At a glance
| Client | Owners of a long-established children’s day nursery |
| Location | Stoke-on-Trent |
| Service | Sale and leaseback: rental advice, lease structure, valuation and confidential sale |
| Rent | £36,000 a year, on a new 15-year FRI lease |
| Sale price | £395,000, the full asking price |
| Timescale | Exchange and completion within six weeks of agreeing the deal |
The brief
The owners of a long-established day nursery in Stoke-on-Trent came to us as they began thinking about retirement. Their two main assets were the building and the business itself.
When we met them, it became clear they weren’t ready to stop working just yet. What they wanted was to release the money tied up in the building so they could pursue other interests, while carrying on running the nursery until they were ready to sell it.
Why a sale and leaseback?
A sale and leaseback was the natural fit. The owners sell the building to an investor and, at the same time, take a lease on it so the business carries on as normal. They get the capital now, the business keeps its home, and the investor gets a let property with a tenant already in place.
Our approach
Getting this right meant balancing two things: a rent high enough to make the building attractive to investors, but affordable for the nursery for years to come.
1. Setting the rent. We advised on the open market rental value and tested it against what the business could comfortably sustain. Based on local evidence, we agreed a rent of £36,000 a year, exclusive of VAT and other outgoings.
2. Structuring the lease. To make the investment as attractive as possible, we recommended a 15-year lease on full repairing and insuring (FRI) terms, so the tenant covers repairs and insurance. The 15-year term was important for a second reason: when the owners eventually sell the nursery, the buyer will still inherit a lease with plenty of time left on it.
3. Valuing the investment. With the new lease in place, we looked at similar investment sales and concluded the property should achieve a yield of around 9%. That’s roughly 11 times the annual rent, so we set an asking price of £395,000.
Marketing with discretion
This was a sale that needed careful handling. The owners didn’t want parents or staff to hear about it until everything was agreed, so there was no “For Sale” board, no press advertising and no listing on the property portals.
Instead, we went directly to our own investor mailing list, which covers private investors, property companies and institutions we have dealt with on previous investment sales. That approach found a buyer, a London-based company, who agreed to pay the full asking price.
The result
Contracts were exchanged and completed within six weeks of agreeing the deal.
- The owners released a life-changing sum to invest in other interests, kept running their nursery, and can still sell the business when the time is right.
- The investor bought a well-let property producing a return of around 9%, with a long lease to an established tenant.
Is a sale and leaseback right for you?
If you own your business premises, a sale and leaseback can turn the value of the building into cash without moving or disrupting your business. It suits owners who are planning for retirement, wanting to reinvest in the business or freeing up capital for something new. The key is getting the rent and lease terms right, because they decide both what the business can afford and what an investor will pay.
Thinking about releasing equity from your premises, or selling an investment property?
Call our agency team on 01782 715725 for a confidential conversation.
