or 5,990 sq ft (Clarke
et al. 2015). Figure 3 highlights the basement covering an area of about 199 sqm. or 2,142 sq ft.
the floor plan shows the mini-football pitch as well as the bike racks mentioned previously.
Figure 6: Floor plan for 1st to 4th floors
(Source: Allsop, 2019)
Figure 7: Floor plan for Basement
(Source: Allsop, 2019)
Accommodation
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MARKET REPORT: DRURY HOUSE
Figure 4 represents the total area for rent on each of the floors at Drury House. A current rental
income rate of £2,040,460 per annum has been noted in the case of Drury House. As per Figure
4, a net floor space of 36,322 Sqft has been recovered for this particular property. Furthermore, a
capital value of £1,163 per sq ft can be noted in this regards as well.
Figure 8: Area for rent
at Drury House (March
2018)
(Source: Allsop, 2019)
Tenure and tenancy
The tenure is noted to be of
freehold with regards to
the building. The tenancy,
however, is subject to
certain to particular
jurisdictions (Sangster,
2017). Figure 5
depicts the tenants
currently taking hold of the office spaces at Drury House and the area covered by them.
Furthermore, Figure 5 illustrates the rent per annum for each of the tenants.
Figure 9: Tenancy schedule
(Source: Allsop, 2019)
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