cafe royal, london - short format update report - nov 11 · 2012-03-20 · definition of market...

Valuation Advisory

The Directors, Alrov (Israel) Limited, c/o EPIC Limited, 11 St Christopher’s Place, London W1U 1NG

Balance Sheet Purposes

Café Royal Retail Development, 50-52, 56-60 & 62 Regent Street, London W1

4th November 2011

Café Royal Retail Development, London W1 November 2011

Appendices

Appendix 1 ..........................................................................................................................General Terms and Conditions

Appendix 2 ............................................................................................................................................. General Principles

Appendix 2 ................................................................................................................................. Definition of Market Value

Appendix 2 .................................................................................................................................. Location Plans and Maps

Appendix 3 ......................................................................................................................................................Photographs

Appendix 4 ............................................................................................................................................ Valuation Print-Out

22 Hanover Square London W1S 1JAtel +44 (0) 20 7493 6040

www.joneslanglasalle.co.uk

Jones Lang LaSalle Limited

Registered in England and Wales Number 1188567

Registered Office 22 Hanover Square London W1S 1JA

4th November 2011

Dear Sir

Terms of Reference

Addressee: The Directors

Alrov (Israel) Limited

c/o EPIC Limited

11 St Christopher’s Place

London

W1U 1NG

For the attention of Roni Greenbaum

Property Address: Café Royal Retail Development 50-52, 56-60 & 62 Regent Street, London

W1

Purpose: Balance Sheet Purposes

Tenure: Long Leasehold for a term of 125 years at a peppercorn rent (assumed).

Valuation Date: 1st November 2011

Instruction Date: October 2011

Instruction and Purpose of Valuation

In accordance with your letter (attached to Appendix 1) we are instructed to

provide you with a report and valuation for a company’s financial statement

which will be published in due course.

Special Assumption: We have, as instructed, prepared our valuation on the basis that there are

no further construction costs outstanding and the units are in a shell and

core condition awaiting incoming tenant fit-out.

The Directors

Alrov (Israel) Limited

c/o EPIC Limited

11 St Christopher’s Place

London

W1U 1NG

Your ref EPIC/CafeRoyalNov11

Our ref JLL/LLB/CaféRoyalNov11

Direct line 020 7087 5167

Direct fax 020 7491 9139

[email protected]

Basis of Valuation: Our valuation has been prepared in accordance with the RICS Valuation

Standards (6th Edition) published by the Royal Institution of Chartered

Surveyors on the basis of Market Value as defined in Appendix 2.

The report is subject to, and should be read in conjunction with, the

attached General Terms and Conditions of Business and our General

Principles Adopted in the Preparation of Valuations and Reports which are

attached in Appendix 2.

No allowance has been made of any expenses of realisation, or for

taxation (including VAT) which might arise in the event of a disposal and

the property has been considered free and clear of all mortgages or other

charges which may be secured thereon.

The valuation was made in accordance with IAS 40.

Inspection: The property was inspected on 4th November 2011 by Lucinda Lee-Bapty.

All significant parts of the property were inspected.

Personnel: The valuation has been prepared by Lucinda Lee-Bapty MRICS under the

direction of Mark Whittingham MRICS, Director.

We confirm that the personnel responsible for this valuation are qualified

for the purpose of the valuation in accordance with the RICS Valuation

Standards.

Status: In preparing this valuation we have acted as External valuers, subject to

any disclosures made to you.

Disclosure: We have previously disclosed to you any recent involvement in this

property.

We confirm that the total fees earned for this assignment, earned by Jones

Lang LaSalle from the Company are less than 5% of the total UK

revenues.

At the time of this report, Jones Lang LaSalle had no other involvement in

the property other than providing valuation advice.

Sources of Information: We have inspected the premises and carried out all the necessary

enquiries with regard to rental and investment value, Rateable Value,

planning issues and investment considerations.

Market Condition: The continued turmoil and instability in the financial markets is continuing

to cause volatility and uncertainty in the world’s capital markets and real

estate markets. There are low levels of liquidity in the real estate market

and transaction levels are significantly reduced, resulting in a lack of clarity

as to pricing levels and the market drivers. This, combined with a

weakening of sentiment towards UK real estate, has resulted in a continual

reappraisal of UK commercial property prices. Many transactions that are

occurring involve vendors who are more compelled to sell, or purchasers

who will only buy at discounted prices. In addition, prices agreed during

negotiation are frequently reduced prior to exchange of contracts as

purchasers bring to bear their greater negotiating position and ability to

complete transactions in the current uncertain market. In this environment,

prices and values are going through a period of heightened volatility whilst

the market absorbs the various issues and reaches its conclusions. As a

result there is less certainty with regard to valuations with the result that

market values can change rapidly in the current market conditions.

Valuation: £34,500,000

(THIRTY-FOUR MILLION FIVE HUNDRED THOUSAND POUNDS)

Purchaser’s Costs: 5.2625%, including Stamp Duty at 4.00 %

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Cafe Royal Retail Development, London W1

50-52, 56-0 & 62 Regent Street

Location and SituationAs one of Europe’s ‘global’ cities, London performs a broad range of functions: it is a global financial, business

and cultural centre, the focus of national government and a major tourist magnet. As a retailing location it is

unique in the country in the extent to which it serves not only a resident population, but also overseas visitors,

visitors from other parts of the UK and a large working population.

Retail provision in London is far more extensive and varied than in any of the UK’s Regional Cities and PMA

identifies eight key Central London retail sub-markets - Oxford Street, Covent Garden, Regent Street, Bond

Street, Knightsbridge, Kensington High Street, Kings Road and the City of London. Most recently, Westfield

London- a 1.4 million ft² shopping centre anchored by Debenhams, House of Fraser and Waitrose opened at

Shepherd's Bush, several stops east of Oxford Circus on the central line.

Regent Street is one of the major shopping streets in London's West End, well known to tourists and Londoners

alike, and famous for its Christmas illuminations. It is named after the Prince Regent (later George IV), and is

commonly associated with the architect John Nash, whose street layout survives, although all his original

buildings except All Souls Church have since been replaced.

The street was completed in 1825 and was an early example of town planning in England, cutting through the

17th and 18th century street pattern through which it passes. It runs from the Regent's residence at Carlton

House in St James's at the southern end, through Piccadilly Circus and Oxford Circus, to All Souls Church. From

there Langham Place and Portland Place continue the route to Regent's Park.

Every building in Regent Street is protected as a Listed Building, at least Grade II status, and together they form

the Regent Street Conservation Area.

The property from Oxford Circus to Piccadilly Circus is owned by the Crown Estate. Since the turn of the

millennium, the Crown Estate has embarked on a major redevelopment programme in Regent Street and some of

its side streets. Early 20th century offices, which typically have many corridors and small individual offices, are

being replaced with modern, flexible open plan accommodation. Some of the smaller shops are being replaced

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with larger units. This is being done by completely stripping out the interiors and rebuilding behind retained

façades.

The largest element of the plan is the reconstruction of the Quadrant at the southern end of the street close to

Piccadilly Circus (including the subject property).

COMMUNICATIONS

London is the financial and tourist capital of the United Kingdom. The area is served well by 12 London

Underground Lines, along with the Docklands Light Railway (DLR), an interconnected local overground train

network and good links to river transport on the River Thames. London is also served by five main airports:

Heathrow located to the west of central London, Gatwick in the south, Stansted in the north east, Luton to the

north and London City Airport located south east of the City.

London, like most major cities, suffers from problems of traffic congestion and a public transport network

struggling to meet demand. A number of important transport infrastructure projects for the capital have been

brought forward or progressed since the election of a Mayor for London and creation of the Greater London

Authority.

The most controversial of the Mayor’s policies was congestion charging in Central London, which came into effect

in February 2003. Vehicles were charged to enter Central London between the hours of 7am and 6.30 pm. This

scheme was the first of such magnitude in the UK and now is generally referred to as a success although it has

had a mixed reception from both the public and business interests in London.

Possibly more controversially, the congestion zone was extended to the west in February 2007, to include much

of Kensington and Chelsea and Westminster, although the hours of operation have been marginally reduced with

charging ending at 6pm. Following a public consultation, London Mayor Boris Johnson is currently undertaking a

public consultation, which may result in the removal of this western extension in December 2010.

Other important infrastructure proposals include new and extended rail links across the capital. The most

important of these is Crossrail, a new line providing a fast, high capacity, east-west tunnel link between the Isle of

Dogs and Paddington; new stations will include Liverpool Street, Farringdon, Tottenham Court Road and Bond

Street. Services will continue overground to east and west, as far as Shenfield in Essex and Maidenhead in

Berkshire. Mechanisms for funding are now in place after the Crossrail Bill received royal assent in July 2008 and

construction around several stations has commenced. The new Coalition Government has pledged its support for

Crossrail.

Another important new scheme is the East London Line, which will bring a new over-ground service from

Highbury & Islington south to West Croydon. The first phase from Dalston to West Croydon opened in May 2010,

with the second phase opening in 2011.

SITUATION

The property comprises three retail units that occupy an extremely prominent position at the southern end of

Regent Street directly adjacent to Piccadilly Circus on the northern side of the street. The premises was formerly

occupied by the world renowned Café Royal.

A key feature to the location of the units is their proximity to the northern entrance of Piccadilly Underground

Station which according to the TFL passenger flowchart Piccadilly Circus has total flows of 34.7 million entrances

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and exits per annum which compares with Bond Street at 30.6 million, Oxford Circus at 64.2 million and

Knightsbridge at 18.8 million.

Nearby retailers include Boots the Chemist, GAP Clothing, Uniqlo, Sting Clothing Store, Austin Reed (in the

former Aquascutum unit) and incoming Superdry.

In our view the northern side of Regent Street in this location has a significant pedestrian flow from the tube

entrance passing the subject property. The pavement is narrower in the subject location than on the southern

side of the street but the retail offer is superior owing to the nature of the units on the southern side of Regent

Street where shop depth is restricted.

The property forms part of a major redevelopment carried out by the Alrov Group providing a new luxury hotel

facility with a major office development at the rear on a site bounded by Regent Street, Sherwood Street,

Glasshouse Street and Brewer Street.

The Crown Estate are carrying out a major programme of improvement in Regent Street where the international

retail offer has improved significantly over the last two years.

DescriptionThe subject property located in the Quadrant, opened in 1865 and became an institution of London high society.

The present building, by Sir Reginald Blomfield, dates from 1928 and is Grade II listed. The Café Royal closed in

December 2008, as part of Crown Estate plans to redevelop this part of Regent Street.

The Alrov Group has appointed David Chipperfield Architects to design their new luxury 5 star hotel on the site of

the Café Royal on London's Regent Street. The new 25,000 m², 160 room hotel will occupy the entire southern

Quadrant block of Regent Street, overlooking Piccadilly Circus. The location has been referred to as "the most

important architectural statement in Regent Street, which is itself one of the great architectural set pieces of

London."

The project will carefully renovate the listed interiors of the Café Royal including the marble Entrance Hall, the

Grill Room and Domino Room. In addition, the project reinstates an interpretation of the original Tea Room as a

new double height foyer on Air Street, which until recently had been obscured. Five other historic rooms will be

converted to large VIP Suites, including one beneath the copper dome at the apex of Piccadilly Circus and

Glasshouse Street, with views of Big Ben and St James's Park.

Photographs are attached within the Appendices.

AccommodationWe have valued the property on the basis of the net internal floor area figures, on which we have been instructed

to rely, set out below, which are detailed within a the letting agents due diligence report dated May 2009 which

has been compiled from the scaled architects plans. You have expressly instructed us to rely on these floor areas

as being accurate. We assume these are complete and correct, and are the net internal floor areas measured in

accordance with the RICS Code of Measuring Practice, published in August 2007 (6th Edition) as updated.

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56-60 REGENT STREET (UNIT 1)

FLOOR DESCRIPTION FLOOR AREA

m² ft²

Ground Floor Zone A 194.29 2,091.40

Zone B 130.08 1,400.24

Zone C 171.58 1,846.91

Zone D 27.86 299.86

Ground Floor Total ITZA 291.41 3,136.82

For the purposes of our valuation we have adjusted ITZA with 10% discount to reflect the irregular

configuration.

Adjusted ITZA 262.27 2,823.14

Basement Storage 279.29 3,006.38

Basement Total ITZA 13.96 150.319

TOTAL ITZA 276.23 2,973.46

The unit has a frontage to Regent Street of 22.60 m (75.00 ft), however, this narrows significantly after a depth of

10.36 m (34.00 ft) to a minimum internal width of 7.92 m (26.00 ft), widening at the rear to provide the retail unit

with 22.60 m (75.00 ft) of frontage to Glasshouse Street.

In analysing the ground floor accommodation, the landlord has made adjustments in respect of the masked areas

at the rear of the shop (Zone C), as they cannot be seen from Regent Street. Allowance has also been made in

respect that the majority of the retail space is located at the front of the shop (which has the highest rental value),

therefore leading to a disproportionate area of Zone A.

The unit also has the benefit of a frontage of 22.60 m (75 ft) to Glasshouse Street which is due to be

pedestrianised. This significant upgrade will provide retail and restaurant accommodation which will provide an

extremely attractive environment. The Zoning methodology as calculated by the Landlord does not make an

addition for this advantage.

The basement is divided into two parts – a main area and an ancillary area. The current architects plans, show

two areas marked as openings for proposed staircases for access to the basement. In our opinion, it may be

possible to retain a staircase at the very rear of the shop to access the main basement area using the smaller

area as ancillary space accessed via the corridor in the basement without the necessity of a staircase in the

middle of the ground floor accommodation.

62 REGENT STREET (UNIT 1A)


m² ft²

Ground Floor Zone A 53.34 574.21

Zone B 1.96 21.07

Ground Floor Total ITZA 54.32 584.75

5



m² ft²

Basement Storage 41.81 450


TOTAL ITZA 56.41 607.25

50-52 REGENT STREET (UNIT 2)


m² ft²

Ground Floor Zone A 126.38 1,360.42

Zone B 110.47 1,189.14

Zone C 9.23 99.39

Ground Floor Total ITZA 180.44 1,942.34

For the purposes of our valuation we have adjusted ITZA with 15% discount for the frontage.

Adjusted ITZA 153.38 1,650.99

Mezzanine Floor Storage 132.53 1,426.59

Mezzanine Total ITZA 8.84 95.106

Basement Storage 70.15 755.09


TOTAL ITZA 165.72 1,783.85

The site is generally level and is roughly triangular in shape. Access and egress from the site is via both Regent

Street and Glasshouse Street.

General Condition & ContaminationWe have not carried out a detailed building inspection, or a condition or structural survey.

At the time of our inspection, the subject property comprised a vacant construction site, currently being re-

developed as retail units. We have assumed that the construction and refurbishment works will be completed to

a high standard, and any resultant snagging will be completed by the developers at their cost, prior to the

properties being handed over.

Our valuation has been undertaken on the basis that the properties will be built in a good and workman like

manner and, on completion, will be left in good structural repair and condition and will contain no deleterious

materials and that the services function satisfactorily.

Due to the lack of time we have not made any investigations regarding past uses of the property or the threat of

contamination from neighbouring properties. However, the property has been used as retail space for many

years, as have the neighbouring properties, and we note that there are residential uses nearby. We therefore

consider it most unlikely that the property is affected by ground contamination and have valued the premises

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accordingly. We have not been provided with any environmental information or asbestos survey, nor tested for

the presence of any other deleterious materials. We have valued the premises assuming that they are free from

risk in this regard, and that the redevelopment costs would not be unduly affected by the presence of any such

materials. However, these assumptions should not be taken as any form of warranty regarding environmental

factors and deleterious materials. If further investigations reveal the presence of such matters, especially if these

affect the speed and cost of demolition, then the values reported may need to be adjusted.

We have viewed the location on the website of the Environment Agency and note that the property is not in an

area subject to a high risk of flooding.

TenureWe understand that the property is held on a long leasehold for a term of 125 years at a peppercorn rent. We

have assumed that there are no encumbrances easements, restrictions, outgoings or conditions that are likely to

have an adverse effect on the value of the property and we have assumed that there is a good marketable title.

We would recommend that the tenure is verified by your legal advisors and we would, of course, be prepared to

comment further on receipt of a Report on Title. Clearly, you will appreciate that if our assumptions on title are

not confirmed then our valuation may be adversely affected.

TenancyThere are no leases in place and therefore the property does not presently generate an income and will be

handed over with full vacant possession on practical completion unless a pre-let occurs in the interim.

However, although we have not been provided with any legal documentation but are advised by the landlord that

two of the three units (Units 1 & 2) are currently under offer to internationally recognised tenants. Although the

details of the deals are currently confidential, we understand the most salient information is as below:

• Unit 1 – 11 year lease at a rent of £875,000 per annum with a 45 week rent free period.

• Unit 2 – 11 year lease at a rent of £525,000 per annum with a 45 week rent free period.

Although at this juncture we have not been provided with a copy of the occupational leases, following our

discussions with yourselves we understand that they are likely to be drawn on the following basis:

Term: A new effectively full repairing and insuring lease for a term of 11 years. The lease

will be within the security provisions of the Landlord and Tenant Act.

Rent Review

Provisions:

The leases will incorporate upward only rent reviews at the 5th and 10th

anniversaries of the term. The rent will be reviewed to open market rent. The open

market rent should become payable in respect of premises after the expiry of a rent

free period of such length or such concession or inducement as will be negotiated in

the open market in relation to the period for fitting out the premises between a

willing lessor and a willing lessee on a letting of the premises as a whole in the open

market assuming the premises are vacant and fit and available for immediate

occupation and use for business of the willing lessee and the hypothetical term of

10 years. The pre-emption provisions will not be disregarded at review.

Rent Free Period: The lessee will be granted a rent free period of 45 weeks from the access date and

the tenant will not be responsible for business rates or service charge until the date

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of access and handover and in principle is achieved prior to signing the contract.

Specification: The specification of the premises will be handed over in a shell condition in

accordance with the specification provided and agreed between the landlord’s

project managers and the incoming tenants project managers.

Lessees Works: The lessee will fit out the unit as a flagship retail store having received landlord’s

approval to the proposed shop fitting works for which consent would have been

granted at the date of access and commencement of the rent free period.

Alternative Stores: The landlords have suggested that there should be an undertaking agreed by any

tenants in respect of opening alternative stores in Oxford Street, Bond Street and

Regent Street.

Repairing

Obligations:

The property forms part of a major development of a hotel and retail space and we

would not expect the service charge to extend beyond the usual requirements for

retail premises in a Central London location.

Insurance Provisions: The lessee is responsible for paying a fair and reasonable proportion of all

premiums and other expenses incurred and insuring the buildings.

User: Any high class use compatible with a five star hotel within Class A1 of the Town and

Country Use Classes Order 1987 subject to the lessor’s principles for good estate

management.

Keep Open: The lessee will be required to keep premises open for minimum trading hours

throughout the term of the lease other than for reasonable refurbishment or re-fitting

of the premises and periodic stock.

Alienation: The tenant shall be permitted to assign and/or underlet the whole of the demised

premises subject to landlord’s consent not to be unreasonably withheld after the first

two years of the term. On assignment the lessee will be required to enter into an

Authorised Guarantee Agreement. Underletting of the whole or part and market rent

without final premium will be permitted with any underletting of part being outside

the security provision of the Landlord and Tenant Act 1954.Assignments or

sublettings will not be permitted during the first two years of the term.

Pre-emption: Upon application in writing to an assignment the lessor will have two weeks to

respond stating they wish to exercise a right of pre-emption matching those terms

offered by the proposed assignee.

Alterations: We note that structural alterations will not be allowed but that internal alterations are

allowed with landlord’s consent not to be unreasonably withheld.

Total Rent ReservedCurrently Nil.

8


Central London Occupational Market Commentary

Overview

SUMMARY AND OUTLOOK

• In UK retail, the overall picture remains one of London versus the rest of the country, with the capital

continuing to outperform in terms of sales, footfall and general property market activity.

• The August riots led to a short term dip in activity and footfall, although this was primarily in the capital’s

suburbs, with Central London largely unaffected.

• Availability rates in the capital are the lowest in the UK, with fierce competition for space among

occupiers in the major locations.

• A select number of key locations continue to experience upward pressure on rents, with record rents

being achieved in some streets. The downward pressure on prime yields is easing, although investor

demand for good quality stock remains strong.

• Growth in values is therefore expected to slow, but London’s appeal to occupiers and investors will

undoubtedly continue in the run-up to next year’s Olympics.

London’s retail sector remains remarkably resilient in the face of various major challenges. In addition to the

increasingly strong economic headwinds emanating from the ongoing sovereign debt crisis, London’s retailers

also faced the challenge of large-scale public disorder in August, with major riots taking place over several days

in a number of locations.

However, whilst spending and footfall declined in the immediate aftermath, the evidence suggest that both have

since rebounded strongly and Central London in particular continues to experience an excess of retailer demand

over supply.

Indeed, the availability of space in the major thoroughfares remains at very low levels, with Jones Lang LaSalle’s

latest survey of sixteen key retail streets suggesting an average availability level of just 3.9% in terms of unit

numbers. Indeed, Oxford Street, Bond Street and the ever-improving Regent Street all had availability close to

zero as at early July. In contrast, some of the weakest UK towns have retail availability rates in excess of 20%.

International retailers continue to make in-roads in to the Central London retail market, with US operators

featuring prominently of late. Key targets include the traditional high-end location such as Bond Street and

surrounding streets, whilst a number of upmarket brands are considering alternative locations such as Covent

Garden to launch new formats aimed at a younger clientele. Flagship stores also remain in demand from retailers

looking to make an impact in the capital.

Prime rents remain under upward pressure, with Bond Street now surpassing the £950 ZA mark and Oxford

Street at over £700 ZA.

A number of other key location such as Covent Garden have also reached record highs in recent months. IPD

data meanwhile also reflects the continuing growth in Central London retail rents, with the rate of annual growth

actually accelerating in August to 6.6%, against -3.3% for the rest of the UK.

9


In terms of new development, the most significant recent news has been the opening of Westfield Stratford in

September, which is now Europe’s largest urban shopping centre at 1.9m ft². the scheme is almost fully leased

and initial trading reports have been positive.

Regent Street Occupational Market Review

Central London’s eight key retail sub-markets differ in size and retail offer. Oxford Street is by far the largest with

retail floorspace approaching four and a half million square feet. Knightsbridge and Regent Street, although

sizeable centres, are much smaller; Regent Street, with 1.3 million ft² has around 30% of the floorspace of Oxford

Street. Covent Garden and Bond Street have very different retail offers but are broadly similar in size, with around

820,000 and 850,000 ft² respectively, whilst Kensington High Street and Kings Road are rather smaller. Retailing

in the City of London has a more diffuse pattern but the main concentrations total around 1.6 million ft².

Regent Street's PMA Retail Score has increased significantly in recent years and is now closer to that of Bond

Street and Oxford Street. In total, the retail score of the eight traditional Central London markets is equal to 3.5

Westfield London centres or just over four Glasgow city centres.

Regent Street ranks 32 on the PMA Retail Provision Indicator and 23 on the PMA Fashion Score; the area ranks

135 on the PMA Anchor Stores Indicator.

The Crown Estate has historically been the sole owner of Regent Street. However, in April 2011 The Crown

Estate completed on the sale of a 25% stake on a 150 year lease to Norges Bank Investment Management

(NBIM), entering into a partnership now referred to as The Regent Street Partnership.

Active management by The Crown Estate has significantly improved Regent Street’s retail offer providing well-

configured, modern retail units behind the traditional facades. Tenant mix has been hugely improved with non-

retail uses (such as airline offices) and mass-market traders being replaced by quality retailers.

Regent Street now has no department store with a frontage onto the street. In 2005 Liberty sold its Regent Street

property and in early 2006 left the building to trade only from the refurbished and stylish main Tudor building that

fronts Great Marlborough Street, immediately east of Regent Street. The other department store on Regent

Street, House of Fraser's Dickins & Jones, closed in January 2006 and has since been redeveloped to create

large units, let to international retailers including Banana Republic.

In addition to Liberty and prestigious flagship/destination stores like Burberry, Austin Reed, Aquascutum and

Apple, Regent Street has a range of established multiple fashion and footwear stores, focused at the middle and

upper end of the quality spectrum. Whilst many are UK based, including Coast, Church’s Shoes and Jaeger, an

increasing number are overseas operators, in particularly fashion retailers from the US and Europe like Zara,

Timberland, Cos, Hoss Intropia and Brooks Brothers; retailers from the UK are under-represented when

compared to the Central London average. There are also some speciality retailers such as Lush, L’Occitaine and

Crabtree & Evelyn and Zara Home.

PRIME PITCH

As in many of the Central London sub markets, prime pitch within this busy and constantly changing area can be

difficult to define precisely and rental levels are often affected by the attributes of individual buildings. However,

traditionally the northern part of the eastern side of the street has been regarded as prime pitch, leading south

from Oxford Circus, just past Hamleys. Retailers here include Jaeger, Coast, Mamas & Papas, Desigual and

Gap; the latter three retailers occupy the reconfigured former Liberty building. Prime pitch also includes the

10


former Dickins & Jones, where redevelopment has brought H&M Hennes, All Saints, Banana Republic and

Armani Exchange to Regent Street's prime pitch.

OTHER RETAIL AREAS

South of the prime pitch on the east side of Regent Street, retailers represented include the most recent additions

Anthropologie and Guess as well as Brooks Brothers' flagship store, Timberland, Tommy Hilfiger, Zara, Mango,

Aquascutum and Uniqlo; Aquascutum was due to vacate its unit at the time of our 2011 audit, to be replaced by

Austin Reed which will relocate from the western stretch of Regent Street. While at the extreme southern end of

the street the pitch falls away a little, a scheme is underway to redevelop the Regent Palace Hotel and Cafe

Royal block; completion is set for spring/summer 2012.

On the western side of Regent Street the process of change continues apace; the quality of the retail offer has

improved very significantly over much of the length of the street and the fashion offer is now typified by retailers

like Ted Baker, Hobbs, Burberry and Hackett. Following high profile lettings in summer 2011, both Hollister and

Superdry are to take sizeable units on the western side of the street at end 2011/early 2012.

The completion of the redevelopment scheme on the north west side of the street at the end of 2004 marked a

significant step forward in Regent Street's fortunes, attracting Apple's flagship store. In 2006, further development

created large units for Gant and, most strikingly, for Habitat, which involved the conversion of a former cinema.

Habitat, however, surrendered its lease in 2011 with the store set to be combined with a neighbouring unit to form

a flagship for Burberry; Burberry is to relocate to allow for The Crown Estate's W4 development in a block further

north.

FUTURE CHANGE IN SUPPLY

On the east side of Regent Street, at the southern end, two sites have been earmarked for redevelopment. The

scheme to redevelop Regent Palace Hotel and the Café Royal Block at 50-72 Regent Street is under construction

and due to complete prior to the 2012 Olympics. At the adjacent block, which includes 74-90 Regent Street and

the Quadrant Arcade, full planning permission was granted in 2008 for a large scale redevelopment behind the

facades, retaining the Arcade, and for offices above. However, a smaller scheme focusing on the redevelopment

of 74-78 Regent Street, creating two large units from three, was later pursued in 2011 and is now under

construction. The intentions of The Crown Estate towards the proposed redevelopment of Quadrant Arcade were

unclear at the time of our latest 2011 audit.

On the west side, two blocks, known as W4 and W5 are to be redeveloped, offering 150,000 ft² of retail and office

accommodation. A listed building consent application has been submitted by The Crown Estate.

An important initiative - The New West End Company - was set up in late 2000 and is now well established. It is

backed by key landlords and some retailers with a mandate to manage, strengthen and promote the key West

End retail streets – Oxford Street, Regent Street and Bond Street. The backers provided initial funding and in

April 2005 the area became a Business Improvement District which made further funding available for three

years, raised by a levy on business rates and by some contributions from the property sector as well as a

matching contribution from the Mayor of London. The New West End Company has already had considerable

success in raising the profile of the West End which has seen retail sales performance ahead of the UK and in

addition has taken steps to improve the physical environment of the West End’s shopping streets.

After an initial three years, in December 2007 BID was renewed for a further five years. BID status means

enhanced and secure funding (£34m budget until 2013 )which is being spent on a multi-faceted approach to

marketing the West End, on operations which include amongst other things, street management, red caps

11


(wardens), cleaning, CCTV, a retail crime unit, environmental enforcement, and on providing a strong voice

representing the interests of the West End Business community.

This initiative, various forms of which have long been suggested for the West End, marks a significant step

forward in the management and promotion of Oxford Street as one entity, enabling it to compete even more

effectively with both out of town shopping centres and revitalised regional centres.

VACANCIES, IN-MOVERS AND CLOSURES

The average vacancy level across the eight central London sub-markets was a relatively low 3.6% at the time of

our August 2011 audit. This represented a notable decrease on the 4.5% of units recorded in April 2010 and was

well below the PROMIS and PMA Major Cities averages. Vacancy rates varied across the sub markets, the

highest being in Kensington High Street and the lowest in Regent Street.

At the time of our August 2011 survey, the vacancy rate in the Regent Street area stood at 0.0% of units, well

below the Retail PROMIS average and a slight fall on the level recorded in April 2010. There were no vacant units

along Regent Street at the time of our August 2011 audit, compared to one at the time of our previous 2010 audit.

Take-up stood at 11.5% of units, slightly higher than in the period between our 2009 and 2010 audits, and there

were also a number of reported changes amongst occupiers yet to take place. As is typical for a retail pitch of

reputable quality, almost all of the activity along Regent Street involved high profile retailers.

At the Oxford Circus end of our audited Regent Street area, on the eastern side of the street, on what is

considered the prime stretch of Regent Street, Omega had taken the former Tous unit. Heading south, activity

was limited to the western side of the street, with Michael Kors taking the former Dollond & Aitchison units at the

street's junction with Maddox Street, whilst further south still, Jack Wolfskin replaced Viyella and 7 for All Mankind

replaced GIVe.

Continuing south, neighbouring Habitat and LK Bennett stores had been vacated in preparation for the relocation

of Burberry; the current Burberry unit is to be redeveloped as part of The Crown Estate's W4 development.

At the southern end of the street, past Vigo Street, Charles Tyrwitt had replaced Chemistry. It is within this lower

section of Regent Street that significant forthcoming change has been reported. We understand that Supergroup

(t/a Superdry) has secured Austin Reed's store on the west of the street, which will in turn relocate to the adjacent

Aquascutum store on the east of the street. Meanwhile, Hollister has secured the large National Geographic

store.

Close to Regent Street's junction with Piccadilly Circus, Hawes & Curtis had taken the former Cafe Coton. At the

Quadrant Arcade block, additional units including McDonalds and Starbucks had been boarded up as the site

was undergoing redevelopment; a pre-let of a unit in the redevelopment has been agreed with Sebago, an

American shoe retailer. Meanwhile, the neighbouring Uniqlo unit was being refurbished and extended to include a

further level of retail, previously occupied by offices.

RETAILER DEMAND

The latest Spring 2011 PMA survey of retailer demand in Central London showed a continued improvement

across Central London since the 2009 post-recession lull in demand. Retailer demand as a whole improved from

'above average' in 2010 to 'strong' in 2011, with the majority of respondents suggesting 'stronger', or at least

stable, demand over the year. Robust retailer demand for Central London contrasts sharply with a significantly

more subdued picture at the national level.

12


Regent Street is currently one of the most sought-after Central London locations, with retailer demand described

as ‘strong’, verging on 'very strong'.

Demand has been particularly high from overseas retailers and a selective lettings policy on the part of the major

landlord (The Crown Estate) has delivered a successful focus on upper middle market fashion. Recent high

profile lettings to SuperGroup, Hollister, Anthropologie and The Sting are good examples, with the latter two

retailers making their UK debuts in flagship stores on Regent Street. This approach means that Regent Street is

now well-positioned, in terms of retail offer, between Oxford Street and Bond Street.

COMPETITION

Regent Street faces competition at many levels. This competition includes not only the other parts of Central

London covered in PMA’s Central London PROMIS reports, but also major shopping centres in the outer

London/South East area, UK regional centres and other international centres.

Oxford Street, with its four department stores, large branches of Marks & Spencer and flagship stores of major

UK and international fashion retailers as well as attractions like Nike Town, constitutes a formidable retail

destination. On Oxford Street West, in the block adjacent to Primark, a 123,000 sq ft scheme (Park House) has

full planning permission; the site's long leasehold was sold by Land Securities to Barwa Real Estate in early 2010,

although Land Securities is to act as development manager before handing over the building upon completion,

set for end 2012.

Bond Street has a strong mix of internationally renowned fashion and jewellery luxury brands along with - still - a

fine arts presence. Luxury goods retailing has, in recent years, gone from strength to strength on Bond Street,

with high profile brands found in stylish premises, particularly in the middle and southern parts of the street.

The Knightsbridge area includes the middle market (and some upmarket) fashion multiples of Brompton Road,

along with the luxury brands of Sloane Street and the key destinations of Harrods and Harvey Nichols department

stores. Harrods is a particular magnet for tourists.

Over recent years there has been large amount of development activity in the Knightsbridge area, on both sides

of Brompton Road. Whilst development schemes on and near prime pitch on the south side of Brompton Road let

relatively successfully, new units on the north side proved slower to let, although the recent addition of Top Shop

is an important boost for this pitch.

Covent Garden is one of the most distinctive of Central London’s major retail destinations. It has a unique

combination of youth-oriented cutting edge fashion, speciality shopping, restaurants and bars as well as,

increasingly, mainstream multiple retailers. These are located in a mainly traffic free environment focused on the

historic Covent Garden Market. Most recently, new development on Long Acre has further strengthened the area

with the addition of several fashion retailers including Banana Republic, Cos, Hoss Intropia and Jack Wills.

Estimated Rental ValueOver the period of record, prime rents along Regent Street have broadly remained in-line with the Central London

average, increasing at a constant rate and not falling as a result of the 2008/2009 recession. Rents on Regent

Street are based on 30ft Zones.

At mid-2011, agent sources estimated prime rents in Regent Street at £525 /ft² Zone A. This represents a

significant increase on the end 2010 level of prime rents in the area.

13


At the time of our August 2011 audit, agents estimated prime rents in Regent Street to be in the order of £525-

£550 /ft² Zone A. Agents advised us that despite little true open market evidence to support this, a lease re-gear

to Coast in October 2010, which effectively acted as an extension to the lease until June 2014, was settled at

£555 /ft² Zone A. The only recent in-mover to prime was Omega, which reportedly took an assignment of Tous'

lease; we understand that the passing rent is in the order of £400 /ft² Zone A, with a £1 million premium being

paid.

Also in October 2010 on prime, a rent review for Mamas & Papas was settled at £500 /ft² Zone A; Mamas &

Papas previously paid around £430 /ft² Zone A based on a 2005 letting. More recently in January 2011, a rent

review for the significantly larger Hamleys was settled at £415 /ft² Zone A.

Previously on prime, in 2010, the lease on a unit let to Nokia was assigned to All Saints at a passing rent of £1

million, reflecting £400-£425 /ft² Zone A. Meanwhile, deals concluded in Autumn 2006, in the conversion of the

former Dickins & Jones store, were reported by the landlord's agents to reflect between £400 and £425 /ft² Zone

A; a letting to Banana Republic concluded at the end of January 2007 reflected around £440 /ft² Zone A on a

29,000 ft² unit.

A little further south on prime, in the former Liberty Regent Street building, we understand that deals with Cos and

Desigual, concluded in 2006, reflected about £380 /ft² Zone A.

In the block, north of Bleak Street, lettings in 2009 to Guess and Anthropologie reflected Zone A rents of £400 /ft²

Zone A. South of this block a June 2011 rent review for Tommy Hilfiger was settled at £400 Zone A. South of

Regent Place, lettings of smaller units to Iittala, since vacated, Russell & Bromley and Folli Follie in 2007

reflected rents of £355-£380 /ft² Zone A.

On the western side of the street, top rents are found opposite prime at the northern end of the street. The

scheme at 229-247 undoubtedly increased the tone of rents in this location, which traditionally was very much the

poor relation to the east side.

Letting agents for the scheme reported headline rents in 2004 at £325 /ft² Zone A, although incentives were

involved in these deals. Agent opinion suggests that the current tone on this block is around £400-£425 /ft² Zone

A following the settlement of a March 2010 rent review for Karen Millen at £410 /ft² Zone A and a June 2010 rent

review for Quiksilver being settled at £400 /ft² Zone A.

A little further south on Regent Street west, opposite Hamleys, 193-197 was let to Ferrari at a rent reflecting £350

/ft² Zone A, a considerable uplift on the previous rental tone which was around £275 /ft² Zone A. In the block to

the south of this at 179- 189 Regent Street, recent lettings to Jack Wolfskin and 7 for All Mankind have only been

on short term leases as this block is the focus of The Crown Estates proposed W5 redevelopment. However,

agents placed Zone A rents here at around £375 /ft² Zone A. Further South, the most recent deals date from mid

2006 and reflect £250-£280 /ft² Zone A, including Duchamp taking a letting on a unit in December 2006 at £250

/ft² Zone A; agents purported rents had remaind at this level.

Following several recent high profile lettings to the south of Vigo Street, agents purported at the time of our latest

2011 audit that rents have reached £340 /ft² Zone A based on a pre-let to Sebago in September 2011 and a lease

re-gear to Uniqlo in June 2011. Previously, a July 2010 letting to Charles Tyrwhitt achieved £290 /ft² Zone A and

a 2009 rent review for Clarks was settled at £250 /ft² Zone A. Earlier still, a letting to National Geographic in

Autumn 2008 achieved £230 /ft² Zone A; this unit has subsequently been acquired by Hollister. At the junction

with Piccadilly, The Sting took the former Zavvi unit at a rent of £1.95 million per annum in 2009.

14


A recent spate of high profile tenant changes at this southern end of Regent Street have seen large premium

being paid. Both Hollister and Superdry have taken assignments with premiums of £10 million being reported,

whilst Austin Reed is to relocate into Aquascutum's store and reportedly paid a £5 million premium to secure the

unit.

SUMMARY

We are advised that there is considerable interest for the subject units, and that the landlord is currently in

advanced negotiations with potential tenants on two of the units (Unit 1 & Unit 2). You have informed us that

terms have been agreed in principal at rents equating to a Zone A rate of £3,122 /m² (£290 /ft²) £3,229 /m² (£300

/ft²). We are of the opinion that this is supportable/achievable in the current market and have therefore, adopted

this level for the purposes of our valuation. However, this is subject to the necessary rent free period for fit out of

45 weeks (11 months).

We have detailed below, are Zone A market rent apportionments:

BUILDING / FLOOR DESCRIPTIONRENTAL VALUE

/FT² TOTAL PA

Unit 1

Ground Zone A £295.82 £618,560

Zone B £147.91 £207,074

Zone C £49.30 £91,060

First Zone D £36.98 £11,093

Adjusted ITZA -10% -£97,225

Basement Storage £14.79 £44,462

SUB TOTAL £875,024

Unit 1a

Ground Floor Zone A £275.00 £215,329

Zone B £187.50 £3,951

SUB TOTAL £219,000

Unit 2

Ground Floor Zone A £292.50 £397,800

Zone B £146.25 £173,981

Zone C £73.13 £7,239

Adjusted ITZA -15% -£92,666

Mezzanine Floor Storage £19.48 £27,799

Basement Storage £14.63 £11,042

SUB TOTAL £525,105

TOTAL MARKET RENT £1,619,423 p.a.

15


With regard to the above, we are of the opinion, that the total headline market rental value of the subject property

is £1,619,500 per annum.

The disparity between the market rent rate of the pre-let units (Units 1 and 2) and the remaining (Unit 1a) lies

predominantly in the date of transaction, however, also in the size of the unit. The two units which are now very

close to completing have been in negotiations for the past 16 months and although we do not necessarily have

the benefit of comparable evidence to that effect, the sentiment in this area of Regent Street has been enhanced

dramatically and the market moved on “a pace”.

Regent Street, and more particularly, the micro vicinity of the subject property, is now perceived as the new high

end quarter, demonstrated by the bidding situating and premium’s paid on units. At the time of the negotiations of

Unit 1 and 2, the focus was more on the ‘right’ tenant as opposed to the ‘highest paying’ tenants and as a result,

the deals, although not yet formalised, do now appear ‘soft’.

With this is mind and in addition to the smaller nature of the remaining unit, we are of the opinion that a

significantly higher market rent would be achieved, if the deals we renegotiated today.

Central London Investment Market Commentary

MARKET COMMENT

September ordinarily marks the onset of the second wave of investment activity and high hopes of increased

volumes of new investment opportunities. The West End Investment market has however so far disappointed. We

recorded only 14 new opportunities introduced to the market this month, which appears promising at first sight,

but only 2 of those were priced at over £20m, and 4 over £15m. A year ago the West End market witnessed 21

new sales in the same period.

Compared with the reported circa. £6 billion of investment opportunities available in the City, across over 75

deals, the West End looks very quiet. In the past illiquidity has been consistent with market uncertainty and this

seems to be the case at present. Although a true picture will only develop once opportunities increase.

In terms of deals done however, the story is quite the reverse. By our records September has witnessed the

greatest volume of investment deals since the start of 2011 with £743m of transactions in 16 deals, and the

second highest monthly volume of deals done in the past 18 months. This data of course includes the sale of the

freehold interest in W Hotel, Leicester Square which sold to a Qatari investor for circa. £200m and the sale of the

freehold interest in the Royal Mail Group site at Rathbone Place to GPE for £120m.

Interestingly by sector we only saw one office deal transact this month. This perhaps says something about the

nature of demand in the market and buyers’ attitude to the sector. In contrast, retail deals are dominating.

September for example saw the sale of six retail assets, three on Oxford Street alone, including the sales of the

freehold interest in 388-396 Oxford Street to the Weston Family for £86.50m, reflecting 3.52% net initial yield and

the sale of the leasehold interest in 355-361 Sedley Place to SWIP for £76m, reflecting 4.23% net initial yield.

OTHER TRENDS & ANALYSIS

In terms of disposals, Irish ownerships are clearly now beginning to unwind and investors, NAMA and

administrators have provided 17 sales so far this year; 5 in September alone. In the following months more can

be expected with several currently under offer.

16


Whilst demand still remains robust, the uncertainties for the wider economy have nonetheless begun to filter into

the market as we head into the final quarter of 2011. Other sectors, like equities in contrast have seen huge

volatility, whereas property in London to date has at least held firm. The key question will be, ‘Is property

perceived a safe haven or will it be the next asset class to falter, and will that reach London?’ Will some investors

see value in now suppressed equity markets and switch off or out of property?

NOTABLE DEALS

Most saliently, Berwick House, 139-143 Oxford Street is currently on the market. The freehold property

comprises an attractive property originally constructed in 1886 and of two distinct elements: the ground and

basement provides three separate retail units totalling 2,941 ft² and an office / education element comprising

4,614 ft² arranged over first to fourth floors. Berwick House occupies a prominent corner location on the southern

side of Oxford Street and Berwick Street, midway between Oxford Circus and Tottenham Court Road, and

directly opposite the Plaza Shopping Centre. The property is fully let and produces a total rental income of

£544,500 per annum. The property is multi-let to three retail tenants and one office / educational user with a

weighted unexpired term of 8.6 years. 80% of the current income is secured against the retail element off rents of

£320 to £355 /ft². The property provides exceptional prospects for rental growth as a result of numerous planned

improvements to the street. The property is currently on the market for an excess of £13.00 million, reflecting a

net initial yield of 4.00%. The agents have advised us that the property is currently under offer at just below level,

demonstrating the strong sentiment for prime assets in today’s market.

Sector Area Tenure Price Yield Purchaser Date

No Street PC sq ft FH LH CV psf

117 - 129 Baker Street W1Retail

Residential6,099 FH £5.65 M 4.85% All Souls College Sep-11

53 King's Road SW3Retail

Residential1,945 FH Est. £3.25 M Est. 4.05% Martins Properties Sep-11

8-9

16

Long Acre

Gatwick StreetWC2

Retail

Office18,407 FH £22.7 M 4.47% OMCI Trust Sep-11

8 - 12 Neal Street WC2 Retail 4,893 vFH £16.46 M 5.25% Henderson Sep-11

388 -396 Oxford Street W1Retail

Office38,768 FH £86.50 M 3.52% Weston Family Sep-11

187 - 195 Oxford Street W1Retail

Office33,475 FH Est. £53.50 M Est 4.1% Confidential Sep-11

355 - 361Oxford Street

Sedley PlaceW1

Retail

Restaurant

Office

Residential

45,769 LH £76.00 M 4.23% SWIP Sep-11

153 Oxford Street W1 Retail FH £7.5 M 4.00% Coolway Jun-11

192 - 194

& 26

Oxford Street

Market PlaceW1 Retail vFH £19.22 M 4.25% SWIP May-11

197 - 213

& 11

Oxford Street

Hills PlaceW1 Retail FH £160 M 4.51% Ponte Gadea May-11

159 Oxford Street W1 Retail FH £7.49 M 4.10% Private UK Investor Dec-10

301 - 307

& 17

Oxford Street

Hanover SquareW1 Retail FH £94.50 M 4.04% Best Seller Group Dec-10

215 - 219 Oxford Street W1 Retail FH £55.10 M 4.08% Ponte Gadea Nov-10

221 - 223

& 10

Oxford Street

Hills PlaceW1 Retail FH £37.00 M 4.70% Lucky Land Jul-10

321 Oxford Street W1 Retail FH £23.40 M 4.04% Banif May-10

17


The property is located in a prominent Regent Street location and comprises a trophy asset that would command

strong occupier and investor demand once let. The properties are currently vacant as the redevelopment works of

the upper parts are completed. The units are being marketed and terms have been agreed in principal on Units 1

and 2. The units have excellent lettability prospects. Overseas buyers remain the likely market for this asset and

we believe there is currently good interest if this were to be offered to the market but we believe that the location

strength of the asset would lead to a record level of rent being established to a strong financial covenant, in light

of this and the above comparables, we are of the opinion that the property would achieve an equivalent yield of

4.25%.

Private investor demand for Regent Street remains very strong for two principal reasons. Firstly investors are

attracted by the quality of the investment assets – shops, requiring little ongoing capital investment, let to global

brand names. Secondly, because of the international nature and strength of the pitch, capital values historically

have been less volatile than the rest of the commercial property market.

Bearing in mind the comfortable level of base rent in the subject property, the reversionary potential and

particularly the prospects for re-structuring the leases, we consider the yield profile we have adopted to be

appropriate.

Key AttributesWe would highlight the following key attributes in respect of the subject premises:

• The subject property comprises three prominent and well located retail units, currently vacant and being re-

developed. The units form part of a major re-development carried out by the Arlov Group providing a new

luxury hotel facility with a major office re-development at the rear of the site bounded by Regent Street,

Sherwood Street, Glasshouse Street and Brewer Street.

• The properties are in the course of development and as yet unlet, but are being marketed and active interest

has been expressed. We understand that terms have been agreed in principal for the larger units (Unit 1 & 2),

although we have not had sight of the heads of terms.

• The retail units occupy an extremely prominent position at the southern end of Regent Street strategically

positioned adjacent to Piccadilly Circus on the northern side of the street in premises formerly occupied Café

Royale in this renowned location.

• The main retail pitch in Regent Street is between Oxford Circus and Piccadilly Circus with the prime stretch

extending only a short distance south of Oxford Circus. At the extreme southern end of the street the pitch

does fall away however.

• Over the last few years Regent Street has been transformed in terms of retail offer. Department stores have

been replaced with the arrival of numerous high profile international brand names. Liberty now only trades

from Great Marlborough Street. Its former premises together with Dickens & Jones department store have

been converted and let to high profile retailers bringing further occupier to Regent Street’s prime pitch. South

of this top prime pitch, on the east side of Regent Street, there are various retailers represented in flagship

stores.

• Relative to other key central London thoroughfares Regent Street has the advantage of a single prominent

landowner, The Crown Estate Commissioners, who are able to exert an unprecedented degree of control over

its tenant mix strategy and other estate management related issues. The task of managing the estate is akin

to a modern shopping centre. The downside to this is that as a single owner, they are able to exert

unprecedented control over its tenant mix, which can sometimes bring about a restricted and outmoded

policy. For example, we refer to the Crown’s restriction against underletting to TK Maxx on the basis that it

does not accord with the Crown Estate’s retail strategy for Piccadilly Circus.

18


• However, what is certain is that within the last decade the Crown Estate has incurred substantial expenditure

carrying out numerous redevelopment, refurbishments and general infrastructure improvements. At the same

time they have adopted an enlightened tenant mix strategy, as a result of which all sections of Regent Street

have seen significant improvements. There have been a number of high profile new arrivals which has been

accompanied by a surge in rental growth.

• Regent Street has been transformed with Apple, taking their store in 2004, acting as a catalyst. In 2006

further developments created large units for Gerry Webber and Habitat. With Austin Reed’s large store

immediately to the south, Habitat, Zara Homes, the large Aquascutum, Mango and Zara stores on the

immediately opposite east side of the street, the subject property occupies an attractive prime location on

Regent Street. A recent letting to Urban Outfitters trading as Anthropologie at 158 Regent Street and Levi

Strauss (UK) Ltd. At 174/176 Regent Street just completing a reversionary lease are votes of confidence in

the street.

• In our opinion, Regent Street is shown as having amongst the highest concentrations of high end retailers

divided between the middle, upper and high quality sectors. The Street has been resilient to the problems in

the economy and in general terms there is a marked imbalance between the strong demand for prime Regent

Street stores and a virtually non-existent supply. This has resulted in several competitive bid situations

emerging and a rapid increase in rental values. For example, Barclays acquired the former Burger King store

at 48 Regent Street (immediately adjacent to the subject property) effective from April 2008 paying a rent at

just over £720 per sq ft Zone A.

• The arrival of high quality traders has improved retail in Regent Street considerably in recent times, and

although the majority of these are located towards the northern end of Regent Street in superior locations to

the subject property, the southern end is improving as supply remains restricted, evidenced by the arrival of

National Geographic, opposite the subject property on the western side of Regent Street.

• For this reason, we consider that the subject units comprise trophy assets that would command strong

occupier and investor demand (once let). The units have excellent re-letting prospects as operators continue

to seek flagship stores in this location;

The property is located in a prominent Regent Street location and comprises a trophy asset that would command

strong occupier and investor demand once let. The properties are currently vacant as the redevelopment works of

the upper parts are completed. The units are being marketed and terms have been agreed in principal on Units 1

and 2. The units have excellent lettability prospects. Overseas buyers remain the likely market for this asset and

we believe there is currently good interest if this were to be offered to the market but we believe that the location

strength of the asset would lead to a record level of rent being established to a strong financial covenant.

Principal RisksIn considering this property as security for the proposed loan, we would draw your attention to the following main

risks:

• Two of the units are currently under offer with details to be formalised and the remaining unit is currently

vacant.

• The investment market’s preference is for prime property with long unexpired terms to strong covenants,

therefore, it is essential that the subject property is let to strong institutional tenants for a 10 year plus

unexpired term in order to maximise value.

19


Valuation Approach

All Risk Yield Approach

We have valued the subject property on a conventional basis, splitting the units into its constituent parts and

valuing the reversionary elements separately. We have adopted a blended yield approach by adopting different

yields for the different units to reflect differences in their individual relettability prospects, their configuration,

location and overall rental growth prospects. We have also had regard to the overall “blended” yield of the

property as a whole.

We note the active interest in the vacant units and for the sake of good order we have been mindful of the

confidential offers received. We re-affirm at this juncture that we fully appreciate and will observe the requirement

for the confidentiality of these deals at this sensitive juncture.

We have assumed within our valuation that the prominent nature of the units means that they will let up quickly,

however we have assumed lease start dates in line with offers received. In terms of the actual handover however,

we would highlight that it is likely the retail tenants will give due consideration to timing of the opening of the hotel

and the reconfiguration and re-modelling of Glasshouse Street at the rear so that an assessment can be made of

when adjoining traders’ will be open.

The cost of the rent free periods has been deducted from our valuation as a capital deduction, in line with recent

transactions. This allows for a more attractive yield profile, which will be principal factor in driving value, and

represents an advantage to the financing of the building an amortisation profile. It is therefore, in our opinion, how

the property would be bought/sold should it be marketed.

As agreed with you, we have relied upon provided to us by yourself, which includes inter alia the following:

• Floor areas (Gross and Zone A rates calculated by Messers CBRE)

• Unit 1/3 – we understand is currently under offer to an undisclosed national retailer for a term of 11 years

at a rent of £875,000 per annum, with a rent free period of 11 months. This is in line with our market

rental projections.

• Unit 2 – we understand is also currently under offer to a separate national retailer for an 11 year term at

a rent of £525,000 per annum, with a rent free period of 11 months. This is in line with our market rental

projections.

• Unit 1a – we understand is currently vacant and being marketed.

• Assumed long leasehold interest, free from encumbrances.

• We have, as instructed, prepared our valuation on the basis that there are no further construction costs

outstanding and the units are in a shell and core condition awaiting incoming tenant fit-out.

Where applicable we have allowed for appropriate marketing voids, in order to get the units fully income

producing.

We have detailed knowledge of the occupational and investment market in the immediate vicinity. In the last two

months the retail sector has benefited from significant improvement for prime assets due to an increasingly

positive investor sentiment and lack of supply being brought to the market. In addition, there have been a few

noteworthy investments that have sold at surprisingly low yields in central London in recent off market deals.

20


With particular consideration to the macro and micro location of the units, we are of the opinion that the Market

Value is in the region of £34,500,000 (Thirty-four million and five hundred thousand pounds), reflecting an

equivalent yield of 4.25%.

We would comment that change between current valuation and the previous valuation provided by ourselves, is

due to a number of individual factors including the reduction in capital expenditure required, reduction in letting

uncertainty and more saliently an improvement in both the occupational and investor market for such trophy

assets, as detailed in the market commentary section contained within. Expanding further on the first two

comments, since our last valuation, significant required capital expenditure has been undertaken and the

properties are now in a shell and core condition awaiting tenant fit-out on completion of the remainder of the

property, whereas, our previous valuation took account of this capital expenditure. In addition, at the juncture of

our previous valuation, although the negotiations for the occupational tenants where advanced, there is more

certainty as at today that they will be completed in line with our assumptions and are currently in solicitor’s hands

awaiting formalisation, this obviously further eliminates an element of risk.

Market Value as at 4th November 2011£34,500,000 (Thirty-four million and five hundred thousand pounds)

Initial Yield: 0.00%

Yield on ERV (date): 4.30%

Equivalent Yield (Ann Arr): 4.25%

Confidentiality and Publication

Finally, and in accordance with our normal practice we confirm that the Report is confidential to the party to whom

it is addressed for the specific purpose to which it refers. No responsibility whatsoever is accepted to any third

party.

Yours faithfully

Lucinda Lee-Bapty F/MRICS

Associate Director

For and on behalf of


Mark Whittingham MRICS

Director

For and on behalf of


Appendices

COPYRIGHT © JONES LANG LASALLE IP, INC. All Rights Reserved

Appendix 1

General Terms and Conditions

General Principles

Definition of Market Value

General Terms and Conditions of Business

COPYRIGHT © JONES LANG LASALLE IP, INC. 2008. Page 1 of 4

General Terms and Conditions of Business Introduction When the Terms Apply

These Terms of Business (“the Terms”) apply where Jones Lang LaSalle provides a service to a client and there is no written agreement for the provision of that service or if there is, to the extent that these Terms do not conflict with the terms of that written agreement. In the case of conflict between these Terms and the terms of any written agreement, the terms of the written agreement shall prevail to the extent of the conflict. Reference in these Terms to the agreement means the written or informal agreement that incorporates these Terms (“the Agreement”). Jones Lang LaSalle Jones Lang LaSalle means Jones Lang LaSalle Limited of 22 Hanover Square, London W1S 1JA and/or any subsidiary or holding company of Jones Lang LaSalle Limited, that provides any of the service under the Agreement.

Service Level Standard Jones Lang LaSalle is to provide the service to the specification and performance level stated in writing in the Agreement or, if none is stated, to the specification and performance level that it ordinarily provides in accordance with Jones Lang LaSalle’s duty of care as set out below. Any variations must be agreed in writing. What is not included Jones Lang LaSalle has no responsibility for anything that is beyond the scope of the service so defined. In particular, it has no obligation to provide nor liability for: • an opinion on price unless specifically instructed to carry out a formal valuation • advice, or failure to advise, on the condition of a property unless specifically instructed to carry out a formal

survey • the security or management of property unless specifically instructed to arrange it • the safety of those visiting a property, unless that is specified in its instructions. Financial and Insurance Services Jones Lang LaSalle is not permitted to carry out any activity regulated by the Financial Services and Markets Act 2000 including the insurance of property, except through an authorised person and in accordance with a separate agreement Estate Agency Where instructed to carry out estate agency business Jones Lang LaSalle must: • report in writing all offers it receives • comply with its obligations under the Estate Agents Act 1979 and regulations made under that Act. Valuations Jones Lang LaSalle must comply with professional requirements for the rotation of valuers, and the implications of this are to be agreed in writing with those clients who require valuation services.

Liability and Duty of Care

Duty of care Jones Lang LaSalle owes to the client a duty to act with reasonable skill and care in providing the service and complying with the client’s instructions where those instructions do not conflict with (a) these Terms, (b) the Agreement or (c) applicable law and professional rules. Jones Lang LaSalle is not obliged to carry out any instructions of the client which conflict with the applicable law, regulations and professional rules. Liability to the Client Jones Lang LaSalle has no liability for the consequences, including delay in or failure to provide the services, of any failure by the client or any agent of the client: • promptly to provide information or other material that Jones Lang LaSalle reasonably requires, or where

that information or material provided is inaccurate or incomplete. The client warrants that, where it provides information or material to Jones Lang LaSalle, Jones Lang LaSalle is entitled to rely on its accuracy



• to follow Jones Lang LaSalle’s advice or recommendations. The liability of Jones Lang LaSalle in contract, tort (including negligence or breach of statutory duty), misrepresentation or otherwise howsoever caused arising out of or in connection with the provision of services or otherwise under the Agreement is not limited for fraud or where its negligence causes death or personal injury, but otherwise: • is excluded to the extent that the client or someone on the client’s behalf for whom Jones Lang LaSalle is

not responsible is responsible, • is excluded if caused by circumstances beyond Jones Lang LaSalle’s reasonable control; • excludes loss of profit, revenue and anticipated savings; • excludes indirect, special and consequential losses; • (where Jones Lang LaSalle is but one of the parties liable) is limited to the share of loss reasonably

attributable to Jones Lang LaSalle on the assumption that all other parties pay the share of loss attributable to them (whether or not they do); and

• in any event is limited to £5 million in aggregate under this Agreement. Liability to Third Parties Jones Lang LaSalle owes no duty of care and has no liability to anyone but its client, unless specifically agreed in writing by Jones Lang LaSalle. No third party is intended to have any rights under the Agreement unless agreed in writing. Liability for Others Jones Lang LaSalle has no liability for products or services that it reasonably needs to obtain from others in order to provide the service. Delegation Jones Lang LaSalle may delegate to a third party the provision of the service, or part of it, only where this is reasonable but remains liable for what the third party does unless the client agrees to rely only on the third party (and the client must not unreasonably withhold that agreement). If delegation is at the client’s specific request, Jones Lang LaSalle is not liable for what the third party does or does not do. The Client shall effect and maintain adequate property and public liability insurance and general third party liability insurance providing coverage for bodily injury and property damage which will either include Jones Lang LaSalle as a joint insured or a waiver of the insurer’s subrogation rights against Jones Lang LaSalle, its employees or delegates. Protection of Employees Apart from fraud or criminal conduct no employee of the Jones Lang LaSalle group of companies has any personal liability to the client and neither the client nor anyone representing the client may make a claim or bring proceedings against an employee or former employee personally. Complaints Before taking any other action against Jones Lang LaSalle the client agrees to use the Jones Lang LaSalle complaints procedure, which is available on request/which is attached hereto. Liability to Jones Lang LaSalle The client agrees to indemnify Jones Lang LaSalle against all third party (including any insurer of the client) claims (including without limitation all third party actions, claims, proceedings, loss, damages, costs and expenses) (“Claims”) • for which the client has agreed to insure under the Agreement; • that relate in any way to the provision of the service except a Claim that a court of competent jurisdiction

decides or Jones Lang LaSalle acknowledges (whether or not it admits liability) was caused by the fraud, wilful default, breach of contract or negligence of Jones Lang LaSalle or of a delegate for whom Jones Lang LaSalle is responsible under these Terms.

Delivering the Service

Timetable Jones Lang LaSalle is to use reasonable endeavours to comply with the client’s timetable but is not responsible for not doing so unless specifically agreed in writing. Even then, Jones Lang LaSalle is not liable for delay that is beyond its control.



Outside England and Wales Where Jones Lang LaSalle reasonably requires a service to be performed by a service provider outside England and Wales it may require the client to enter into a separate contract with that service provider that is subject to local law, separate invoicing arrangements and a standard of service no greater than that reasonably obtainable in that locality. E-mail and on-line Services Jones Lang LaSalle may use electronic communication and systems to provide services, making available to the client any software required that is not generally available. Conflict If Jones Lang LaSalle becomes aware of a conflict of interest it is to advise its client promptly and recommend an appropriate course of action. Publicity Neither Jones Lang LaSalle nor its client may publicise or issue any specific information to the media about the service or its subject matter without the consent of the other. Criminal Activity To comply with law and professional rules on suspected criminal activity Jones Lang LaSalle has to check the identity of clients and to report, without telling the client, any activity that it suspects may be linked to crime. Personal Data Jones Lang LaSalle processes and protects personal data about individuals in compliance with the law of England and Wales wherever in the world that data is accessed. In most cases individuals are entitled to see the personal data about them on request. Intellectual Property All intellectual property rights in material supplied by the client belong to the client and in material prepared by Jones Lang LaSalle belong to Jones Lang LaSalle, unless otherwise agreed in writing. Each has a non-exclusive right to use the material provided for the purposes for which it is supplied or prepared. No third party has any right to use it without the specific consent of the owner. Confidential Material Each party must keep confidential all confidential information and material of commercial value to the other party of which it becomes aware but it may: • use it to the extent reasonably required in providing the service • disclose it if the other party agrees • disclose it if required to do so by law, regulation or other competent authority This obligation continues after termination of the Agreement. The effect of Termination on Client Material On termination of the Agreement Jones Lang LaSalle may, to comply with legal, regulatory or professional requirements, keep one copy of all material it then has that was supplied by or on behalf of the client in relation to the service. The client may request the return or destruction of all other client material. Destruction of Papers Jones Lang LaSalle may after six years from the earlier of completion of the service or termination of the Agreement destroy any papers it retains.

Remuneration Not Specified Where the fees and expenses payable for the service are not specified in writing Jones Lang LaSalle is entitled to: • the fee specified by the RICS or other applicable professional body or, if none is specified, to a fair and

reasonable fee by reference to time spent • reimbursement of expenses properly incurred on the client’s behalf. Part Performance Where the service is not performed in full Jones Lang LaSalle is entitled to a reasonable fee proportionate to the service provided as estimated by Jones Lang LaSalle.



VAT The client must pay VAT at the rate then current on the issue of a valid VAT invoice. Interest on Overdue Amounts If an invoice is not paid in full within 28 days Jones Lang LaSalle may charge interest on the balance due at a daily rate of 2% above the base rate of National Westminster Bank.

Miscellaneous Transfer The client may transfer the benefit of the Agreement but must first get the consent of Jones Lang LaSalle, which will not be unreasonably withheld. Termination The client or Jones Lang LaSalle may terminate the Agreement immediately by notice to the other if the other: • has not satisfactorily rectified a substantial or persistent breach of the Agreement within the reasonable

period specified in an earlier notice to rectify it • is insolvent according the laws of its country of incorporation. Effect of Termination on Claims Termination of the Agreement does not affect any claims that arise before termination or the entitlement of Jones Lang LaSalle to its proper fees up to the date of termination or to be reimbursed its expenses. Waiver and Severance Failure to enforce any of these Terms is not a waiver of any right to subsequently enforce that or any other term of the Agreement. The invalidity, illegality and unenforceability in whole or in part of any of the provisions of this Agreement shall not affect the validity, legality or enforceability of its remaining provisions which shall remain in full force and effect. Notices A notice is valid if in writing addressed to the last known address of the addressee and is to be treated as served: • when delivered, if delivered by hand (if that is during normal business hours) otherwise when business

hours next commence • two business days after posting, if posted by recorded delivery • when actually received, if sent by ordinary mail or fax. Notice may not be given by electronic mail. Governing law The law of England and Wales applies to the Agreement and to the Terms. Jones Lang LaSalle and the client submit to the exclusive jurisdiction of the courts of England and Wales.

General Principles

COPYRIGHT © JONES LANG LASALLE IP, INC. 2011. All Rights Reserved Page 1 of 3

General Principles Adopted in the preparation of Valuations and Reports These General Principles should be read in conjunction with Jones Lang LaSalle’s General Terms and Conditions of Business except insofar as this may be in conflict with other contractual arrangements. 1 RICS Valuation Standards (7th Edition):

All work is carried out in accordance with the Practice Statements contained in the RICS Valuation Standards (7th Edition) published by the Royal Institution of Chartered Surveyors, by valuers who conform to the requirements thereof. Our valuations may be subject to monitoring by the RICS.

2 Valuation Basis: Our reports state the purpose of the valuation and, unless otherwise noted, the basis of valuation is as defined in the Valuation Standards (7th Edition). The full definition of the basis, which we have adopted, is either set out in our report or appended to these General Principles.

3 Disposal Costs Taxation and Other Liabilities: No allowances are made for any expenses of realisation, or for taxation, which might arise in the event of a disposal. All property is considered as if free and clear of all mortgages or other charges, which may be secured thereon. No allowance is made for the possible impact of potential legislation which is under consideration. Valuations are prepared and expressed exclusive of VAT payments, unless otherwise stated.

4 We do not normally read leases or documents of title. We assume, unless informed to the contrary, that each property has a good and marketable title, that all documentation is satisfactorily drawn and that there are no encumbrances, restrictions, easements or other outgoings of an onerous nature, which would have a material effect on the value of the interest under consideration, nor material litigation pending. Where we have been provided with documentation we recommend that reliance should not be placed on our interpretation without verification by your lawyers.

5 Tenants: Although we reflect our general understanding of a tenant’s status in our valuations, enquiries as to the financial standing of actual or prospective tenants are not normally made unless specifically requested. Where properties are valued with the benefit of lettings, it is therefore assumed, unless we are informed otherwise, that the tenants are capable of meeting their financial obligations under the lease and that there are no arrears of rent or undisclosed breaches of covenant.

6 Measurements: All measurement is carried out in accordance with the Code of Measuring Practice (6th Edition) issued by the Royal Institution of Chartered Surveyors, except where we specifically state that we have relied on another source. The areas adopted are purely for the purpose of assisting us in forming an opinion of capital value. They should not be relied upon for other purposes nor used by other parties without our written authorisation.

7 Estimated Rental Value: Our opinion of rental value is formed purely for the purposes of assisting in the formation of an opinion of capital value. It does not necessarily represent the amount that might be agreed by negotiation, or determined by an Expert, Arbitrator or Court, at rent review or lease renewal.

8 Town Planning and Other Statutory Regulations:

Information on town planning is, wherever possible, obtained either verbally from local planning authority officers or publicly available electronic or other sources. It is obtained purely to assist us in forming an opinion of capital value and should not be relied upon for other purposes. If reliance is required we recommend that verification be obtained from lawyers that:-

i the position is correctly stated in our report;

ii the property is not adversely affected by any other decisions made, or conditions prescribed, by public authorities;

iii that there are no outstanding statutory notices.

General Principles


Our valuations are prepared on the basis that the premises (and any works thereto) comply with all relevant statutory and EC regulations, including fire regulations, access and use by disabled persons and control and remedial measures for asbestos in the workplace.

9 Structural Surveys: Unless expressly instructed, we do not carry out a structural survey, nor do we test the services and we therefore do not give any assurance that any property is free from defect. We seek to reflect in our valuations any readily apparent defects or items of disrepair, which we note during our inspection, or costs of repair which are brought to our attention. Unless stated otherwise in our reports we assume any tenants are fully responsible for the repair of their demise either directly or through a service charge.

10 Deleterious Materials: We do not normally carry out investigations on site to ascertain whether any building was constructed or altered using deleterious materials or techniques (including, by way of example high alumina cement concrete, woodwool as permanent shuttering, calcium chloride or asbestos). Unless we are otherwise informed, our valuations are on the basis that no such materials or techniques have been used.

11 Site Conditions: We do not normally carry out investigations on site in order to determine the suitability of ground conditions and services for the purposes for which they are, or are intended to be, put; nor do we undertake archaeological, ecological or environmental surveys. Unless we are otherwise informed, our valuations are on the basis that these aspects are satisfactory and that, where development is contemplated, no extraordinary expenses, delays or restrictions will be incurred during the construction period due to these matters.

12 Environmental Contamination: Unless expressly instructed, we do not carry out site surveys or environmental assessments, or investigate historical records, to establish whether any land or premises are, or have been, contaminated. Therefore, unless advised to the contrary, our valuations are carried out on the basis that properties are not affected by environmental contamination. However, should our site inspection and further reasonable enquiries during the preparation of the valuation lead us to believe that the land is likely to be contaminated we will discuss our concerns with you.

13 Insurance: Unless expressly advised to the contrary we assume that appropriate cover is and will continue to be available on commercially acceptable terms, for example in regard to the following:

Composite Panels Insurance cover, for buildings incorporating certain types of composite panel may only be available subject to limitation, for additional premium, or unavailable. Information as to the type of panel used is not normally available. Accordingly, our opinions of value make no allowance for the risk that insurance cover for any property may not be available, or may only be available on onerous terms.

Terrorism Our valuations have been made on the basis that the properties are insured against risks of loss or damage including damage caused by acts of Terrorism as defined by the 2000 Terrorism Act. We have assumed that the insurer, with whom cover has been placed, is reinsured by the Government backed insurer, Pool Reinsurance Company Limited.

Flood and Rising Water Table Our valuations have been made on the assumption that the properties are insured against damage by flood and rising water table. Unless stated to the contrary our opinions of value make no allowance for the risk that insurance cover for any property may not be available, or may only be available on onerous terms.

14 Outstanding Debts: In the case of property where construction works are in hand, or have recently been completed, we do not normally make allowance for any liability already incurred, but not yet discharged, in respect of completed works, or obligations in favour of contractors, subcontractors or any members of the professional or design team.

General Principles


15 Confidentiality and Third Party Liability: Our Valuations and Reports are confidential to the party to whom they are addressed and for the specific purpose to which they refer, and no responsibility whatsoever is accepted to any third parties. Neither the whole, nor any part, nor reference thereto, may be published in any document, statement or circular, nor in any communication with third parties, without our prior written approval of the form and context in which it will appear.

16

Statement of Valuation Approach: We are required to make a statement of our valuation approach. In the absence of any particular statements in our report the following provides a generic summary of our approach. The majority of institutional portfolios comprise income producing properties. We usually value such properties adopting the investment approach where we apply a capitalisation rate, as a multiplier, against the current and, if any, reversionary income streams. Following market practice we construct our valuations adopting hardcore methodology where the reversions are generated from regular short term uplifts of market rent. We would normally apply a term and reversion approach where the next event is one which fundamentally changes the nature of the income or characteristics of the investment. Where there is an actual exposure or a risk thereto of irrecoverable costs, including those of achieving a letting, an allowance is reflected in the valuation. Vacant buildings, in addition to the above methodology, may also be valued and analysed on a comparison method with other capital value transactions where applicable. Where land is held for development we adopt the comparison method when there is good evidence, and/or the residual method, particularly on more complex and bespoke proposals. There are situations in valuations for accounts where we include in our valuation properties which are owner-occupied. These are valued on the basis of existing use value, thereby assuming the premises are vacant and will be required for the continuance of the existing business. Such valuations ignore any higher value that might exist from an alternative use.

Market Value

Copyright © Royal Institution of Chartered Surveyors (RICS) May 2011. Page 1 of 2

Market ValueDefinition and Interpretive Commentary reproduced from the RICS ValuationStandards 7th Edition, VS 3.2Valuations based on Market Value (MV) shall adopt the definition, and the conceptual framework, settled by the InternationalValuation Standards Committee.

Definition‘The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in anarm's-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently and without compulsion.’

3.2 The term property is used because the focus of these Standards is the valuation of property. Because these Standardsencompass financial reporting, the term Asset may be substituted for general application of the definition. Each element ofthe definition has its own conceptual framework.

3.2.1 ‘The estimated amount ...’Refers to a price expressed in terms of money (normally in the local currency) payable for the property in an arm's-lengthmarket transaction. Market Value is measured as the most probable price reasonably obtainable in the market at the date ofvaluation in keeping with the Market Value definition. It is the best price reasonably obtainable by the seller and the mostadvantageous price reasonably obtainable by the buyer. This estimate specifically excludes an estimated price inflated ordeflated by special terms or circumstances such as atypical financing, sale and leaseback arrangements, specialconsiderations or concessions granted by anyone associated with the sale, or any element of Special Value.

3.2.2 ‘... a property should exchange ...’Refers to the fact that the value of a property is an estimated amount rather than a predetermined or actual sale price. It is theprice at which the market expects a transaction that meets all other elements of the Market Value definition should becompleted on the date of valuation.

3.2.3 ‘... on the date of valuation ...’Requires that the estimated Market Value is time-specific as of a given date. Because markets and market conditions maychange, the estimated value may be incorrect or inappropriate at another time. The valuation amount will reflect the actualmarket state and circumstances as of the effective valuation date, not as of either a past or future date. The definition alsoassumes simultaneous exchange and completion of the contract for sale without any variation in price that might otherwise bemade.

3.2.4 ‘... between a willing buyer ...’Refers to one who is motivated, but not compelled to buy. This buyer is neither over-eager nor determined to buy at anyprice. This buyer is also one who purchases in accordance with the realities of the current market and with current marketexpectations, rather than on an imaginary or hypothetical market which cannot be demonstrated or anticipated to exist. Theassumed buyer would not pay a higher price than the market requires. The present property owner is included among thosewho constitute ‘the market’. A valuer must not make unrealistic Assumptions about market conditions or assume a level ofMarket Value above that which is reasonably obtainable.

3.2.5 ‘... a willing seller ...’Is neither an over-eager nor a forced seller prepared to sell at any price, nor one prepared to hold out for a price notconsidered reasonable in the current market. The willing seller is motivated to sell the property at market terms for the bestprice attainable in the (open) market after proper marketing, whatever that price may be. The factual circumstances of theactual property owner are not a part of this consideration because the ‘willing seller’ is a hypothetical owner.

3.2.6 ‘... in an arm's-length transaction ...’Is one between parties who do not have a particular or special relationship (for example, parent and subsidiary companies orlandlord and tenant) which may make the price level uncharacteristic of the market or inflated because of an element ofSpecial Value (defined in IVS 2, paragraph. 3.8). The Market Value transaction is presumed to be between unrelated partieseach acting independently.

Market Value

Copyright © Royal Institution of Chartered Surveyors (RICS) May 2011. Page 2 of 2

3.2.7 ‘... after proper marketing ...’Means that the property would be exposed to the market in the most appropriate manner to effect its disposal at the bestprice reasonably obtainable in accordance with the Market Value definition. The length of exposure time may vary withmarket conditions, but must be sufficient to allow the property to be brought to the attention of an adequate number ofpotential purchasers. The exposure period occurs prior to the valuation date.

3.2.8 ‘... wherein the parties had each acted knowledgeably, prudently ...’Presumes that both the willing buyer and the willing seller are reasonably informed about the nature and characteristics of theproperty, its actual and potential uses and the state of the market as of the date of valuation. Each is further presumed to actfor self-interest with that knowledge and prudently to seek the best price for their respective positions in the transaction.Prudence is assessed by referring to the state of the market at the date of valuation, not with benefit of hindsight at somelater date. It is not necessarily imprudent for a seller to sell property in a market with falling prices at a price which is lowerthan previous market levels. In such cases, as is true for other purchase and sale situations in markets with changing prices,the prudent buyer or seller will act in accordance with the best market information available at the time.

3.2.9 ‘... and without compulsion.’Establishes that each party is motivated to undertake the transaction, but neither is forced or unduly coerced to complete it.

3.3 Market Value is understood as the value of a property estimated without regard to costs of sale or purchase, and withoutoffset for any associated taxes. ©IVSC 2007, IVS 1, paragraphs 3.2 and 3.3

Commentary1 The basis of Market Value is an internationally recognised definition. It represents the figure that would appear in a

hypothetical contract of sale at the valuation date. Valuers need to ensure that in all cases the basis is set out clearly in boththe instructions and the report.

2 Market Value ignores any existing mortgage, debenture or other charge over the property.

3 In the conceptual framework in IVS quoted above (para 3.2.1) it is clear that any element of special value that would be paidby an actual special purchaser at the date of valuation must be disregarded in an estimate of Market Value. Special valueincludes synergistic value, also known as marriage value.

4 IVS describes special value and synergistic value as follows:

Special Value can arise where an asset has attributes that make it more attractive to a particular buyer, or to a limitedcategory of buyers, than to the general body of buyers in a market. These attributes can include the physical, geographic,economic or legal characteristics of an asset. Market Value requires the disregard of any element of Special Value becauseat any given date, it is only assumed that there is a willing buyer, not a particular willing buyer.

Synergistic Value can be a type of Special Value that specifically arises from the combination of two or more assets to createa new asset that has a higher value than the sum of the individual assets.

When Special Value is reported, it should always be clearly distinguished from Market Value.©IVSC 2007, IVS 2, paragraphs 6.6 to 6.8

5 Notwithstanding this general exclusion of special value where the price offered by prospective buyers generally in the marketwould reflect an expectation of a change in the circumstances of the property in the future, this element of ‘hope value’ isreflected in Market Value. Examples of where the hope of additional value being created or obtained in the future may impacton the Market Value include:

the prospect of development where there is no current permission for that development; and the prospect of synergistic value arising from merger with another property or interests within the same property at a

future date.

6 When Market Value is applied to plant & equipment, the word ‘asset’ may be substituted for the word ‘property’. The valuermust also state, in conjunction with the definition, which of the following additional assumptions have been made:

the plant & equipment has been valued as a whole in its working place; or the plant & equipment has been valued for removal from the premises at the expense of the purchaser.

Further information on plant & equipment valuation, including typical further assumptions that may be appropriate in certaincircumstances, can be found in GN 5, Plant & equipment.

7 Where the property is personal property it may be necessary to interpret Market Value as it applies to different sectors of themarket. Further information on this type of valuation can be found in GN 4, Personal property.

Appendices


Appendix 2

Location Maps and Plans

This plan is published for the convenience of identification only and although believed to be correct is not guaranteed and it does not

form any part of any contract. © Crown Copyright. All rights reserved. Licence Number 100017659

Café Royal Retail Development,50-52, 56-60 & 62 Regent Street,

London, W1

Ordnance Survey © Crown Copyright 2011. All rights reserved. Licence number 100020449. Plotted Scale - 1:50000




London, W1


CRWard Bdy

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Appendices


Appendix 3

Photographs

Photographs


Exterior of Café Royal Site looking north east from Regent Street

Exterior of Café Royal Site looking north from Piccadilly Circus

Photographs


Exterior of Café Royal looking west from Piccadilly Circus

Exterior of Café Royal Site looking south east from junction of Air Street & Glasshouse Street

Appendices


Appendix 4

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Valuation Update Year End 2011

8005 ZürichHardturmstrasse 123-129Commercial property

Moritz MengesMatthias Arioli

Market Value31.12.2011

AppraiserProject managerProject number

ClientValuation date Valuation reportValuation purpose

40631.7

EPIC Group

- Year End 2011 Page 1 of 21Hardturmstrasse 123-129, 8005 Zürich Valuation no. 14460.14Created on 01.02.2012

Wüest & Partner 1 Summary

Volume (SIA 416)

CHF

* Yield: Annuity in % of market value

5.27

Volume (GVA)

NPV repair costs 1-10

%

Land Reg. Sheet no.Volume (SIA 116)

Plot utilisation ratio

Ann. 11

Vacant

Ann. 1-10

Potential

Floor Area (SIA 416)

Project manager

Post code, Town/City

Construction Year

Discount rate (nominal) %

Ownership form

Vacant

Canton

Quality profile coefficient

Current

Property accounts Annuity

Construction Year 2

Building insurance value

%

InspectionGround lessee

Potential

Costs

Street 1

NFA Ann. (%)

Rep. c. 1-10/m³ to GVA

Perc.

Street 2

Net present value

Rep. c. 1-10/GVA value %

Ownership Share %

Current

Rep. c. 1-10/m³ to SIA 116

Planning zone

Project name

%

Discount rate (real) %

Annuity

Total

Market value

%

Current

Total refurbishment

Rental IncomeCurrent

Values

Owner

% projected

Cadastral no.

Imprint

Construction type

Percentile

% MV

%

%

Property no.

p. m³

Site area Partial refurbishment

Annuity

%

Current

Yield (*)

% GVA

Potential

Property type

current %

p. m³

Market value (MV)

Client

Produced by

Proj. income ground lease

Reference value

Yield (Y)

Inflation p.a. %

Annuity

Potential

Property name

Appraiser

Book value

Rental Area

Contact

Valuation date

Projected

143.3

178,500

Repair costs

100.0

[email protected]

25,009 m²

Seefeldstrasse 113

CHF

345

7,493,129

2.4

Förrlibuckstrasse 70-72

0

Others 36

Repair costs

355

1.9

0.36

58.2

0.30 309,068

100.0

46

CHF

EPIC FIVE Property Investment AG

211,4010

0.6

310

Trade / Industry

100.0

Income losses

Upkeep costs

723,785

6,438,203

7

7.0

[email protected]

8002 Zürich

4.37

5,826,250

Gotthardstrasse 6

AU5871

119,7400

0.0

285

Upkeep costs

0.0

3.40.18

Hardturmstrasse 123-129

com.West

120

7,061,591

CHF

2002

0.0

0

100.0

104,1000.0

Total net income

Ground lease (costs)523,653

8.64

141,000,000

[email protected]

8005 Zürich

3,441

Repair costs

255,000

CHF

2.3

Arik Parizer

32

CHF p. m² NFA

0.0

176,377

7

129,200 m³

+41 44 289 90 00

20.9

Office

ZH

309,068

100.0

10.2

Total additional costs11,964,439

CHF

30061.0

5.27

CHF/m²

1.04

31.12.2011

8008 Zürich

0

896,626

0 7,432,708

9,938 m²

21.1Year End 2011

CHF/m²

17 0.224.2

100.0Running costs

21

Matthias Arioli

6,551,610

Commercial property

07.07.2011

83.0

Running costs

0

255,000

287

523,653

EPIC 9

6,168,610

123.0

Wüest & Partner

Projected rental income

Retail305

Sole ownership

1.6 300

4.40

141,000,000

CHF

9.7

0.61

Moritz Menges3.4

129,200 m³

7.0

Z6, Zentrumszone

Upkeep costs

2.885.9

119

5.44

7,507,734

EPIC Group

5.27

141,001,789

100.05,638

4,031,409

Special use

1.00

4.1

0.13Running costs

673,524

Residential

169,885,478

56

3912.4

0.0

CHF/m²

86,047,200

0.0

www.wuestundpartner.com

0.37


Wüest & Partner 2 Summary II

in nominal terms

in nominal terms

31.12.2021

31.12.2016

CHF

CHF p. Mt.

0.02011540.00.00.0

105263

06094

Parking space (bike/bicycle)Outdoor parkingIndoor parking

0000000

Total6 Room +5 Room4 Room3 Room2 Room1 Room

Total

%UnitsParking TypeVacantPercentileUnitsApartment Type

%

Parking Spaces - DetailsApartment Mix

%Vacant

CurrentCHF p. Mt.

8057.044.916.090105.074.63.0

MthsLatestWeighted Av.Earliest

IndexationContract Length

32435654

% m²Potenzial

%Current

Percentile Classification

38821817413496766496387290177519358290216165

Trade / IndustryRetailOffice

57439633725890%70%50%30%

19910%

p. m²CHF

Price Ranges City District

Residential%

Vacant

Current Weighted Av.Mths Mths %

Current

Locational quality

Properties with handicaps

Problem properties

Prime propertiesQuestion marks

III II I

VI V IV

IX VIII VII

poor good

Period1 2 3 4 5 6 7 111098

105.1104.8104.3103.8103.2102.8102.3101.9101.5100.9100.0Market value

110.1109.0104.6102.5102.0101.6101.7101.1100.499.8100.0Projected rental income

107.2106.1102.9101.2100.8100.9101.6101.1100.499.0100.0Total income

110.5109.4108.3107.2106.2105.1104.1103.0102.0101.0100.0Running costs

3.43.43.53.63.53.53.53.53.53.43.4 in % of projected rental income

233.2109.4108.3107.2106.2105.1104.1103.0102.0101.0100.0Upkeep costs


114.10.00.00.00.00.00.00.00.027.8100.0Repair costs

131.740.940.540.139.739.339.038.638.255.2100.0Total costs

102.6118.1114.3112.4112.0112.2113.1112.6111.8107.0100.0Total net income


5.585.545.345.265.265.275.295.285.265.275.31Gross yield %

4.375.054.914.854.864.894.954.954.934.754.48Net yield %

7.2

1.1

7.2

927,000

37.1

6.04

6.68

% Building insurance value

per m³ SIA 116

Exit

Exit

Repair costsTotal Period 1-10

Various Indicators

per m²

per m³ GVA

per m³ SIA 416

Internal Rate of Return

per Apartment

Development: Value, Revenue, Costs & YieldsMarket matrix and Quality profile

1.71.8

Market CoefficientProperty quality

1.7Locational quality

5.0

Condition Micro location

Standard Usability

Macro-location

Quality profile property

4.0

3.0

2.0

1.0

1=very good; ... 5=very poor

%


Wüest & Partner 3 Contents

1 Summary

2 Summary II

3 Contents

4 Description

5 Income summary

Tenant summary6

7 Rent roll

8 Projected account summary

9 Results

10 Quality profile (extended)

11 Context

12 Photographic Documentation


4 DescriptionWüest & Partner

(100.0%)MV

141,000,000CHF

(100.0%)

No

Sole ownership100.0

EPIC FIVE Property Investment AG2002EPIC 9

ZH8005 ZürichFörrlibuckstrasse 70-72Hardturmstrasse 123-129Commercial propertycom.West

4.40 %

31.12.2011

141,000,000CHFValuation date

Net discount rate

MVProperty no.Construction YearOwnerOwnership formOwnership Share %Ground lease (lessee)Canton

Post code, Town/CityStreet 2Street 1Property typeProperty name

Update as per 31-12-2011 - The property was last inspected by Wüest & Partner in July 2011.- According to provided tenancy schedule and adtional information received the current passing rent totals at CHF 7,493,129 p.a. as per date of valuation. Compared to the latest valuation this implies an increase of CHF 28,930.- The increase is mainly due to the rental contract with ZH Gastronomie AG, who run the catering premises on the ground floor. The previous rent reductions expired as per the end of 2011- Notice is given by tenant CCC Competence for the offices and a storage facility of a total 747 sq m (tenant CCC) as per the end of November 2012. - The current rent roll reports a smaller area for the offices held by Hitachi Zosen Inova AG of 10,000 sq m. The valuation takes account of a total of 10,324 sq m as assumed in the previous report.- The additional contribution by PC&S AG for the payback of the interior fit-out is due to expire as per 31-03-2012. Within these three months a final installment of CHF 16'023 is still due.- IMG Suisse S.A. exercised the option for another 5 year letting-period. According to the rent roll the rental income was raised by to CHF 222,262 p.a.- As per the date of valuation the property is fully let. - The Estimated Rental Income is unchanged at CHF 7,507,734 p.a. by taking into account of an average market vacancy rate of 3.0%.- No current Property accounts and budgets were provided and so the perspective of regular operating and upkeep costs are left unchanged.- Projected repair investments were not yet realised in 2011 and thus the expected CAPEX of CHF 927,000 are delayed into 2012 and 2013. - The discount rate is left unchanged at 4.40%.

Conclusion: Slight increased market value thanks to raised rental income. Opinion of market value:Current market value as per 31-12-2011: CHF 141,000,000Compared to the previous statement as per 01-07-2011 (CHF 140,300,000) + CHF 700,000; + 0.5%

Update

General locational factors for the City of Zurich (issued 07-2011)Macro-location



Office marketWith a population of 368,677 (up by 6.1% between 2005 and 2009), the municipality of Zurich (ZH) stands at the centre of Switzerland's largest conurbation (home to a total population of approx. 1,170,000). High-income households (executive grades and senior management) accounted in 2000 for 13% of Zurich's population, compared to the Swiss average of 10%. 1,219,000 inhabitants and 660,000 jobs in Switzerland lie within half an hour's drive of Zurich (equivalent figures for city of Berne: approx. 738,000 inhabitants and 352,000 jobs). The number of people working in sectors other than agriculture stood at 300,445 in 2008, 90.3% of these being employed in the service sector (nationwide figure: 70.5%). Since 2001, the employment figure for Zurich has risen by 4.1%, though the number of jobs in industry has declined. Between 2010 and 2011, the region of Zurich has witnessed a net outward corporate migration, i.e. more companies moved out of the area than arrived from other regions.

Overall, the town/city Zurich provides some 8,964,000 m2 of office space. The volume of new-build office development (in relation to the existing stock) over the last few years in the town/city Zurich has been below par for Switzerland. The average rental for new office lettings in Zurich is CHF 290 per m2 p.a. This value is above the Swiss average of CHF 190 per m2 p.a. On Wüest & Partner AG's location and market rating, which is used to quantify the attractiveness of a specific municipality as an office location on the basis of about 300 factors, Zurich ranks as a municipality with excellent location quality for office premises (1.0 points on a scale from 1 [municipality with excellent location quality] to 5 [municipality with extremely poor location quality]).

Retail market With a population of 368,677 (up by 6.1% between 2005 and 2009), the municipality of Zurich (ZH) stands at the centre of Switzerland's largest conurbation (home to a total population of approx. 1,170,000). High-income households (executive grades and senior management) accounted in 2000 for 13% of Zurich's population, compared to the Swiss average of 10%. 369,000 people live within a 10-minute and 511,000 within a 20-minute drive of Zurich (the corresponding figures for the city of Berne being around 128,000 and 326,000). The number of people working in sectors other than agriculture stood at 300,445 in 2008, 90.3% of these being employed in the service sector (nationwide figure: 70.5%). Since 2001, the employment figure for Zurich has risen by 4.1%, though the number of jobs in industry has declined. Between 2010 and 2011, the region of Zurich has witnessed a net outward corporate migration, i.e. more companies moved out of the area than arrived from other regions.

Overall, the town/city Zurich provides some 1,841,000 m2 of retail space. This is equivalent to some 5.0 m2 retail space per inhabitant of town/city, a figure above the Swiss average (4.1 m2 per head population). The volume of new-build retail development (in relation to the existing stock) over the last few years in the town/city Zurich has been above par for Switzerland. The average rental for new retail lettings in Zurich is CHF 370 per m2 p.a. This value is above the Swiss average of CHF 230 per m2 p.a. On Wüest & Partner AG's location and market rating, which is used to quantify the attractiveness of a specific



municipality as a retail location on the basis of about 300 factors, Zurich ranks as a municipality with excellent location quality (1.0 points on a scale from 1 [municipality with excellent location quality] to 5 [municipality with extremely poor location quality]).

The commerical property is located at Hardturmstrasse 123-129 in so-called Zürich West. The neighbourhood is characterized by various office and retail buildings as well as residential dwellings. Various restaurants and cultural institutions are located within the immediate vicinity. The district is undergoing important development in recent years with important construction (Prime Tower and area, Toni-Areal, City West, Hardturm-Areal etc.) under way or even near completion.The main station of Zürich can be reached by tramway at station Förrlibuckstrasse within about 15 minutes ride. Another railway hub at Hardstrasse is located within walking distance. The junction to the motorway A1 is located in approx. 2 minutes drive to the west of the property.

Micro-location

The property labeled com.West is situated at Hardturmstrasse 123-129 to the north and Förrlibuckstrasse 70-72 to the south. The plot comprises an area of 9,938 sqm in total and is registered in Zürich, cadastre number 5871. The building has been constructed in 2002 and comprises a volume of 129,200 cbm and an effective rentable area of 25,010 sqm.

There are some various entries (reservations, easements) in the land registre. They have in our understanding non-adjusting effects on the current market value.

The construction shows two longitudinal 6-storey buildings, which are linked by 3 lateral constructions (connecting wings) from the second floor onwards. Each of these two buildings comprise three entrances and two elevators as vertical connections to the upper floors. There is a straight open passage at the ground floor with two big atria from where the retail premises and the restaurant can be accessed. The passage connects the Hardturmstrasse and the Förrlibuckstrasse.

Building/Site

The building is constructed in a mix of reinforced concrete framed and solid structure with a glazed facade. The flat roof is made of bitumen covered with gravel and can only be accessed by a ladder from the 6th floor terrace. The terrace is covered with concrete slabs, which show some roughness. The roof respectively the bitumen layer seems to be in bad condition. According to the statement of the appointed facility manager at heavy rain fall there are water entries at the ceiling in the offices. Provision is made for an electrial potential field measurement to be able to find the cracks.

The outdoor area at the ground floor is covered with large perforated concret slabs, flat water basins and some concrete blocks that serve as seating areas. On the eastern and western side of the building outdoor parking units can be found. The access to the indoor parking space is situated on the east side. In the basement water penetrated into the ceiling close to the envelope. That is caused by a defective stilt-connection. The ceiling in the

Building fabric/Condition



parking area has a non-combustible cladding. To solve grund water inlet appropriate pumps were installed in recent years.

The facade consists of box-type windows with blinds between the glazings, which can be opened vertically. On the ground floor there are exterior venetian blinds in front of the windows. The windows in the upper floors are in an insecure condition. During past years some glazings fell out of their edgings and some windows got problems with their frame joints. Because of this it is neccessary to fix the frame joints and to improve the edgings of all glazings. Other problems are detected due to calcium carbonat attack, what slightly damages the windows below concrete component parts and makes them look dirty. The calcium carbonat is washed out of the concrete slabs of the terrace and the concrete facade. It could be recommended (and it is planned) to seal the concrete parts to avoid more defects.

There are two ventilation-system for the entire building-complex. One is situated at 6th floor of the connecting wing between Hardturmstrasse 123 and 127. The other one is installed in connecting wing between Förrlibucktrasse 70 and 72. Each of the systems uses 3 device. There have been some problems with the filtration design. That will cause the installation of a reverse-osmosis system if this is more profitable than changing the defect filter. A refrigerating system with 6 devices is installed at 6th floor of the connecting wing Hardturmtrasse 125 and 129. The heat is distributed by district heating network.

Each of the 12 elevators are able to handle 10 people or 800 kg. Their stone floors showed some spallings. The starways consists of concrete with stone floor cladding and with handrails made of satin stainless steel. The sanitary areas are in good condition and are tiled to the ceiling. The kitchen of the restaurant is also in good condition. There is only one problem with heat accumulation above the Stove, which results from a weak air pressure in the exhaust air system of the building.

The offices are fitted-out by the tenants and have either exposed concrete finish or coated inner walls. There are exposed concrete finish or suspended ceilings with suspended or integrated lights and suspended cooling ceilings in addition. Floors are covered with carpet, wood or synthetic material like kind of PVC or linoleum. The heat distribution is installed in the floor along the facade. Heating cannot be regulated individually (for selected rooms) which might be considered to diminish comfort.

UseThe majority of the effective area of 25,010 sqm is dedicated to offices. In sum the area is split to 21,122.5 sq m of offices, some 2,945 sq m for storage / archiving, 595 sq m of retail and 347 sq m for hospitality / restaurant. In addition there are 94 car parking spaces in the basement and 60 outside parking spaces. Head tenants are Hitachi Zosen Inova AG and Axel Springer Schweiz AG with a letting space of about 19,790 sqm and 118 parking spaces in total. The passing rent of CHF 3,874,337 per year for the two tenants represents some 73% of the total annual income.

The operation of the restaurant has been facing important difficulties in the past. The restaurant is due to the mean demand usually closed after lunchtime. There are few construction sites in the vicinity (especially the art



school campus at Förrlibuckstrasse / Toni-Areal), which is expected to be finalized within the near future. Due to current situation ZH Gastronomie AG profits from a rent reduction to CHF 60,000 until the end of 2011. From 01-01-2012 onwards the regular lease of CHF 96,226 per year has to be payed. Due to current situation it seems to be neccessary to expand the period of minor rent to the end of 2012.

A special lease-agreement has been agreed with PC&S AGm, where the interior fit-out of some CHF 600’000 has been financed by the owner. Based on the information provided in the rent-roll additional payment for the amortisation of the contribution of CHF 64,095 per year is due until 31-03-2012. Thereafter interior fitting is completely owned by PC&S AG.

As per the date of valuation no information regarding the lease contract with IMG Schweiz AG and the according option to extend the contract by the tenant is provided. The current rental contract is about to expire as per 31-10-2011. Negotiations are still in progress.

As per the date of valuation the annual income is reported at CHF 7,464,199 p.a.. The property is fully let and only a few lease contracts expire within 2011 without any existing lease renewal (660.5 sqm).

Within this valuation we assume the estimated rental income (ER) of the entire property at CHF 7,507,930 per year. This estimate is based on following assumptions:

- Office: CHF 300 - 320 per sqm and year (corresponds to 53%-percentile)- Warehouse/Archive: CHF 120 per sqm and year- Retail: CHF 300 per sqm and year (corresponds to 36%-percentile)- Gastronomy/Restaurant: CHF 320 per sqm and year- Parking space inside: CHF 220 per space and month- Parking space outside: CHF 100 per space and month- In addition there is an income of CHF 64,094 per year for the amortisation of the interior fit-out (see above)

Furthermore, we assume a structural vacancy rate of 3% of the expected future rental income making allowance for fluctuation of tenants.

Rental income

Due to a good assignment of operating costs it can be assumed that administration costs are based on a level of 3.5% of total annual income. For further costs we make following assumptions:

- Caretaking: CHF 5,000 per year- Insurance: CHF 35,000 per year- Utilities: CHF 5,000 per year- Management: CHF 190,000 per year- Other cost / miscellanous: CHF 20,000

Running and maintenance costs



Running costs, which are payed by tenants additionally, amount to around 9% of net-lease.

The maintenance costs are estimated at approx CHF 310,000 per year in average for all upcoming periods. This correponds to the following ratios:- Maintenance costs / value GVA: 0.36%- Maintenance costs / total income: 4.13%

Based on the information provided, various capital expenditures and repairs are expected for the next years. The valuation makes allowance for the following items, as informed by HSG Zander, Ms. Barbara Bissig, and/or are estimated by Wüest & Partner.

- Exchange of 72 door glazings: CHF 360,000 (CHF 5,000 each estimated by HSG Zander)- Repair of windows due to problems with edgings and frame joints: CHF 1,000 each window (estimated by HSG Zander)- New building control system: CHF 500,000 (estimated by HSG Zander)- Revision fire alarm control panel: CHF 87,000 (estimated by HSG Zander)- Floor plates in all 12 lifts: CHF 36,000 (estimated by HSG Zander)- Light shafts and water entry in basement ceiling: CHF 24,000 (estimated by HSG Zander)- Repair of flat roof due to water entry: CHF 140,000 (estimated by Wüest & Partner)- Cleaning windows and sealing concrete plates of facade and terrace deck due to calcium carbonat attack and erosion: CHF 50,000 (estimated by Wüest & Partner)

The valuation makes allowance of an annuity of all capital expenditures for the value preserving of the building structure and installations of approx CHF 566,000 per year which equates to following ratio:

- CapEx / insurance value: 0.66%- CapEx / total income: 6.54%

Refurbishment

Due to current situation of market and the prevailing letting situation with long-term secured income, Wüest & Partner assumes a discount rate of 4.4% net and effective.

Risk/Return profile


CHFCHF

Wüest & Partner

Rental Income

Income summary

%AnnuityPercentileper m²% Currentmin/m²max/m²Percentileper m²ShareIncomeAreaUnits

CHFUse

Potential in nominal terms

5

85.96,438,203 54305

98.7

101.8 563103.0

6,355,062

6,551,610

6,304,5362.4

6,456,8161474140.0

6,438,203

21,12221Office

Actual

ProjectedVacant %

2.8211,401 43355

81.9

84.4 323003.0

173,145

178,500

178,1322.5

182,6653503640.0

211,401

5953Retail

Actual

ProjectedVacant %

4.7351,419 119

97.5

100.6 1203.0

342,763

353,364

340,9352.3

349,079931320.0

351,419

2,94511Warehousing / Archiving

Actual

ProjectedVacant %

1.6119,740 345

82.6

86.9 3005.0

98,895

104,100

109,8843.4

113,7243453450.0

119,740

3471Catering / Gastronomy

Actual

ProjectedVacant %

4.0296,544

81.2

83.73.0

240,715

248,160

251,6532.3

257,4650.0

296,544

94Indoor parking

Actual

ProjectedVacant %

1.075,822

92.1

95.03.0

69,840

72,000

70,5072.4

72,2750.0

75,822

60Outdoor parking

Actual

ProjectedVacant %

2873.0

7,507,734285

97.2

100.2

7,255,6462.4

7,432,023100.00.0

7,280,420

7,493,129

7,493,129

190 25,009Vacant %Actual

ProjectedTotal


CHF CHF


VacantShare %per m²SC %RenovationOptionsW. index %W. duration [a]Latest endEarliest end1st Early BreakShare %per m²AreaNo area %Units

Wüest & Partner

ContractIncomeTenant

6 Tenant summary

3.032.62822,448,0240.01005.431.05.201731.05.201733.52872,510,1408,2768659Axel Springer Schweiz AG3.03.2298236,5600.0750.930.11.201230.11.20123.6340269,9707478010CCC Competence Call Center GmbH3.00.530039,0000.0784.830.09.201630.09.20160.636146,778126502Delta Light AG3.046.32903,477,6700.0788.830.09.202030.09.202042.92653,213,75311,5159174Hitachi Zosen Inova AG3.02.7291205,1600.01004.831.10.201631.10.20163.0314222,262660758IMG Schweiz AG3.00.527440,3200.0781.330.04.201330.04.20130.633048,469143333L'Oreal3.01.230388,4400.0993.330.04.201530.04.20151.333397,21029202Nefos GmbH3.05.1286383,2800.0950.231.03.201202.03.20125.6309415,9441,2758010PC&S AG3.01.5286110,1000.0784.331.03.201631.03.20161.7332127,870377504PM Care3.01.229088,0000.0761.331.03.201331.03.20131.4349105,646286605Polymedes AG3.01.6298120,4600.0752.231.03.201431.03.20141.7312127,313383605Reflexion AG3.01.4300106,5000.0781.228.02.201328.02.20131.8377133,249347673Zahnarztzentrum Zürich West AG4.32.2276164,2200.0786.831.10.201831.10.20182.3293174,525582405ZH Gastronomie AG

3.0Total 100.02877,507,7340.0876.230.09.202002.03.2012100.02857,493,13025,00981190


Wüest & Partner

LeaseSC %Area Perc. Vacantper m²Perc.per m²OptionsIndex %EndStartUnitsRoomsVacant

IncomeRental UnitsCHFCHFUseStoreyTenantNo.


7 Rent roll

1 x 5 53300 3.0153,900512930.08030.09.202001.10.20055131 150,348O0Hitachi Zosen Inova AG1 x 5 53300 3.0104,100723770.08028.02.201301.01.20113471 130,667O0Zahnarztzentrum Zürich West AG1 x 5 53300 3.046,800472770.08031.10.201801.11.20081561 43,260O0ZH Gastronomie AG1 x 5 32300 3.0104,100423500.08031.03.201601.01.20113471 121,450RT0PM Care1 x 5 32300 3.036,600453640.08030.04.201301.05.20111221 44,419RT0L'Oreal1 x 5 32300 3.037,800453610.08030.09.201601.10.20061261 45,532RT0Delta Light AG1 x 5 32300 5.0104,100413450.08031.10.201801.11.20083471 119,740C0ZH Gastronomie AG1 x 5 56310 3.0465,930512930.08030.09.202001.10.20051,5031 440,499O1Hitachi Zosen Inova AG

56310 3.0217,000693540.08030.11.201201.12.20027001 247,972O1CCC Competence Call Center GmbH1 x 5 56310 3.0139,500573150.010031.05.201701.04.20024501 141,673O1Axel Springer Schweiz AG1 x 5 56310 3.0690,68051470.010030.09.202001.10.20052,2281 327,077O2Hitachi Zosen Inova AG1 x 5 56310 3.0345,960633340.010031.03.201201.07.20091,1161 372,909O2PC&S AG1 x 5 56310 3.0241,800573150.010031.05.201701.04.20027801 245,567O2Axel Springer Schweiz AG1 x 5 56310 3.0584,040774140.08030.09.202001.10.20051,8841 779,885O3Hitachi Zosen Inova AG1 x 5 56310 3.0794,840573150.010031.05.201701.04.20022,5641 807,225O3Axel Springer Schweiz AG1 x 5 56310 3.0482,670512930.08030.09.202001.10.20051,5571 456,325O4Hitachi Zosen Inova AG1 x 5 56310 3.0241,800573150.010031.05.201701.04.20027801 245,566O4Axel Springer Schweiz AG1 x 5 56310 3.0241,800573150.010031.05.201701.04.20027801 245,566O4Axel Springer Schweiz AG

56310 3.079,360723760.08031.03.201301.01.20112561 96,269O4Polymedes AG1 x 5 56310 3.0818,090512930.08030.09.202001.10.20052,6391 773,438O5Hitachi Zosen Inova AG1 x 5 56310 3.0345,960573150.010031.05.201701.04.20021,1161 351,346O5Axel Springer Schweiz AG1 x 5 56310 3.0110,980603250.08031.03.201401.04.20093581 116,259O5Reflexion AG1 x 5 59320 3.0180,160573150.010031.05.201701.04.20025631 177,248O6Axel Springer Schweiz AG

59320 3.0180,800663450.010031.10.201601.11.20065651 195,110O6IMG Schweiz AG1 x 5 59320 3.085,440683520.010030.04.201501.01.20112671 93,991O6Nefos GmbH1 x 5 120 3.0142,9201050.08030.09.202001.10.20051,1911 124,748W-1Hitachi Zosen Inova AG1 x 5 120 3.0149,1241320.010031.05.201701.04.20021,2431 163,667W-1Axel Springer Schweiz AG1 x 5 120 3.019,0801310.010031.03.201201.07.20091591 20,797W-1PC&S AG

120 3.011,4001290.010031.10.201601.11.2006951 12,293W-1IMG Schweiz AG1 x 5 120 3.09,480930.08031.10.201801.11.2008791 7,325W-1ZH Gastronomie AG0 x 0 120 3.05,6401280.08030.11.201201.12.2002471 6,013W-1CCC Competence Call Center GmbH0 x 0 120 3.03,6001200.08001.02.2005301 3,600W-1Polymedes AG1 x 5 120 3.03,6001260.08031.03.201601.01.2011301 3,780W-1PM Care1 x 5 120 3.03,0001290.08030.04.201501.01.2011251 3,218W-1Nefos GmbH1 x 5 120 3.03,0001300.08031.03.201401.04.2009251 3,247W-1Reflexion AG1 x 5 120 3.02,5201300.08030.04.201301.05.2011211 2,730W-1L'Oreal1 x 5 3.0108,2400.0030.09.202001.10.200541 128,781IP-1Hitachi Zosen Inova AG1 x 5 3.095,0400.010031.05.201701.04.200236 113,393IP-1Axel Springer Schweiz AG


Wüest & Partner

LeaseSC %Area Perc. Vacantper m²Perc.per m²OptionsIndex %EndStartUnitsRoomsVacant

IncomeRental UnitsCHFCHFUseStoreyTenantNo.


7 Rent roll

1 x 5 3.015,8400.0031.03.201201.07.20096 19,621IP-1PC&S AG3.010,5600.010031.10.201601.11.20064 12,384IP-1IMG Schweiz AG

1 x 5 3.07,9200.0030.11.201201.12.20023 9,593IP-1CCC Competence Call Center GmbH1 x 5 3.05,2800.0031.03.201401.04.20092 6,503IP-1Reflexion AG1 x 5 3.02,6400.0031.03.201301.01.20111 3,269IP-1Polymedes AG1 x 5 3.02,6400.0031.10.201801.11.20081 3,000IP-1ZH Gastronomie AG1 x 5 3.031,2000.0030.09.202001.10.200526 32,651OP0Hitachi Zosen Inova AG1 x 5 3.018,0000.010031.05.201701.04.200215 18,888OP0Axel Springer Schweiz AG

3.06,0000.0030.11.201201.01.20115 6,392OP0CCC Competence Call Center GmbH1 x 5 3.02,4000.0002.03.201201.07.20092 2,616OP0PC&S AG

3.02,4000.010031.10.201601.11.20062 2,476OP0IMG Schweiz AG1 x 5 3.02,4000.0028.02.201301.01.20112 2,582OP0Zahnarztzentrum Zürich West AG

3.02,4000.0031.03.201301.01.20112 2,507OP0Polymedes AG1 x 5 3.02,4000.0031.03.201601.01.20112 2,640OP0PM Care1 x 5 3.01,2000.0030.04.201301.05.20111 1,320OP0L'Oreal1 x 5 3.01,2000.0031.10.201801.11.20081 1,200OP0ZH Gastronomie AG1 x 5 3.01,2000.0030.09.201601.02.20061 1,246OP0Delta Light AG1 x 5 3.01,2000.0031.03.201401.04.20091 1,303OP0Reflexion AG

227,314 3.0

% proj.% proj.

285 100.0 287 100.0

97.00.00

100.07,493,129 7,280,420

25,009 7,493,129190

Total actual rental incomeTotal vacant

7,507,734Total projected rental income


CHF -31.12.2111

1101.01.2022

-31.12.2021

1001.01.2021

-31.12.2020

901.01.2020

-31.12.2019

801.01.2019

-31.12.2018

701.01.2018

-31.12.2017

601.01.2017Potential

Annuity

Accounts % Proj.

Account % Proj. -31.12.2015-31.12.2014-31.12.2013-31.12.2012

01.01.201501.01.201401.01.201301.01.20121 2 3 4

-31.12.2016

01.01.20165

Period


8 Projected account summaryWüest & Partner

8,262,4978,180,6907,850,3277,698,4637,657,9587,629,3647,491,169 7,492,896 7,534,818 7,590,743 7,633,728100.0 7,432,0237,507,7340 0.0Projected rental income00000016,024 0 0 0 00.0 68500 0.0Interior fitting PC&S AG

8,262,4978,180,6907,850,3277,698,4637,657,9587,629,3647,507,193 7,492,896 7,534,818 7,590,743 7,633,728100.0 7,432,7087,507,7340 0.0Projected rental income250,166247,689160,367131,367123,86888,99130,508 91,745 29,182 32,118 37,1603.0 176,377227,3140 0.0Vacant

0000000 0 0 0 00.0 000 0.0Other income losses250,166247,689160,367131,367123,86888,99130,508 91,745 29,182 32,118 37,1603.0 176,377227,3140 0.0Income losses

8,012,3317,933,0017,689,9607,567,0967,534,0907,540,3727,476,685 7,401,151 7,505,636 7,558,625 7,596,56897.0 7,256,3317,280,4200 0.0Total income5,5235,4685,4145,3615,3085,2555,000 5,050 5,100 5,152 5,2030.1 5,0005,0000 0.0Caretaking

38,66238,27937,90037,52537,15336,78535,000 35,350 35,704 36,061 36,4210.5 35,00035,0000 0.0Insurance5,5235,4685,4145,3615,3085,2555,000 5,050 5,100 5,152 5,2030.1 5,0005,0000 0.0Utilities

209,878207,800205,743203,706201,689199,692190,000 191,900 193,819 195,757 197,7152.5 190,000190,0000 0.0Property Management0000000 0 0 0 00.0 000 0.0Property taxes

22,09221,87421,65721,44321,23021,02020,000 20,200 20,402 20,606 20,8120.3 20,00020,0000 0.0Other expenditure281,679278,890276,128273,395270,688268,008255,000 257,550 260,126 262,727 265,3543.4 255,000255,0000 0.0Running costs419,756196,863194,914192,984191,074189,182180,000 181,800 183,618 185,454 187,3095.1 309,068380,0000 0.0Upkeep costs829,16100000727,000 202,000 0 0 010.0 523,653750,6290 0.0Repair costs

1,530,596475,753471,043466,379461,761457,1891,162,000 641,350 443,744 448,181 452,66318.5 1,087,7201,385,6290 0.0Total running and maint. costs1,530,596475,753471,043466,379461,761457,1891,162,000 641,350 443,744 448,181 452,66318.5 1,087,7201,385,6290 0.0Total costs

6,481,7347,457,2487,218,9177,100,7177,072,3297,083,1836,314,685 6,759,801 7,061,892 7,110,444 7,143,90678.5 6,168,6105,894,7910 0.0Total net income

In regard of prospective renovations, we assume the following cost items as necessary:

2012 – CHF 140,000: Remidiation of water infiltration on roof and parking area; CHF 587,000: Adjustment of building control systems and fire detection2013 – CHF 100,000: Local repair of the facade; CHF 50,000: Replacement of windows; CHF 50,000: Replacement of flooring in the elevators as well as other interior-fitting


Market value in CHF

CHF

CHF

CHF

CHF

CHF

00.0

08,262,497

250,1663.0

8,012,331

08,180,690

247,6893.0

7,933,001

07,850,327

160,3672.0

7,689,960

07,698,463

131,3671.7

7,567,096

07,657,958

123,8681.6

7,534,090

07,629,364

88,9911.2

7,540,372

07,633,728

37,1600.5

7,596,568

07,590,743

32,1180.4

7,558,625

07,534,818

29,1820.4

7,505,636

07,492,896

91,7451.2

7,401,151

07,507,193

30,5080.4

7,476,685Total income Income losses %Income losses

CurrentIncome

Results

01.01.2012 01.01.2013 01.01.2014 01.01.2015 01.01.2016 01.01.2017 01.01.2018 01.01.2019 01.01.2020 01.01.2021 01.01.2022

100.0 100.9 101.5 101.9 102.3 102.8 103.2 103.8 104.3 104.8 105.1141,000,000 142,248,400 143,120,030 143,726,990 144,310,964 144,892,246 145,576,873 146,303,590 147,051,941 147,702,196 148,162,966

100.0 107.0 111.8 112.6 113.1 112.2 112.0 112.4 114.3 118.1 102.66,314,685 6,759,801 7,061,892 7,110,444 7,083,183 7,072,329 7,100,717 7,218,917 7,457,248 6,481,734

100.0 55.2 38.2 38.6 39.0 39.3 39.7 40.1 40.5 40.9 131.715.5 8.6 5.9 5.9 5.9 6.0 6.0 6.1 6.0 5.8 18.5

1,162,000 641,350 443,744 448,181 452,663 457,189 461,761 466,379 471,043 475,753 1,530,596

1,530,5961,162,000 641,350 443,744 448,181 452,663 457,189 461,761 466,379 471,043 475,753727,000 202,000 0 0 0 0 0 0 0 0 829,161180,000 181,800 183,618 185,454 187,309 189,182 191,074 192,984 194,914 196,863 419,756255,000 257,550 260,126 262,727 265,354 268,008 270,688 273,395 276,128 278,890 281,679

100.0 99.0 100.4 101.1 101.6 100.9 100.8 101.2 102.9 106.1 107.2

7,507,193 7,492,896 7,534,818 7,590,743 7,633,728 7,629,364 7,657,958 7,698,463 7,850,327 8,180,690 8,262,497

4.70 132,970,000 5.64

141,000,000

4.60 135,540,000 5.53

4.20 5.10

4.50 138,220,000 5.424.40

143,890,0005.31

4.30146,900,000

5.21

150,030,0004.10 4.99Current GY %

Discount Rate/Yields %4.40

5.44

5.27

1.00Discount rate in real terms

Gross yield (GY) annuity

Discount rate in nominal terms141,000,000141,000,000

100.0 %

SensitivityDiscount rate %

Assumed inflation p.a.Ownership interestTotal market value

Market Value

DevelopmentMarket ValueExtrapolation of market value

Development

Total net incomeTotal net income

% projected incomeDevelopment

Total additional costs

7,143,906

Repair costsUpkeep costs

Total running and maint. costs

Running costs

Total costs

Accounts

0

0

00

0.0

7,493,129

0

Costs

Development

Total income before income lossesAdditional incomeProjected rental income

-31.12.2013

01.01.2013

-31.12.2014

01.01.2014

-31.12.2015

01.01.2015

-31.12.2016

01.01.2016

-31.12.2017

01.01.2017

-31.12.2018

01.01.2018

-31.12.2019

01.01.2019

-31.12.2020

01.01.2020

-31.12.2021

01.01.2021

-31.12.2111

01.01.2022

-31.12.2012

01.01.20121110987654321

Period


9Wüest & Partner


10 Quality profile extended

++-- - +/- +12345RatingWeighting

Wüest & Partner

1.9100Commercial very poor poor good very goodaverage

average very goodgoodpoorvery poorMicro location 50 2.1

3.02.02.0

104050Commercial location in municipality

Public transport linksPedestrian thoroughfare

very goodgoodaveragepoorvery poorvery goodgoodaveragepoorvery poorvery goodgoodaveragepoorvery poor

2.0 average very highhighlowvery lowUsability 202.02.02.0

503020 very poor poor average good very good

very low low average high very highvery low low average high very highLayout quality

Access/ParkingFlexibility

2.0 average very highhighlowvery lowStandard 10

2.02.0

2.0333333

Space provisionBuilding fabricBuilding services very low low average high very high

very low low average high very highvery limited limited standard large very large

1.420 averageCondition very poor poor good very good1.21.41.430

5020Building envelope

InteriorBuilding services very poor poor average good very good

very poor poor average good very goodvery poor poor average good very good

2.0

1.42.0

2.11.9

average

TotalMicro locationUsabilityStandardCondition

very poorvery poorvery poorvery poor

very poor

poorpoorpoorpoorpoor

goodgoodgoodgoodgood

very goodvery goodvery goodvery goodvery good

averageaverageaverageaverage


Wüest & Partner 11 Context

MethodCommission

The valuation uses the discounted cash-flow (DCF) method. With this method, the current market value of a property is determined as the total of all projected future net income from ongoing operations discounted to present-day equivalents. No allowance is made for any possible transaction cost (such as taxes, charges or fees). Further valuation does not account for any taxation (except of mandatory property taxes) or interest cost. The net income of operations is discounted individually for each property with due allowance for specific opportunities and threats, and with adjustment in line with prevailing market conditions and risks. All projected cash flows are presented to ensure maximum transparency. Wüest & Partner applies a so-called one-period DCF model. The valuation period extends for 100 years , from the valuation date. Due to formal constraints the report displays a time-weighted residual value for the period 11 through 100 of the valuation.

Wüest & Partner was commissioned by EPIC Group to value the property in question as per the stipulated day of valuation for accounting reasons. The valuations comply with national and international standards. These standards also accord with the reporting guidelines commonly used in Switzerland. The valuation focuses on the calculation of the market value. In the absence of any official definitions of market value in Switzerland, the concept used in standard European valuation textbooks is adopted. Property values are thus determined in accordance with the guidelines of the RICS (Royal Institution of Chartered Surveyors) and TEGOVA (The European Group of Valuers' Associations). In accordance to these regulations the market value is defined as «the estimated amount for which a property should exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing, wherein the parties have each acted knowledgeably, prudently, and without compulsion.» Value and price may diverge. No allowance can be made in this valuation for any circumstances affecting the price.


Wüest & Partner 11 Context

The commissioned valuation – and, in particular, the forecasts presented therein – were prepared by Wüest & Partner to the best of its knowledge and with due observance of current professional standards. The valuation was performed with reference to the specified valuation date and may be affected by subsequent events for which no allowance can be made at the present time. A revaluation shall become necessary should any such events occur. The valuation is based on the disclosed documentation provided by the landlord or it’s agents and listed in the documentation summary. A site visit has been held in the course of the first recognition of the property.

Nothing in the Report should be construed as advice to proceed or not to proceed with a transaction and/or any investment or provision of finance or the consideration of terms on which to so proceed. The scope of this Report is not nor does it purport to be a confirmation or complete review of all matters of a legal, technical or real estate relevant nature which may be of interest or concern to a potential purchaser and financing parties considering or evaluating whether to proceed with a transaction or the consideration or terms on which to so proceed. In consideration of our agreement to make a copy of the Report available to you, you agree to treat the contents of the Report as confidential and not to distribute copies of the Report, or otherwise disseminate the contents of the Report, to any person without our prior written consent, with the exception of (a) disclosure on a confidential basis to such of your professional advisers, directors, officers, servants, employees and/or agents and members of the group of companies controlled by you who need to consider the matters set out in the Report (b) disclosure required by law in any jurisdiction, or (c) disclosure for regulatory purposes. We hereby confirm to have performed the valuation independently and neutrally in conformity with its business policies. It is addressed to EPIC Group and was carried out solely for those purposes specified above. No conflicts of interest of any kind exist. The valuation was; Wüest & Partner shall accept no liability in respect of third parties other than that mentioned above.

The valuation is based on the current letting situation as disclosed in the relevant rent-roll prepared by the charged management. The projected rental income reflects the relevant terms and conditions of ongoing rental contracts as well as the general regulations of the rental law and the generally applied business principles. The estimation of the rental values is determined individually for all separate letting units on the basis of the prevailing local and regional market conditions. The projection of the running and maintenance cost is determined on the basis of the property accounts of previous operations and validated with benchmarks and comparable information of the extensive database by Wüest & Partner. The expected capital expenditures for preserving the building and it’s structure were calculated by means of a lifecycle analysis of the individual building elements. The building structure's remaining lifespan was estimated and periodic refurbishments modelled on the basis of the general condition of the fabric as determined during the property inspection. Appropriate annual reserves were calculated accordingly and plausibility tested using comparables and Wüest & Partner's own benchmarks. The calculation factors in 100% of repair costs in the first 10 years; the proportion applied from year 11 onwards is limited to the value-preserving investments. The relevant discount is based on a risk-adjusted interest rate. Rates are determined individually for each property on the basis of appropriate benchmarks derived from comparable transactions. Credit risks posed by specific tenants are , if not otherwise stated, not explicitly factored into the valuation Inflation is respected with an annual rate of 1.2%. Specific adjusment clauses in the rental contracts are reflected individually.

Disclaimer Valuation Assumptions


Wüest & Partner

Office spaceStaircaseEntrance hall

Inside courtyardSide view


View at bar


Wüest & Partner

Indoor parking spaceFlat roofKitchen

RestaurantOffice space


Door glazing defect


cafe royal, london - short format update report - nov 11 · 2012-03-20 · definition of market...

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