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Why I bought an empty bank at auction

Ken McEwan, the chief executive of estate agency McEwan Fraser Legal, bought an axed RBS branch in Edinburgh for £1.3m for his family investment portfolio in March.

The Grade A listed commercial building occupies a corner position on Blenheim Place in the city, putting it within close reach of Princes Street and the Edinburgh St James retail, leisure and residential development by TH Real Estate, which is due to open in 2020 with John Lewis as anchor.

The former RBS bank was sold by SVA Property Auctions with GVA as joint auctioneer. Two months later, taxpayer-owned Royal Bank of Scotland announced that it would be closing a further 162 RBS-branded branches this year.

Why did you buy the property?

Ken McEwan

“I bought it as an investment because it’s an iconic building in a fantastic location. I can’t recall any other building like this, with period stone pillars going around the entire building.

“I believe property prices in that area could double in the next five years, with the Edinburgh St James development attracting thousands of people. There will be a ripple effect for all buildings.

“The east end of Glasgow will effectively become the new west end. It is reported that penthouse flats are changing hands ‘off market’ for £1.5m at the new St James Centre.”

The property has a 500 sq ft basement, 1,500 sq ft former banking hall on the ground floor and 2,000 sq ft of first-floor office space. What will you do with it?

“The first floor could make a fantastic flat. I’ve got a number of people interested in the building already.

“McEwan Fraser Legal is marketing it and we’ve enquiries from all over the world, from ice cream parlours, Italian restaurants, serviced apartments, a company that provides high-security vaults, and a bookshop.

“I’m considering which tenant would give the best facelift to the building. I’ve got people interested in taking all three floors.

“Letting the entire building to one operator would make it easier to go through planning, but there’s the option for someone to take the ground and basement.

“The first floor could be one of the largest and finest central flats in Edinburgh.”


137: Number of former banks and building societies sold at auction 1 May 2017 to 30 April 2018 (Source: Essential Information Group)

What change of use class would you need?

“It’s Class 2 at the moment [for financial services], We would have to go to Class 1 for retail or Class 3 for a restaurant.”

There were 250 requests for the schedule on this lot. What was bidding like on the day?

“It was the last item in the auction and there were 40 to 50 people still in the room. Two bidders went hammer and tongs for it. I nipped in at the 11th hour and got it.”

The guide price was £700,000. Do you ever worry you overpaid?

“I had a ceiling of £1.5m and I was only £20,000 above the person who came second and £40,000 above the person who came third.

“In a closed bidding situation you could pay £200,000 more than the next person without knowing. The guide price is designed to seduce people.”

RBS sold five other former branches in the same auction. What’s your take on the rising number of bank closures?

“It’s a bad thing. People like to go in and do their business. It’s bad for the economy, but it’s a necessity. It’s the same in our business – we don’t need high street premises, we have one main central location.”

What advice would you give to would-be bidders on other vacant bank lots?

“Do your own homework. Get professional opinions on the state of the building and the cost to repair and do it up. Talk to architects about what consent might be allowed.

“Do your calculations on returns and potential uplift in value. Weigh up whether to take a strong, corporate covenant at a lower yield or a secondary covenant at a
higher yield.

“Remember professional advisers don’t always see the bigger picture and that’s why they are not investors. If you buy location, location, location, then the market will normally catch up and exceed your investment. I have set a new benchmark for commercial properties in this area.”

To send feedback, e-mail julia.cahill@egi.co.uk or tweet @egjuliac or @estatesgazette

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