HEXAGON HOUSE, MICHIGAN DRIVE, TONGWELL, MILTON KEYNES MK15 8HT REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY

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1 REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY

2 INVESTMENT SUMMARY OPPORTUNITY TO ACQUIRE A SOUTH-EAST OFFICE HQ BUILDING FREEHOLD MICHIGAN DRIVE IS ONE OF THE PRINCIPAL BUSINESS CENTRES IN MILTON KEYNES 28,987 SQ FT (IPMS) OF GOOD QUALITY OFFICE ACCOMMODATION AND ANCILLARY STORAGE AREA OF 3,320 SQ FT 70 CAR PARKING SPACES PROVIDING A RATIO OF 1:414 SQ FT LET ON A FULL REPAIRING AND INSURING LEASE TO LEICA GEOSYSTEMS FOR A TERM OF 10 YEARS AND 5 MONTHS FROM 1ST JUNE 2013 A TOTAL RENT OF 259,420 PER ANNUM, EQUATING TO A LOW ANNUAL RENT OF 7.83 PSF OFFERS ARE INVITED IN EXCESS OF 3,000,000 (THREE MILLION POUNDS) FOR THE FREEHOLD INTEREST, SUBJECT TO CONTRACT AND EXCLUSIVE OF VAT. A PURCHASE AT THIS PRICE REFLECTS A NET INITIAL YIELD OF 8.12%, ALLOWING FOR PURCHASERS COSTS OF 6.45%, AND A LOW CAPITAL VALUE OF 93 PSF REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 2

3 LOCATION Milton Keynes is a core corridor location, strategically positioned between London (52 miles to the south east), Birmingham (71 miles to the north west), Cambridge (18 miles to the north west) and Oxford (42 miles to the south west). The town has excellent transport links and lies adjacent to Junctions 13 and 14 of the motorway, providing easy access to the North and London to the south. The A5 and A421 dual-carriageways also run through the town and provide access to the M40 motorway. The property is located approximately four miles from Milton Keynes Central Railway Station, which provides regular and direct services to London Euston with an approximate journey time of 33 minutes. London Heathrow, Stansted and Luton Airports are also all accessible within a 60 mile radius from the property. Milton Keynes is one of the fastest growing cities in the UK and has been identified as one of four major growth areas in the South East. Between Milton Keynes saw population growth in excess of 18% and it is projected that by 2031, 71,000 new homes will have been developed bringing increased labour to the area. A5 Saxon St A422 Bradwell Road Wolverton Rd V6 Grafton St H3 Monks Way Dansteed Way Saxon St Milton Keynes Central Station Brickhill St A422 Dansteed Way V9 Overstreet Marlborough St Hexagon House Brickhill St H6 Childs Way A422 Tongwell St Chaffron Way H6 Childs Way Liverpool M6 M61 Newcastle upon Tyne Leeds M62 A1(M) Manchester Sheffield A1(M) SITUATION M54 M6 M42 The property is located in the established commercial area of Tongwell just four miles north east of Milton Keynes town centre. The building is prominently located on Michigan Drive adjacent to the motorway with Junction 14 a short distance to the south. The A422 is directly north of the property connecting to the A5 to the west. Local occupiers situated in the immediate vicinity, including Volkswagen, Parcelforce Worldwide, LG Electronics, Coca-Cola Enterprises, Mercedes- Benz and John Lewis. Hexagon House M4 Birmingham M50 Bristol M6 M40 Oxford M4 Northampton Bedford Milton Keynes M40 A1(M) 1 M25 London Cambridge M5 M3 M23 M20 Southampton M27 Portsmouth Brighton REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 3

4 DESCRIPTION The property comprises a two storey detached office building with ancillary loading bays, storage and yard to the southern elevation of the property. The property occupies a mature landscaped site with 70 car parking spaces, providing a ratio of 1:414 per sq ft. SITE The property extends to approximately acres (0.879 hectares), with a low site cover of 34%. The property has benefitted from capital expenditure with tenants works including electrical and mechanical installation. The current specification includes; Comfort cooling Solid floors with underfloor trunking Suspended ceilings with LG7 lighting Reception with stairwell and 8 person passenger lift 0m 10m 20m 30m ACCOMMODATION The property has been measured in accordance with RICS Property Measurement 1st Edition. The IPMS 3 and Net Internal Areas are as follows; FLOOR IPMS 3 NIA SQ M SQ FT SQ M SQ FT Ground 1, ,811 1, ,811 First 1, ,176 1, ,176 Storage , ,290 TOTAL 3, ,307 2, ,277 REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 4

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6 TENURE The property is held freehold. TENANCY The property is let in its entirety on an FRI lease to Leica Geosystems for a term of 10 years and 5 months from 1st June The passing rent is 238,000 per annum ( 7.18 psf), with a fixed uplift to 259,420 ( 7.83 psf) in November 2018, which the vendor will top-up for the purpose of the sale. The lease is subject to a schedule of condition, which is available upon request. The rent is paid quarterly in advance, less 1,282 per calendar month by way of phased recovery for the duration of the term, which will be topped up by the vendor. REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 6

7 COVENANT INFORMATION Leica Geosystems (D&B 4A1) based in eastern Switzerland produces products and systems for surveying and geographical measurement (geomatics). Its products employ a variety of technologies including GPS satellite navigation and laser rangefinders to enable users to model existing structures, terrains in computer based systems to high accuracies. The most recent accounts information for Leica Geosystems shows the following: 31/12/ /12/ /12/2015 Turnover 63,029,000 55,471,000 51,831,000 Profit before taxes 5,940,000 3,889,000 1,944,000 Tangible Net worth 15,714,000 10,246,000 6,728,000 (Source: D&B Report) REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 7

8 SOUTH EAST OFFICE INVESTMENT MARKET Relative to trend, South East offices is among the most actively traded sectors in the UK property market. Some 5.4bn of assets have changed hands over the last 12 months, up 46% on the previous year and 77% above the annual average. In addition to strong levels of activity, the sheer breadth of demand for South East offices has never been greater than it is currently. While 2015 represents the high watermark for volume, the number of unique buyers of South East offices climbed to a new record of 192 in 2017, 17% above 2015 s level. In a market where investors are struggling to find value we continue to see strong appetite for buildings with medium term income (3-6 years) where there is an opportunity to add value via various asset management opportunities. MILTON KEYNES OFFICE MARKET OVERVIEW TAKE-UP H has achieved a take up of 99,000 sq ft, a 42% increase on the first half of The town s take-up continues to be under-pinned by internal movement, but is now seeing greater interest from occupiers considering locations other than London and the fringes of the M25 as moving north they will benefit from lower occupational costs. Performance is continuing to improve with the delivery of 100 Avebury Boulevard that offers Grade A accommodation which could achieve record pre-let rents of between and per sq ft which will surpass the pre-let at Victoria House, Avebury Boulevard in the town centre to Grant Thornton in 2016 at per sq ft. SUPPLY Milton Keynes has a total office stock of 5.8m sq ft with 43% being located out of town. There has been a dramatic reduction in stock since 2010 from 1.4m sq ft to a current availability of approximately 646,000 sq ft, of which only 20% is Grade A. Milton Keynes is centrally located between London/Birmingham and Oxford/ Cambridge. The location has attracted established key occupiers, such as, Network Rail, VW Financial services, Rightmove and Mercedes Benz. Milton Keynes will benefit from the proposed Oxford-Cambridge expressway and rail link that will connect three of the UK s most successful cities. Recent rental evidence includes; Date Property Tenant Size (sq ft) Lease Length Rent (psf) The city provides modern living for a diverse population of over 267,000, with a great mix of retail and leisure facilities where you are never more than 5 minutes from an area of parkland. It s internal excellent roadways and cycle paths allow for an easy commute, even when arriving via the motorway and with cities like London being within a 33 minute railway journey. Continuously achieving Top 10 City Status for population growth and new business start-ups, to meet the challenge of sustainable growth without exceeding the capacity of the infrastructure, the initiative MK:Smart has been created to develop innovative solutions to support the cities economic growth, where businesses, education and community will all be engaged. Q Q Q Solaris House, Kiln Farm 2nd Floor, Silbury Court East Part G, K2, Kents Hill Monier Redland 14, (5) NoteMachine 7, (5) Selo 5, (5) Q Icon, Kiln Firm Energie 11, Q nd Floor, Partis House Matrix SCM 6, (5) REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 8

9 COMPARABLES DATE ADDRESS TENANT WAULT PRICE NET INITIAL YIELD PURCHASER Under Offer Bong UK HQ, Michigan Drive, Milton Keynes Bong UK Limited m 6.75% August 2018 Spencer House, Reading Thames Water m 7.45% Private Investor June 2018 Ricoh House, Northampton Ricoh UK Limited m 7.55% East Hampshire District Council December 2017 Arup Campus, Solihull Ove Arup & Partners International m 7.23% JHA Investment Limited November 2017 Units E1 & E2 The Chase, Hertford Multi-let m 6.74% LSHIM November 2017 Maple Court, Watford Hilton Worldwide m 6.53% Sidra Capital October & 1500 Parkway, Solent Business Park Matchtech Group m 7.26% Huntingdon District Council April Cyrus Way, Peterborough Bulley Davey m 7.00% Cambridge City Council INVESTMENT RATIONALE Attractive HQ building, situated on 2.17 acre site, and a low site cover of 34%. Let to strong covenant Leica Geosystems Limited (4A1). At the point of sale, an attractive low passing rent of 7.18 psf, with a fixed rental uplift to 7.83 psf in November 2018, which will be topped up by the vendor. Leica Geosystems Limited are committed to the building having not exercised their recent break option and their investment into the building. Asset management opportunities to include tenant lease re-gear and driving the rental tone at future lease events. Future development potential. REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 9

10 ALTERNATIVE USES The site coverage equates to only 34%, therefore there is an opportunity to explore alternative uses (STPP). EPC The property has a rating of E125. VAT The property is elected for VAT. It is intended that the sale will be treated by way of a Transfer of a Going Concern (TOGC). PROPOSAL FURTHER INFORMATION For further information or to arrange an inspection, please contact: Offers are sought in excess of 3,000,000 (Three Million Pounds) for the freehold interest. Mitchel Flaherty mflaherty@lsh.co.uk Charlie Lake clake@lsh.co.uk Jack Baker jabaker@lsh.co.uk David Ball dball@lsh.co.uk A purchase at this level reflects a net initial yield of 8.12%, assuming purchasers costs at 6.45%, and a low capital value of 93 psf. Lambert Smith Hampton UK House 180 Oxford Street London W1D 1NN Subject to Contract and Exclusive of VAT Lambert Smith Hampton September 2018 Disclaimer: Lambert Smith Hampton Group Limited and its subsidiaries and their joint agents if any ( LSH ) for themselves and for the seller or landlord of the property whose agents they are give notice that: (i) These particulars are given and any statement about the property is made without responsibility on the part of LSH or the seller or landlord and do not constitute the whole or any part of an offer or contract. (ii) Any description, dimension, distance or area given or any reference made to condition, working order or availability of services or facilities, fixtures or fittings, any guarantee or warrantee or statutory or any other permission, approval or reference to suitability for use or occupation, photograph, plan, drawing, aspect or financial or investment information or tenancy and title details or any other information set out in these particulars or otherwise provided shall not be relied on as statements or representations of fact or at all and any prospective buyer or tenant must satisfy themselves by inspection or otherwise as to the accuracy of all information or suitability of the property. (iii) No employee of LSH has any authority to make or give any representation or warranty arising from these particulars or otherwise or enter into any contract whatsoever in relation to the property in respect of any prospective purchase or letting including in respect of any re-sale potential or value or at all. (iv) Price or rent may be subject to VAT and any prospective buyer or tenant must satisfy themselves concerning the correct VAT position. (v) Except in respect of death or personal injury caused by the negligence of LSH or its employees or agents, LSH will not be liable, whether in negligence or otherwise howsoever, for any loss arising from the use of these particulars or any information provided in respect of the property save to the extent that any statement or information has been made or given fraudulently by LSH. (vi) In the case of new development or refurbishment prospective buyers or tenants should not rely on any artists impressions or architects drawings or specification or scope of works or amenities, infrastructure or services or information concerning views, character or appearance and timing concerning availability or occupation and prospective buyers or tenants must take legal advice to ensure that any expectations they may have are provided for direct with the seller or landlord and LSH shall have no liability whatsoever concerning any variation or discrepancy in connection with such matters. REVERSIONARY SOUTH-EAST HQ OFFICE INVESTMENT OPPORTUNITY 10