WHAT MAKES A SERVICE STATION AN ATTRACTIVE ACQUISITION?
Beauty is in the eye of the beholder. To the general public a petrol filling station is not a particularly interesting acquisition, but to the canny property investor it can offer a lot more than the eye can see.
A service station in the right location and let on a strong covenant provides a strong investment and can provide the potential for adding value and planning an alternative, higher-value use in the future.
As an example, RO Real Estate has just acquired Westacre Services, an Esso petrol filling station and convenience store on the A36, which is one of the major routes in and out of Salisbury towards Wilton and the A303.
Whenever we look to make an acquisition we focus on two things: is the asset in a strong location and does it offer covenant strength?
Westacre ticks both boxes, but it also offers a lot more. The property is currently let to Flying Visit Limited on a 15 year lease at a rent of £150,705 a year, providing a net initial yield of 7.46% after costs.
However, we discovered that there are a number of fuel sale and retail operators, that are keen to secure a position on the prominent site. In addition, the site also has excellent prospects for residential conversion in the longer term. This creates for us strong long-term income with the potential to add significant value.
We look at the end potential of every asset, and a service station is definitely one which has much more to offer than initially meets the eye.
