The shape of things to come: what Circle Property could offload next

A raft of regional offices could soon be on the market following an AIM-listed investment company’s announcement that it will step up disposals – and will base its directors’ bonuses on the speed of any sales. This morning AIM-listed Circle Property said it has agreed to sell Kents Hill Park Conference Centre in Milton Keynes to LXi REIT for £34.5m. It’s a notable disposal – the site is the largest asset in Circle’s portfolio so will require shareholder approval. And Circle won’t stop there. The company said it will now look to continue selling assets and returning money to shareholders. Chief executive John Arnold and chief operating officer Edward Olins will have some of their future cash bonuses linked to the speed and value of those sales. “Since admission to AIM, the company has suffered from limited liquidity in its shares and the share price has remained at a significant discount to the company’s NAV,” the company said in a statement. “Notwithstanding the strong financial and operational performance of the company since IPO and strategic execution, the structural discount in the company’s share price relative to its NAV persists. The board has therefore determined to continue to make targeted asset sales in an orderly manner over an extended period of two to three years, if not sooner.” Circle wasn’t specific about which properties might or might not be sold, although some marketing is already underway, with its two Pavilion Drive assets in Northampton Business Park on the market together via LSH with a combined asking price of more than £10.4m. Based on details from Circle today of how the portfolio now stacks up, as well as information from the company’s last annual report, here’s a look at the 10 remaining assets in Circle’s £76m portfolio. The properties show historic valuations undertaken during the pandemic, and Circle has a track record of selling assets at significant premiums to valuations. Somerset House, Birmingham Valued at £17.35m at the end of September 2021, this is the largest asset in the portfolio by value after the Kents Hill Park Conference Centre. Circle bought the building, on the city centre’s Temple Row, in early 2016. Tenants include BE Offices Birmingham, Las Iguanas and Cameron’s Brewery. Total passing rent, according to the company’s attest annual report, stands at £1.23m, with a weighted unexpired lease term of 13.17 years to expiry and 12.46 years to break. Concorde Park, Maidenhead Circle picked up this site in August 2019 for £14.6m – it is currently valued at £16.8m. The near-69,000 sq ft of office space is let to Socionext Europe, Stabilo International, Lambert Smith Hampton and Regus. Total current passing rent is £1.02m but Circle said in its last annual report that this could rise to £1.62m when refurbished office space is fully let. Kents Hill Business Park, Kents Hill, Milton Keynes (K1, K2, K3 – offices) These offices at the park have a combined valuation of £13.4m and annual rent of £1.04m – Circle bought the offices, along with the conference centre now being sold to LXi, for just £11m in 2013. The K3 office site is under development and due to be completed this summer and Circle says it has received “strong tenant interest” for the space. Tenants in the completed space include Grand Union Housing Group and Trafficmaster. Park House, 300 Pavilion Drive, Northampton Business Park The 43,577 sq ft of office space is let to four tenants – Grant Thornton, NRG Group, ALD Automotive and NAK Consulting – with WAULT of 2.85 years to expiry and 1.77 years to break as of Circle’s last annual report. Passing rent is £519,092 per annum. The property was last valued at £5.85m. 36 Great Charles Street, Birmingham Valued at £4.9m as of last September, this 25,787 sq ft office was delivering a passing rent of £253,666 when Circle published details in its annual report last summer. Roughly 40% of the refurbished office space was vacant at that point and available to let at £18 per sq ft. Once fully let, Circle estimates annual rent to be £543,264. Cheltenham House, 14-16 Temple Street, Birmingham Bought and refurbished in 2013, the city centre property comprises 16,469 sq ft of office and restaurant accommodation fully let to New World Pubco, the company behind the Botanist chain. The site has a WAULT of 18.49 years to expiry and brings in rent of £257,500. It’s valued at £4.5m. 710 & 720 Waterside Drive, Aztec West, Bristol Valued at a combined £4.15m, these two buildings sit in one of Bristol’s best-known out-of-town business parks, and were bought by Circle in 2018. They are let respectively to BDW Trading, part of Barratt Homes, and Integral UK. Passing rent across the two – albeit with some of 720 vacant – was £305,135 as of last summer. Victory House, 400 Pavilion Drive, Northampton Business Park (pictured) This 22,300 sq ft office building was last valued at £3.2m. It’s let to Regus, which pays a concessionary rent of £252,000 per annum as well as a profit rent, according to Circle’s annual report. The company estimates its rental value at £360,000. Elizabeth House, London Road, Staines A near-15,000 sq ft office accommodation 60% let to various tenants at the time of Circle’s last market update and producing annual rent of £190,979. Valued at £3m. 141 Moorgate, EC2 Circle sold its 51% share in this London office, valued last September at £2.85m, for £3.62m. The deal is expected to complete in the coming weeks. To send feedback, e-mail tim.burke@eg.co.uk or tweet @_tim_burke or @EGPropertyNews Image © Xyz Pictures/imageBROKER/Shutterstock