IntroductionToAnnington-2019-web - Page 17



Introduction to Annington 2019
RENT REVIEW MECHANISM CAPTURES MARKET MOVEMENTS
SITE REVIEW PROCESS CRYSTALIZES REVERSIONARY POTENTIAL
• 5 year rolling Rent Review process ensures that rent tracks open market movements
• Site Review designed to review rents to open market on a site by site basis
• The MoD currently benefits from a 58% discount to open market rent reflecting:
• On 7 March 2019, Annington and the MoD agreed an expedited and binding process in place of the form of
Site Review prescribed by the leases. This process will produce an equivalent outcome to the Site Review but:
- The bulk nature of the portfolio
- The MoD covenant
- Responsibility for management and maintenance costs
• Site Review mechanism expected to reduce the MoD’s discount from 2021
-
In a shorter period of time, and
-
At a significantly reduced cost
• New rent charged to the MOD will apply from 2021 onwards as prescribed in the leases
• Early determination process will lead to a confirmed outcome by March 2021
• Process will give Annington and the MoD certainty on rent payable
Five-yearly rent review
Timing
• Continuous 1996–2196
• Five year cycle, c. 25% of sites reviewed in each of four years followed by one year off
Mechanics
• 510 individual sites
• Each site has a representative property to benchmark the Rent Review (the “Beacon Unit”)
• The parties have agreed to additional key commercial terms to strengthen their relationship, most importantly
a mechanism to reduce vacant properties held by the MoD through the provision of relief by Annington on costs
associated with returning the units to Annington:
-
MoD committed to release 500 units p.a. for 7 years
-
In return, Annington provides £7,000 per unit dilapidations relief
• Open market rent increase assessed for each Beacon Unit and applied across the site
• 58% discount applied to updated open market rent
Track record
• Well established and routine process
• 16 annual rent reviews successfully completed over four full cycles
• Successfully tracks market rent movements
16
Gamlingay, South Cambridgeshire
| Annington Limited Introduction to Annington 2019
| Annington Limited Introduction to Annington 2019
• 3.9% average rent CAGR
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