PRIME SOUTH EAST INVESTMENT OPPORTUNITY. TheVillage V. Great Marlings, Luton LU2 8DL

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1 PRIME SOUTH EAST INVESTMENT OPPORTUNITY TheVillage V Great Marlings, Luton LU2 8DL

2 INVESTMENT SUMMARY Modern multilet South East office campus Excellent location positioned equidistant from the and A1(M), in close proximity to both London Luton Airport and Luton Parkway Railway Station The Village comprises 7 two storey office buildings totaling 56,265 sq ft, built in 2007 High specification accommodation with BREEAM Excellent Rating Currently approximately 75% let to 9 tenants producing 680,702 per annum, rising to 684,327 per annum by way of stepped rental increases Weighted average unexpired lease term to expiry of 3.6 years and 3.3 years to breaks Tenants include the University of Bedfordshire, Royal Bank of Scotland and Total Oil, with a strong history of tenant retention and expansion Attractive market dynamics with a distinct lack of Grade A accommodation in the direct vicinity and neighboring office centres Excellent asset management opportunities in respect of the vacant accommodation, with a further potential income of approximately 270,000 per annum at our opinion of ERV Vendor to provide an effective 18 months rates and service charge guarantee on the vacant accommodation Freehold We are seeking offers in excess of 8,000,000 subject to contract, reflecting a net initial yield of 8.04%, after allowing for the usual purchaser s costs at 5.80%, rising to 8.09% based on the fixed uplifts and 11.25% upon letting the vacant accommodation 1

3 TheVillage V Great Marlings, Luton LU2 8DL Park Centre Photograph taken in 2008.

4 210 LOCATION COMMUNICATIONS SITUATION Luton is located 33 miles north of Central London and is an important employment centre in the South East. It is home to a number of major corporate occupiers including; Vauxhall Motors, AstraZeneca, Selex Systems, Whitbread & InBev Uk to name but a few. Luton s robust economy and job market attracts international investment and has enabled Luton to adapt from a reliance on the car industry and manufacturing to a strong, balanced economy. Complementing the major corporate occupation from Vauxhall Motors are research and development firms such as Selex Galileo (BAe Systems) and AstraZeneca, as well as a strong service sector presence, including household names such as Ernst & Young and Europe s leading travel group, TUI. Luton s biggest economic asset is London Luton Airport. Its circa nine million passengers a year make it the UK s fifth busiest airport after Heathrow, Gatwick, Stansted and Manchester. Further expansion of London Luton Airport is a key contributor to future prosperity both as an employer and as an international gateway to the area. The airport supports around 8,000 employees and has significant plans to utilise its current site to expand to 18m passengers per year providing a range of business, freight and charter services. M40 READING JUNCTION 11 MILTON KEYNES A4 A5 M4 MILTON KEYNES/ THE NORTH AYLESBURY BEDFORD HIGH WYCOMBE M3 A41 SLOUGH 11 WOKING A GUILDFORD 10 10a ST ALBANS WATFORD HEATHROW A40 A3 GATWICK A602 A1(M) 23 A6 8 STEVENAGE WELWYN GARDEN CITY ENFIELD LONDON CROYDON A23 7 M A10 HARLOW 8 STANSTED 1 27 A20 DARTFORD SEVENOAKS 28 L U A6 T O N 30 CHELMSFORD A12 1 PARKWAY A13 A2 GILLINGHAM 1 M20 MAIDSTONE A1(M) STOPSLEY M2 AIRPORT Road Luton benefits from excellent road links with the providing access to the and A1(M). Junctions 10 and 11 of the are located circa 10 miles to the north of the London orbital, linking Luton to the regional and national motorway network. Rail Luton Parkway Station is located approximately 4 miles from The Village, providing direct services to Central London with a fastest journey time of approximately 20 minutes. There are regular Thameslink services to London St Pancras, Farringdon and Gatwick Airport as well as services to the Midlands and the North. Air London Luton Airport is located approximately 4 miles from The Village and is one of the UK s fastest growing airports, alongside the country s biggest base for private jet travel. The airport services over 80 national and international destinations including all major UK and European cities together with some intercontinental flights. Luton Airport Luton Parkway Station A1(M) 4 miles 4 miles 5 miles 8 miles The Village is a high quality campusstyle office development located on the North East side of Luton, approximately 3.5 miles from the town centre at Great Marlings. The scheme occupies a prominent position fronting the dual carriageway, providing quick and easy access to the A1(M) and the, located 8 and 5 miles away respectively. The scheme is served by multiple bus routes providing localised access to Luton, Stevenage and Hitchin. Butterfield Business and Technology Park, which includes The Village campus, has itself attracted over 100 new hightech knowledgebased startups since its inception. SITE We understand the property extends to approximately acres (1.294 hectares) JUNCTION 10 A1081 JUNCTION 10A Heathrow Airport 14 miles 37 miles The Village LONDON/ Source: AA Route Planner El Sub Sta 220 GREAT MARLINGS Not to scale. For indicative purposes only. 3

5 DESCRIPTION ENVIRONMENTAL CREDENTIALS The Village comprises 7 twostorey office buildings providing suites from 1,000 sq ft upwards to self contained buildings of 12,550 sq ft, totaling 55,905 sq ft of Grade A accommodation. The scheme benefits from ample onsite car parking. Facilities include 24 hour guarded security and CCTV. The Village has achieved a BREEAM Excellent standard which incorporates the pioneering earth duct ventilation system. Further information, including a video tour, can be found at co.uk. SPECIFICATION Full access raised floors LG7 compliant lighting Earth duct heating and cooling system Exposed concrete ceilings integral to Earth Duct system Automatic opening windows Full height glazing BREEAM Excellent rating The offices at The Village have an innovative under floor ventilation system which uses passive heating and cooling through buried earth ducts, which are predicted to reduce energy consumption by up to 75% compared to a standard airconditioned office. The system regulates air temperature and promotes excellent air quality. The concrete earth ducts are buried one metre below the ground which is at a constant temperature. In the Summer, the earth will cool the air before it is introduced into the buildings. In Winter, the cold air is warmed up by the ground before passing over a small heating panel to bring it to room temperature. The Village buildings should have a carbon footprint which is 20% of standard air conditioned out of town offices and they are the first of their kind in the UK. 24 hour CCTV monitoring system Male, female WC s on each floor Shower facilities DDA compliant Recycling compounds MATURE TREES PROVIDE SHADING EXTERNAL TEMPERATURE 30 O C FRESH AIR INTAKE EARTHDUCT 80M LENGTH/900MM DIAMETER VENTILATION VIA FLOOR GRILLES EXPOSED CONCRETE SLAB PRESSURISED FLOOR VOID PLANTROOM UNDER STAIRS AHU TEMPERATURE COOLED DOWN TO 24 O C NIGHT BY PASS ADJUSTABLE INTERNAL BLINDS FIXED SOLAR SHADING WINDOWS OPEN FOR PRESSURE RELIEF & NATURAL VENTILATION IF REQUIRED BY OCCUPIER Facilities 170 car parking spaces, providing a ratio of 1:330 sq ft Bicycle shelters 24 hour CCTV monitoring system Male, female WC s on each floor ENERGY PERFORMANCE The buildings have an EPC Rating of between B and C. Full reports are available on request. TENURE Freehold. 4

6 TENANCIES The property is currently let to 9 tenants under 15 leases, producing 680,702 per annum, with an average weighted unexpired lease term to expiry of 3.6 years and 3.3 years to breaks. All leases are effectively drawn on full repairing and insuring terms. Vendor to provide an effective 18 months rates and service charge guarantee on the vacant accommodation. Building Demise Tenant Area sq ft Term Lease Start (Rent Review) Lease Expiry (Break) Current Rent pa 210 Ground Floor Suite A1 The University of Bedfordshire Higher Education Corporation 2, /02/ /09/ , Current Rent psf Comments Ground Floor Suite A2 Techad Ltd 2, /01/ /04/ , Fixed rental increase to 32,600 pa on 03/01/2016. Break has not been activated, therefore granting the tenant a 2 month rent free period from 19/01/2015. Ground Floor Suite B1 Sommers Waste Solutions Ltd /01/ /01/2017 (19/01/2015) 15, month rent free period if break not activated. Rent rises to 16,005 pa from 20/03/ ,600 rental deposit held. Ground Floor Suite B2 Techad Ltd 1, /04/ /04/ , Initial rent of 14,250 pa, rising to 20,000 pa from 30/04/2015 and 28,500 pa from 30/04/2016. Vendor to top up. Ground Floor Suite B3 Instant Business Ltd /06/ /06/2017 (17/12/2014) Ground Floor Suite B4 Town and Country Mortgage Services Ltd /12/2011 (13/12/2014) 15, Break legitimately activated, effective 17/12/ /12/ , Rent deposit of 3,024 held. Ground Floor Suite C The University of Bedfordshire Higher Education Corporation 1, /01/ /01/ , Rent commencement date of 13/11/2014. Vendor to top up. First Floor Suite A Vacant 4,669 Rateable Value 78,800. First Floor Suite B The Royal Bank of Scotland Plc 4, /04/ /04/ , First Floor Suite C1 Total UK Ltd 1, /10/ /10/ , Rent rises to 16,640 pa from 31/10/2014 to 30/10/ ,160 pa thereafter. 220 Ground Floor Vacant 1,581 Rateable Value 26,750. First Floor McCann Erickson Central Ltd 1, /02/2011 (03/02/2014) 31/03/ , Ground Floor Vacant 4,636 Currently not listed on the VOA website and no rates being charged. First Floor Vacant 4,655 Currently not listed on the VOA website and no rates being charged. 240 Ground Floor The University of Bedfordshire Higher Education Corporation 2, /09/ /09/ , First Floor Fujifilm Sonosite Ltd 2, /05/ /05/2018 (09/11/2015) 250 Entirety The University of Bedfordshire Higher Education Corporation 5, /07/ /09/ , Entirety The University of Bedfordshire Higher Education Corporation 3, /07/ /09/ , Entirety The University of Bedfordshire Higher Education Corporation 9, /07/ /09/ , TOTAL 56, ,702 47, month rent free period if break not activated. The Service Charge budget for the year ending 24th March 2015 is 249,550, equating to an overall cost across the accommodation 4.44 per sq ft. The buildings are subject to separate cost schedules and subsequent varying rates per sq ft. Further details are available on request. 5

7 COVENANT The property benefits from good security of income, with the latest filed accounts for each tenant summarised as follows: Company Name Registration Number Date of Accounts Turnover ( 000) Pre Tax Profits ( 000) Net Worth ( 000) Rent Passing as % of Income 61.76% The University of Bedfordshire Higher Education Corporation The Royal Bank of Scotland Plc SC /12/12 31/12/11 31/12/10 26,375,000 30,665,000 33,070,000 Fujfilm Sonosite Ltd ,500 7,356 9, ,661 2,463 2, % Techad Ltd % McCann Erickson Central Ltd ,968 47,230 44,021 2, ,808 24,348 21,741 18, % Total UK Ltd ,828,000 6,108,000 5,100,000 (79,000) (21,000) (345,000) 9,000 (109,000) (39,000) 2.47% Sommers Waste Solutions Ltd (10) 2.38% Instant Business Ltd /03/13 31/03/12 31/03/ % Town & Country Mortgage Services Ltd /03/13 31/03/12 31/03/ % (3,412,000) 59,288,000 (864,000) 61,726,000 (171,000) 57,010, % Rental deposits are held from Sommers Waste Solutions Ltd and Town & Country Mortgage Services Ltd. 6

8 OCCUPATIONAL MARKET COMMENTARY INVESTMENT MARKET COMMENTARY As the South East office market continues to strengthen, positive occupier sentiment has lead to a dramatic rise in take up across the northern market. Luton has a total built office stock of circa 4.2m sq ft, with a respective availability rate of approximately 8.5%. Luton experienced year on year increased take up of over 100,000 sq ft over the course of Occupier demand in Luton is focused on the out of town markets, with Butterfield and Capability Green dominating occupational appetite. Total office availability in Luton peaked in 2009 at 630,000 sq ft, which has since fallen year on year to stand at a cycle low of 350,000 sq ft, of which only 37,000 sq ft is Grade A and 130,000 sq ft is considered Grade B. The figures represent a distinct lack of Grade A availability in the market. The remaining 184,000 sq ft is classified as Grade C and largely constitutes obsolete town centre stock which is being consumed by the increased activity in office to residential conversion MARLOW 21 HIGH WYCOMBE M4 A MAIDENHEAD A31 20 MILTON KEYNES M40 A4 M HEMEL HEMPSTEAD ST ALBANS WATFORD 32 UXBRIDGE STOCKLEY PARK A3 A1 A HATFIELD BOREHAMWOOD 30 EALING CHISWICK A HAMMERSMITH A23 M23 Since the start of 2013 there has been a change in investor attitude towards the south east office market with investment levels in the sector significantly up on previous years. Improvements in the economy and subsequently the occupier markets has driven performance in the South East office market and induced demand as investors look to capitalize on strong prospects for rental growth and the yield gap between Central London and the wider South East. South East offices continue to perform as the most established market outside of Central London. Investment into the sector totaled 2.66bn in 2013, a further increase on the 2.46bn transacted in This trend is set to continue for the rest of 2014, whilst good quality office stock remains in short supply and a weight of money continues to flow into the UK property market. The sector provides increasing scope for yield compression, with returns augmented by forecast rental growth. Prime, repositioned and valueadd investment opportunities continue to be sought after by an ever expanding investor profile. Grade A rents in Luton are transacting at a significant discount to nearby northern centres: In the last 5 years annual takeup reduced to circa 60,000 sq ft per annum, however 2013 saw an increase back to 152,000 sq ft, in line with the long term average annual takeup of 150,000 sq ft. Butterfield Business and Technology Park, which includes The Village campus, has itself attracted over 100 new hightech knowledgebased startups since its inception. Recent transactions at The Village have maintained a stable tone of per sq ft since The rents achieved compare favorably with the principle competition, Capability Green, where Grade A rents are per sq ft. The Village provides occupiers with the only Grade A accommodation in the 1,000 to 5,000 sq ft size range, at a discount to that of competing centres, providing an excellent platform for future rental growth as the supply and demand of Grade A accommodation is exasperated further. Date Town Property Size (sq ft) Price Net Initial Yield Cap Value (per sq ft) Rent (per sq ft) Tenant WAULT Available Milton Keynes Exchange House 121, m 8.25% Multilet 2.68 years Sep14 Borehamwood Imperial Place 226, m 8.00% Multilet 4.74 years Jun14 Walton on Thames Walton Lodge 13, m 7.75% Multilet 3.1 years Jun14 Bracknell Inspired 86, m 4.98% Multilet 5.60 years May14 Amersham Anglo Office Park 24, m 8.34% Multilet 5.50 years Nov13 Winnersh 100 Berkshire Place 53, m 7.25% Multilet 4.75 years 7

9 ASSET MANAGEMENT FURTHER INFORMATION The Village provides an opportunity to generate significant capital uplift with limited requirement for further capital expenditure and increased performance through the following asset management initiatives: Let the remaining vacant space, currently totalling 15,541 sq ft (28%) Explore potential lease regears / accommodation expansion with current tenants Benefit from increased occupational demand to drive the rental tone of the campus VAT We understand that the property is elected for VAT. It is anticipated that the property sale will be structured as a transfer of a going concern. For further information or to arrange a viewing, please contact: Charlie Lake clake@lsh.co.uk T M Nathaniel Ball nball@lsh.co.uk T M Laura Sweet lsweet@lsh.co.uk T M PROPOSAL Offers are sought in excess of 8,000,000 (Eight Million Pounds). A purchase at this price would reflect an attractive net initial yield of 8.04%, after allowing for the usual purchaser s costs at 5.80%, rising to 8.09% based on the fixed uplifts and 11.25% upon letting the vacant Misrepresentation clause below: Subject to Contract and Exclusive of VAT Lambert Smith Hampton September 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 resale 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. 8