Arazim: What Really Remains of Capella's Rent After June 2027
This follow-up starts from the number the annual report itself cuts: not £5.46 million of annual rent, but £4.33 million of market rent after June 2027, before any marketing period or incentives for a replacement tenant. That £1.12 million gap is the stricter base on which Capella's refinancing capacity should be judged.
The main article argued that Capella's rent still carries Arazim through 2025, but that June 2027 is the real fault line. This follow-up isolates that one issue. Not how much rent comes in today, but how much of it really survives once the current leases roll off, and what that means for any refinancing discussion.
It is cleaner to read this continuation in pounds sterling. Capella's rent is earned in pounds, and the external valuation is built in pounds. Once you do that, the picture sharpens immediately: the valuation does not buy the 2025 rent roll as if it simply continues. It already assumes lower rent after June 2027, and on some assets it also assumes a meaningful gap before income normalizes again.
What Really Remains After June 2027
The first line is also the most important one. Capella currently produces £5.456 million of annual net rent. The external valuation attached to the annual report says the aggregate market rent for the portfolio is only £4.334 million. In other words, the company's own anchor document already cuts about £1.122 million from annual rent, a decline of 20.6%.
| Asset | Tenant | Current net rent | Market rent | Gap | Change |
|---|---|---|---|---|---|
| Market Drayton | Pork Farms | £0.860 million | £0.825 million | £0.035 million | -4.0% |
| Nottingham Queens | Pork Farms | £0.987 million | £0.795 million | £0.192 million | -19.5% |
| Shaftesbury | Pork Farms | £0.230 million | £0.215 million | £0.015 million | -6.5% |
| Riverside | Pork Farms | £0.660 million | £0.549 million | £0.111 million | -16.9% |
| Oldham | Park Cakes | £1.992 million | £1.400 million | £0.592 million | -29.7% |
| Bolton | Park Cakes | £0.726 million | £0.550 million | £0.176 million | -24.3% |
| Total | £5.456 million | £4.334 million | £1.122 million | -20.6% |
This is not a cosmetic adjustment. It is a clear underwriting statement. Anyone building a June 2027 refinancing case on today's rent is missing the base that the valuer has already set for the portfolio.
Where The Cut Actually Sits
The decline is not evenly spread. The two Park Cakes assets, Oldham and Bolton, account for 52.5% of portfolio value, but 68.5% of the total rent haircut. That matters because the bulk of the reset sits exactly where Capella depends on larger, older, more specialized assets.
Oldham alone falls from £1.992 million to £1.400 million. That is almost £0.6 million of annual rent gone. Bolton is cut by another 24.3%. On both assets, the valuers explicitly say the passing rent is above market because of annual RPI uplifts, and that the 10-year reversionary lease option from June 2027 has not yet been triggered. So today's rent here is not a floor. It is a contract peak built on the lease structure of the current cycle.
The Pork Farms side looks less severe, but it is still not automatic. Market Drayton is only marginally lower, yet even there the report refers to discussions with the tenant rather than a formal commitment. Nottingham Queens and Riverside still see cuts of 19.5% and 16.9%. Shaftesbury is sharper still: the tenant is no longer in occupation, continues paying only until lease expiry, and the property report explicitly says the tenant is unlikely to exercise the reversionary option.
That is why the consolidated number can mislead. Not every pound of 2025 rent is a pound the market is willing to underwrite after June 2027. Part of it is still contractual income up to expiry, not proof of replacement demand on the same terms.
The Valuation Is Already Built On A Harder Scenario
This is where the refinancing read really changes. Note 6 says the external valuation is NIS 143.0 million, and only after adding NIS 15.6 million attributed to lease-payment amounts does the balance-sheet carrying value reach NIS 158.6 million. Those are not the same number, and they do not tell the same story. Anyone looking only at the investment-property line in the balance sheet gets a more generous picture than the external valuation itself gives the portfolio.
The haircut is not only about lower market rent. Note 6 also says the value is based on the rent that could be achieved at the end of the current leases without refurbishment or fit-out spend, using fairly demanding yield assumptions: Net Initial Yield of 12.60% to 18.79%, and Equivalent Yield of 9.34% to 13.14%. In other words, the valuation is not assuming a smooth world in which the tenant stays, rent holds, and the market funds the whole thing cheaply. It is already built on lower income and high required returns.
Some assets also include an explicit painful bridge period if the tenant leaves. In Market Drayton, for example, the KEL output moves from current rent of £859.6 thousand, to £876.8 thousand after the June 2026 indexation step, then to zero at June 2027 expiry, and only from September 2028 back to £825 thousand. In Oldham the valuers explicitly assume at least 18 months in total of marketing and incentives if the tenant leaves. In Bolton the assumption is at least 15 months. These are not technical footnotes. They are the mechanism by which the valuation defines what rent is truly financeable after expiry.
What This Means For Refinance Capacity
The practical implication is that refinancing after June 2027 will not be underwritten on 2025 rent. It will be underwritten on one of two tighter scenarios. The first is renewal with existing tenants, but at rents closer to market rent than to today's passing rent. The second is release to the market, in which case both lower rent and a downtime-and-incentive period need to be absorbed.
That is why the real question is not whether Capella produces £5.46 million today. It is whether the portfolio can prove, before June 2027, that the rent left afterwards will be closer to £4.33 million without a long interruption, or even above that because a real renewal has been secured. Until that happens, any refinance discussion sits on a more conservative income base and on a value that has already been marked down to reflect that.
There is also a structural point here. The three leasehold assets in Nottingham and Shaftesbury are already measured on a net basis after head rents, so even if the tenant stays, not all gross rent reaches the asset owner. The two Park Cakes assets have a different problem: they are freehold, but the valuers still treat the current rent as over-rented. In both cases, the cash flow that remains available to support refinancing is lower than the 2025 headline suggests.
Bottom Line
This continuation does not reverse the main article's thesis. It sharpens it. Capella's rent is stable through June 2027. But what remains after that is smaller, slower, and more execution-dependent. The external valuation already assumes a 20.6% cut in market rent, concentrates most of that reset in the two Park Cakes assets, and, for some properties, also builds in downtime and incentives before income stabilizes again.
So anyone reading 2027 only through 2025 rent is reading half the story. The other half is already in the notes and the valuation appendix: Capella's refinance base is not £5.46 million. It is something much closer to £4.33 million, and on some assets even that only arrives after a transition period. That is the number that has to pass the test.
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