Recently, I went to view a parade of shops in South London. Although it’s nice enough to own a string of shops, there was nothing intrinsically juicy about the deal. The yield is circa 5%. Yes, there could be some asset management opportunities as the tenants vacate, especially as there is a nice street to the rear of the buildings.
The angle on this deal is whether the incoming investor could gain another couple of floors on the existing properties through the whole length of the shops.
The seller, who happens to be a property company, had an architect sketch the properties with the two floors on top, with the aim of selling this idea of the potential.
This is similar to the deal I wrote about last week, although, here the idea is a lot more plausible as you actually own the shops you’re requesting planning on, which helps when you come to the implementation.
When I went to the site I noticed a couple of churches in close proximity to the property. Looking at the whole breadth of the street it didn’t make sense this was the only row of shops without two extra floors. I assumed it was due to the churches. Though the buildings themselves were not listed, the churches most certainly were, and there is something known as paying respect to the churches due to their listing.
I assumed this was the reason why planning was never sought for the two extra floors, as I couldn’t see why a property company would be selling without the planning permission in place, if it could be obtained. That was my speculation however, when I ran the site by our planner he pointed out the site was actually in a conservation area, and therefore you run the risk of a planning application for development being blocked.
This would make sense, and would explain as to why the site is being sold only with a sketch and no pre application or application in place.
Despite this, as I like the site and its location; I asked the planner how would the council look at the application if all the properties were aimed for the key worker market?
This may tilt the application in our favour. Planning is not a game of certainty. The weakest link can derail the application; conversely, if you pick the right pressure point and package the application up accordingly it would straighten the case.
It may be that the council in question is behind in its affordable housing target and these units would help it achieve its goal. The balance of whether the architecture should be preserved or key worker units be constructed may be swung in the developer’s favour.
The site has income coming in, and as tenants leave there will be development opportunities. So, even if the planning is not gained this would still be a good asset to hold long term. I am currently doing my due diligence before I present it to interested investors.