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11 September 2019 | Retail

Leasehold retail opportunities and finance advice in the Midlands

In recent years, buyers have been favouring freehold opportunities over leasehold stores. But at a time where banks are tightening their requirements for lending, leasehold is poised to make a striking come back, highlights specialist business property adviser, Christie & Co.

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Buyers looking to acquire a freehold store, who have a budget of around £650,000 would be most likely looking to purchase a store trading at around £10,000 per week in core sales. However, if an entrepreneur was looking to increase their buying power by being able to negotiate preferable terms with suppliers and increase their profitability, leasehold stores may well be the route to investigate.

Right now, for that same budget of £650,000, Christie & Co is offering a group of four stores in the West Midlands area with a combined weekly turnover in excess of £70,000 in core sales and an additional £75,000+ per year in Post Office income.

Some key case studies with Christie & Co’s agents across the Midlands & East Anglia include Select & Save in Radford, Coventry, which is currently turning over circa £22,500 per week in core sales and has an annual Post Office income in the region of £76,000, available at an asking price of £270,000 for the going concern business on a leasehold basis.

Other leasehold opportunities in the region include Michael’s Drinks Stop in Acocks Green, turning over around £16,000 per week (asking price £75,000), Heritage Foodstore in Frankly with weekly sales of around £19,000 per week (asking price £200,000) and Walmley Convenience Store, which is available for an asking price of £99,000 and is trading in the region of £13,000 per week.

To match the availability of leasehold opportunities in the market, funding for buyers entering or expanding in the sector is also highly accessible. Christie & Co’s sister company, specialist commercial finance broker, Christie Finance provide access to funding for a range of retail purchasers.

A recent example of this is an experienced operator who ran a group of stores for many years, however had issues with the symbol group and the business went into administration. The operator was keen to explore a leasehold purchase of a store with £1.2m annual turnover and £114k EBITDA, 9.5% of turnover, and approached Christie Finance having been rejected by other banks. Christie Finance secured funding for the buyer via an alternative, government funded lender at a purchase price of £250,000 with a £30,00 stock payment on a seven year term at a 9% fixed rate.

Steve Bell, Senior Business Agent at Christie & Co’s Birmingham office comments, “The small group of stores in the West Midlands is a prime example of an affordable leasehold portfolio that would be a superb addition to anybody’s portfolio, but would also suit an organised entrepreneur considering going straight in to having a retail empire.”

Ed Brown, Finance Consultant at Christie Finance comments, "There is a perception that leasehold sites are more challenging to fund due to the lack of underlying security provided by freehold ‘bricks and mortar’. While some lenders do adhere to this stereotype, we are seeing a growing number of funding options for leaseholds, backed by the Enterprise Finance Guarantee scheme and regional growth funds. We may also be able to consider more traditional solutions such as leveraging a freehold site or using a freehold site to provide security during the early years of a new loan. The key is using a broker with relevant retail sector experience who can look beyond the immediate detail to structure a solution that works for both the lender and the borrower."