Case Study | Paisley
This is a three storey property with a lower ground floor, right next to the University in Paisley. The property was previously, a greasy spoon cafe and an arcade on the ground floor. On the first floor was a pool room, with American and English pool tables and on the second floor was an English snooker hall. This property was purchased for a Net £120,000 and had clear potential to be a profitable attraction in the local area.
Purchase Price: £120,000
Current Value: £240,000
Current Profit: £120,000
Rental Income: £24,000
Before Dan took over this business he went to see the bookkeeper and produced a departmentalised P&L and found out it was actually losing significant sums of money, so if he proceeded to purchase this business he was actually buying a liability.
The trading business was turned around in a short space of time, which was fairly straight forward and involved restructuring operations and reducing weekly staff overheads.
When the business was returned to profitability Dan facilitated a management buy-out of the business simultaneous to acquiring the property. The business was secured on a long term lease with a business purchase price of £30,000.
The property was purchased for £150,000 less the £30,000 for the business making the net cost of the property £120,000 with the rent being £24,000 the transaction provides a reasonable 20% return.
Getting tenants lined up prior to purchasing the building is always essential, and these days we wouldn’t proceed, or recommend to others to proceed without doing so. Whereas, the increase in value and high-quality lease arrangements with long term national brands hugely reduces risk and creates a lowly geared investment that will survive and thrive during the next economic correction.
|Address||55-57 High Street, Paisley, Scotland|
|Acquisition Date||March 2016|
|Lease Length||5 years|
As with the other developments, the plan for Dan here was to secure a national brand. However, as Paisley is a bit of a ghost town these days, that was harder than anticipated. At one point 8 brands were interested, then 3 brands and then they all fell away one by one. In Dan’s eyes, this deal represents a failure as he did not secure a national brand, even though he had produced a 20% return. Nevertheless, this was a very personal deal for Dan as he helped an employee that had been with him for 13 years previously, cross the bridge from employee to entrepreneur and that kinda lights him up as it’s a big step for anyone to take going from employee to entrepreneur.
Project Plans & Gallery
The business was on the market for over 2 years for offers over £340k.
We created a hybrid strategy that comes from the business buying world.
- We negotiated a No Money Down Lease Option for 5 years.
- We turned the business around quickly to positive cashflow and secured a sub tenant for a small part of the property to pay the rent for the whole property.
- We then facilitated a “MBO” Management Buy Out simultaneously to purchase the freehold, we discuss this more in detail in the accompanying video on our website.
Before: Leisureland, a declining cafe and arcade
Now: Plans for the transformation of the property
Before: Leisureland Before Reconstruction
During: Leisureland During Reconstruction
Transformed: Projected Transformation