Report & Valuation

Morgan Stanley December 2016

Report & Valuation

CityPoint, One Ropemaker Street, London EC2

savills.co.uk

14 December 2016 Ian Malden E: [email protected] Ref: WEVA380886/EMCS/CEHA DL: +44 (0) 207 409 8894

Morgan Stanley Fixed Income & Commodities 33 Margaret Street 20 Bank Street London Floor 03 W1G 0JD Canary Wharf savills.com London E14 4AD

For the attention of Dominic Rea

Dear Sirs,

BORROWER: BSREP CITYPOINT BIDCO LIMITED PROPERTY: CITYPOINT, ONE ROPEMAKER STREET, LONDON EC2Y 9AW

In accordance with the instructions as confirmed in our letter dated, 14 December 2016, we have inspected the property, a landmark multi-let freehold City investment, and made such enquiries as are sufficient to provide you with our opinion of value on the bases stated below. Our letter confirming instructions is enclosed at Appendix 1.

We draw your attention to our accompanying Report together with the General Assumptions and Conditions upon which our Valuation has been prepared, details of which are provided at the rear of our report.

We trust that our report meets your requirements, however should you have any queries, please do not hesitate to contact us.

Yours faithfully

For and on behalf of Savills Advisory Services Limited

EDWARD SHAKESPEARE MRICS CHARLOTTE ASCHAN MRICS IAN MALDEN MRICS RICS Registered Valuer RICS Registered Valuer RICS Registered Valuer Director Director Director

Offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

Savills Advisory Services Limited. Chartered Surveyors. A subsidiary of Savills plc. Registered in England No. 6215875. Registered office: 33 Margaret Street, London, W1G 0JD

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Contents Executive Summary 1 1. Instructions and Terms of Reference 7 1.1. Instructions and Report Reliance ...... 9 1.2. Background ...... 12 2. The Property, Statutory & Legal Aspects 15 2.1. Location ...... 17 2.2. Situation ...... 22 2.3. Description ...... 23 2.4. Accommodation ...... 30 2.5. Condition ...... 32 2.6. Environmental Considerations ...... 34 2.7. Town Planning ...... 35 2.8. Taxation ...... 37 2.9. Tenure ...... 37 2.10. Occupational Leases ...... 42 2.11. Strength of Tenants’ Covenant ...... 48 2.12. Marketing of Vacant Accommodation ...... 54 3. Market Commentary 55 3.1. Macro Economic And Property Market Overview ...... 57 3.2. City of London Office Occupational Market ...... 57 3.3. Retail Occupational Market in Central London ...... 70 3.4. City Investment Market Commentary ...... 74 4. Valuation Advice 91 4.1. Principal Valuation Considerations ...... 93 4.2. Approach To Valuation ...... 99 4.3. Valuations ...... 106 4.4. Indication of Reinstatement Cost ...... 107 5. Loan Security 109 5.1. Suitability As Loan Security ...... 111 6. General Assumptions & Conditions to Valuations 115 6.1. General Assumptions and Conditions ...... 117 Appendices 119 Appendix 1.0 Instructions 121 Appendix 2.0 Schedule of Tenancies 123 Appendix 3.0 Macroeconomic and Property Market Overview 125 Appendix 4.0 Development Pipeline Chart 127 Appendix 5.0 Argus Capitalisation Printout – Existing Income Profile 129 Appendix 6.0 Argus Capitalisation Printout – Topped-Up Income Profile 131

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Executive Summary

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Executive Summary

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Background and Proposal

The building was originally constructed in 1967 as a headquarters building for British Petroleum. By the 1990s, the building was largely obsolete, such that an extensive refurbishment of the building, designed by Sheppard Robson International, was undertaken and completed in 2001. Following completion of the redevelopment works, the building comprised 707,300 sq ft (65,708 sq m) was re-branded as CityPoint and now extends to an aggregate net internal area of 709,501 sq ft (65,915 sq m).

On 15 January 2006 a consortium comprising UBS Global Asset Management (UK) Limited, Schroder Exempt Property Unit Trust, Caisse De Depot Et Placement Du Quebe and Tishman Speyer Properties UK Limited, purchased the freehold interest from CLOUT Limited, for a consideration of £520.0M. Following a short holding period by the above mentioned consortium, the property was comprehensively marketed by CBRE in February 2007. The property was subsequently acquired by Beacon at a price of around £660.0M in May 2007 and the acquisition was financed with the benefit of a loan from Morgan Stanley.

The loan was securitised by Morgan Stanley in July 2007, in the £429M Ulyssses ELoC 27 CMBS, in addition to which was a two tranche £106M junior loan, of which £18.0M was repackaged in a B-Loan Repackaging Programme, known as Hillenbrand Partners. The original loan was due to mature in July 2014. Interest payments were suspended on the junior loan, and the underlying securitisation, in February 2012, and in May 2012 consensual restructuring negotiations between Beacon and CMBS bondholders and the junior lender collapsed and the property was subsequently placed into receivership in October 2012. It was subsequently announced in November 2014 that Brookfield Office Properties had purchased the junior loan for a sum of understood to be in the order of £70.0M to £75.0M.

We understand that in June / July 2016 the receivers approached 15 parties in relation to a potential sale of the property. Of these initial parties circa 7-8 progressed to the second round where they inspected the property and were given access to a data room. First round bids were received on or around 17 October 2016 and our understanding from the vendor’s agents, GM Real Estate, is that around six parties submitted bids, and following the initial first round bid stage discussions progressed with 2-3 parties, and ultimately the property was placed under offer to Brookfield, your Sponsor, at an agreed price of £561.5M, this being a transfer of the shares of the SPV entity.

Our Report and Valuation is required in connection with the proposed loan.

Property Overview

CityPoint is a landmark office building located to the north of the City core on Ropemaker Street at its junction with Moor Lane, immediately to the east of the Barbican Arts and Conference centre. The area benefits from reasonable transport links, and in addition to the existing communications, the local area is also set to benefit from the improvements associated with Crossrail, which will be named the Elizabeth line when the new service opens.

CityPoint, owing to its size and scale, being the largest and the seventh tallest building in the City, dominates the immediate surroundings and is a distinctive landmark on the City skyline. The property comprises a landmark City office complex totalling approximately 709,500 sq ft (65,915 sq m) arranged on four basement levels, lower ground, ground and 34 upper floors. The ground floor is known as Level 1 and extends through to Level 36. There is no Level 13.

Tenure

Freehold.

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Occupational Leases

CityPoint forms a multi-let asset with a range of leases and tenants. The WAULT is in the order of 7 years 1 month, which reduces to 5 years 6 months on a term certain basis once tenant break options are taken into account. There is currently some circa 80,000 sq ft (7,432 sq m) of vacant space within the building of which circa 70,000 sq ft (6,503 sq m) forms office space on the 32nd floor (13,044 sq ft), part 30th floor (6,579 sq ft), 16th to 18th floors (36,097 sq ft) and the 11th floor (16,001 sq ft), all of which reflects a vacancy rate on the office space in the order of 12.20%.

Covenant Strength

The tenants’ covenant strength is considered mixed, but generally good. In particular the principal tenant, Simmons & Simmons, can be consider to offer a good covenant strength. The tenants include several law firms with LLP status and with other tenants offering a parent company guarantee.

Principal Valuation Considerations

The principal advantages and disadvantages of the quality of the investment are as follows:

Advantages:

. Located within central London, inside the City of London core. Thus forming part of a strong investment market, albeit with this strength in part driven by the general lack of supply of investment opportunities over the previous few years, in addition to weight of global money, and nonetheless in the main currently concentrated on lot sizes up to £150/£200.0M . A substantial sized tower building occupying a prominent site . Well positioned to Liverpool Street station and the opening of Crossrail services in 2018 . Freehold tenure . The property provides flexible office accommodation with floorplates in the region of 10,000 sq ft (929 sq m) to 13,000 sq ft (1,208 sq m) with the ability to sub-divide or let on a multi-floor basis and should capture a range of tenant demand profiles . WAULT 7 years 1 month reducing to 5 years 6 months on a term certain basis . A core of income, 26.73% of the current gross committed rent derived from Simmons & Simmons in respect of the lower floors and having an unexpired term of 8 years 4 months without break . Overall considered reversionary and with reversionary potential in respect of let space . A generally good occupational market which appears to be weathering the Brexit referendum, which bodes well for the letting up of the property, should floors become vacant

Disadvantages:

. Not a new building compared to more recent “iconic” Tower Buildings in the City, and thus not a “trophy asset” . A number of tenancies are non-income producing by virtue of active rent free periods . A 15 year old refurbishment and whilst capex works of circa £12.0M over the next ten years likely to be recovered under service charge provisions the works will require careful management in order that building is not “tagged” with a high service charge reputation . Defensive capex required in respect of some floors in order to achieve target rents

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. Significant lot size, and thus a limited pool of buyers

Valuations

NIY EY RY Value per Sq Ft

Market Value £557.30M 3.15% 5.50% 6.30% £785

Vacant Possession Value £350.00M N/A 6.00% 10.00% £493

Suitability as Loan Security

CityPoint forms a predominantly office investment located in the City of London. Although the property generally presents well, with various floors subject to recent refurbishments, the comprehensive refurbishment of the property, i.e. “strip back to frame” is 15 years old. Nevertheless, a significant planned maintenance programme is in place, and the property has been proactively maintained. Whilst the landlord is able to recover the cost of maintenance, repair, renewal and decoration from the tenants through a service charge, a number of service charge caps apply.

Furthermore, capital expenditure is required in order to re-let some of the existing vacant accommodation and further refurbishment capex may be required in the medium term if tenants seek to exercise break options and or do not renew at lease expiry. We recommend that the Bank monitors major planned works, as well as dilapidation negotiations, which may have an impact on the capital expenditure required by the Borrower.

The property is relatively asset management intensive and the value of the property will in part depend on the Borrower’s actions and the extent to which the Borrower actively manages the asset. We recommend that the Bank monitors the Borrower’s asset management plan.

In the short term the net value of the property can be anticipated to increase as rent free periods burn off and vacant space is let up therefore reducing the landlords unrecovered costs in relation to this space, and subsequently when the accommodation becomes income producing. Thereafter in the medium term the value can be anticipated to ebb and flow over the term of the loan as leases expire and tenants potentially exercise break options, although countered by value accretive refurbishment works and re-letting of office floors.

Overall, we consider that the property provides good security for a loan secured upon it, which reflects the nature of the property, our reported opinions of value and the risks involved.

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1. Instructions and Terms of Reference

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1.1. Instructions and Report Reliance

1.1.1. Report Reliance

This report is addressed to and capable of being relied upon by:

(a) Morgan Stanley Bank, N.A. as Mandated Lead Arranger and Original Lender (in each case under and as defined in the facility agreement to be entered into between, amongst others BSREP CityPoint Bidco Limited as the Company and Morgan Stanley Bank, N.A. as Mandated Lead Arranger, as amended from time to time (the Facility Agreement));

(b) Cheyne Real Estate Debt Fund, Cheyne Real Estate Credit Holdings Fund III and Real Estate Credit Investments Limited as Mezzanine Noteholders under the Note Issuance Agreement (each as defined in the Note Issuance Agreement);

(c) Mount Street Mortgage Servicing Limited as Common Security Agent and Mezzanine Security Agent (and its successors and assignees) for itself and on behalf of the Common Secured Parties and Mezzanine Secured Parties (in each case under and as defined in the intercreditor agreement to be entered into between, amongst others BSREP CityPoint Bidco Limited as the Senior Parent, Morgan Stanley Bank, N.A. as the Senior Lenders and the Mezzanine Noteholders, as amended from time to time (the Intercreditor Agreement)); and

(d) Any person, bank, financial institution, trust, fund or other entity which becomes a (i) Lender (as defined in the Intercreditor Agreement) as part of primary syndication or (ii) a Mezzanine Noteholder, in each case within six months of the date of the valuation,

(together, the Addressees) provided that, in relying on this report, each of the Addressees acknowledges and agrees that:

(a) this report refers to the position at the date it was originally issued and, unless otherwise confirmed by us in writing, we have taken no action to review or update this report since the date it was originally issued;

(b) our aggregate liability to any one or more or all of the Addressees in respect of this report shall be limited to the lower of 33% of the Value of the Property as stated in our report and £75million; and

(c) this report is subject to the terms and conditions set out in our letter of engagement with Morgan Stanley dated 14 December 2016.

1.1.2. Instructions and Basis of Valuation

You have instructed us to provide our opinions of value on the following bases:

. The current Market Value of the freehold interest, subject to and with the benefit of the existing leases and otherwise with vacant possession (“Market Value”); . The current Market Value of the freehold interest, on the Special Assumption of full vacant possession (”Vacant Possession Value”); . The current Mortgage Lending Value (”MLV”) and . The current Market Rent.

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1.1.3. General Assumptions and Conditions

All our valuations have been carried out on the basis of the General Assumptions and Conditions set out in the relevant section towards the rear of this report.

1.1.4. Date of Valuation

Our opinions of value are as at the date of our inspection of the property, being 10 November 2016. The importance of the date of valuation must be stressed as property values can change over a relatively short period.

1.1.5. Definitions of Market Value and Market Rent

In undertaking our valuations, we have adopted the RICS definitions of Market Value and Market Rent, as detailed below:

Valuation Standard VPS 4 1.2 of the Red Book defines Market Value (MV) as:

“The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

Valuation Standard VPS 4 1.3 of the Red Book defines Market Rent (MR) as:

“The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.”

1.1.6. Purpose of Valuations

You instruct us that our valuations are required for immediate loan security purposes in connection with a proposed facility to be granted to the Borrower, who is proposing to purchase the property.

1.1.7. Proposed Loan Terms

You have not provided us with details of the proposed loan terms.

Although we comment on the suitability of the property as loan security, we do so generally, and in the absence of any specific loan terms, as we are not qualified to do so.

1.1.8. Conflicts of Interest

We are not aware of any conflict of interest, either with the property or with the Borrower, preventing us from providing you with an independent valuation of the property in accordance with the RICS Red Book. We will be acting as External Valuers, as defined in the Red Book.

For the sake of good order we confirm that we have previously valued the property, in May 2007 on behalf of Morgan Staley Mortgage Servicing Limited, and more recently in April 2013, on behalf of DG Hyp, who held a number of notes, albeit this formed an indication of value only. Our colleagues in various departments have also historically provided advice in relation to the property, to include acquisition services on behalf of tenants, rating and rent review advice.

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We have a wider relationship with Brookfield, to include IDI Gazeley.

We do not consider any of this prior involvement or the wider relationship this firm has with Brookfield to constitute a conflict of interest.

1.1.9. Valuer Details and Inspection

The due diligence enquiries referred to below were undertaken by Edward Shakespeare MRICS, Charlotte Aschan MRICS, Sarah-Kate Nolan MRICS and Bryony Buckmaster BSc. The valuations have also been reviewed by Ian Malden MRICS.

The property was inspected on 10 November 2016 by Edward Shakespeare MRICS, Charlotte Aschan MRICS, Sarah-Kate Nolan MRICS and Bryony Buckmaster BSc. We inspected a sample of the office floors, at various levels throughout the building to include the gym and basement levels. We did not internally inspect the retail units. The weather on the date of our inspection was dry, albeit cloudy.

All those above with MRICS qualifications are also RICS Registered Valuers. Furthermore, in accordance with VPS 3.7, we confirm that the aforementioned individuals have sufficient current local, national and international (as appropriate) knowledge of the particular market and the skills and understanding to undertake the valuation competently.

1.1.10. Extent of Due Diligence Enquiries and Information Sources

The extent of the due diligence enquiries we have undertaken and the sources of the information we have relied upon for the purpose of our valuation are stated in the relevant sections of our report below.

Where reports and other information have been provided, we summarise the relevant details in this report. We do not accept responsibility for any errors or omissions in the information and documentation provided to us, nor for any consequences that may flow from such errors and omissions.

1.1.11. Liability Cap

Our letter confirming instructions at Appendix 1 includes details of any liability cap.

1.1.12. RICS Compliance

This report has been prepared in accordance with Royal Institution of Chartered Surveyors’ (“RICS”) Valuation – Professional Standards January 2014 (the “RICS Red Book”) published in November 2013 and effective from 6 January 2014, in particular in accordance with the requirements of VPS 3 entitled Valuation reports and VPGA 2 Valuations secured lending, as appropriate.

Our report in accordance with those requirements is set out below.

1.1.13. Verification

This report contains many assumptions, some of a general and some of a specific nature. Our valuations are based upon certain information supplied to us by others. Some information we consider material may not have been provided to us. All of these matters are referred to in the relevant sections of this report.

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We recommend that the Bank satisfies itself on all these points, either by verification of individual points or by judgement of the relevance of each particular point in the context of the purpose of our valuations. Our valuations should not be relied upon pending this verification process.

1.1.14. Confidentiality and Responsibility

Our Report is confidential to and for the use only of the Addressees, but the Addressees may disclose the Report on a non- reliance and without liability basis to the following parties provided the relevant Addressee procures any person to whom our Report is disclosed pursuant to this paragraph keeps the Report confidential and does not disclose it to any other party:

(a) its or their employees, officers, professional advisers and auditors; (b) a ratings agency for the purpose of an actual or potential permitted syndication, assignment, transfer, securitisation or collateralization; and (c) an indenture trustee and any institutional provider(s) from time to time of any liquidity facility or credit support for such loan.

1.2. Background

The building was originally constructed in 1967 as a headquarters building for British Petroleum. The original building was some 399 ft (122 metres) tall and comprised the main tower and a six storey building to the west. By the 1990s, the building was largely obsolete, such that an extensive refurbishment of the building, designed by Sheppard Robson International, was undertaken and completed in 2001. The works including stripping back the original building to the structural frame prior to a remodelling of the tower, which included extending the floorplates by approximately one metre around the perimeter to provide around 7.8 metres from the cores to the cladding on the tower floors and thus improve the flexibility of the layout from the original 1960s building.

In addition, the roof areas were extended to house plant, plus two wings were created to the east and west of the tower with malls or gallerias between. The wings each have nine upper floors and link to the tower, providing substantial floorplates of some 40,000 sq ft (3,716 sq m). The building is well served by a number of entrance halls and service cores/lift banks, which provide an excellent level of flexibility. Following completion of the redevelopment works, the building was re-branded as CityPoint.

Following a short holding period by the above mentioned consortium, the property was comprehensively marketed by CBRE in February 2007. The property was subsequently acquired by Beacon at a price of around £660.0M in May 2007 and the acquisition was financed with the benefit of a loan from Morgan Stanley.

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The loan was securitised by Morgan Stanley in July 2007, in the £429M Ulyssses ELoC 27 CMBS, in addition to which was a two tranche £106M junior loan, of which £18.0M was repackaged in a B-Loan Repackaging Programme, known as Hillenbrand Partners. The original loan was due to mature in July 2014. Interest payments were suspended on the junior loan, and the underlying securitisation, in February 2012, and in May 2012 consensual restructuring negotiations between Beacon and CMBS bondholders and the junior lender collapsed and the property was subsequently placed into receivership in October 2012. Beacon were retained by the trustees of the Ulysses CMBS as asset manager for the property, and BSCP V Europe Investments, an affiliate of Beacon, provided a £21.7M capex facility to enable the asset management to be undertaken prior to a then planned sale in 2017.

Asset management initiatives identified included a programme of capital expenditure to include inter alia enhance the entrance hall and plaza area of the property; refurbish the vacant floors; and complete a maintenance programme in respect of the building’s infrastructure.

It was subsequently announced in November 2014 that Brookfield Office Properties had purchased the junior loan for a sum of understood to be in the order of £70.0M to £75.0M. At the time, the loan had a nominal balance of £106.0M plus around £8.0M of accrued unpaid interest.

The current sale of the property was originally mooted in March 2016, at which time agents were invited to pitch to advise on the sale. At the time, speculation was that Brookfield would be the “obvious buyer” for the property following its acquisition of the junior loan, which offered them a strategic advantage over other potential investors, not least because the difference between the price paid for the junior loan and the total liabilities of debt inclusive of unpaid liabilities loan was estimated to be in the order of £114.0M. Accordingly, bidders would need to acquire the junior loan at par and repay unpaid accrued interest on the debt, estimated to amount to between £39.0M and £44.0M.

First round bids were received on or around 17 October 2016 and our understanding from the vendor’s agents, GM Real Estate, is that around six parties submitted bids, and following the initial first round bid stage discussions progressed with 2-3 parties, and ultimately the property was placed under offer to Brookfield, your Sponsor at an agreed price of £561.5M, this being a transfer of the shares of the SPV entity.

Phase III of the data room was opened to the final selected parties on 20 October with final bids due by 17 November. We understand that the lowest bid was £530.0M, whilst the highest was in excess of the agreed £561.5M. However, the bids which were subject to the conditionality of top-ups were unable to be progressed by the vendor given the circumstances of the receivership sale. We further understand that due to investment’s market understanding that Brookfield were likely to be eventual purchaser, the competing bids may not have been “finessed” to the level to which would usually be expected in a sales process such as this given that potential investors were unwilling to commit resources to a bidding process which was likely to yield an unsuccessful result. Accordingly, it could be argued that Brookfield did not experience a genuine level of competition for the asset.

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2. The Property, Statutory & Legal Aspects

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2.1. Location

2.1.1. General

CityPoint is a landmark office building located to the north of the City core on Ropemaker Street at its junction with Moor Lane, immediately to the east of the Barbican Arts and Conference centre. Ropemaker Street connects with Moorgate to the east which links with London Wall and the Bank of England 750m to the south, the traditional core of the City. The EC2 district within which the property lies has traditionally been and remains host to the banking industry and its professional advisors.

The “Square Mile” is characterised by various sub-markets for different financial institutions, such as banks, fund managers, accountants, and insurance companies. EC2 is associated with the banking and finance sectors, while EC3 ad EC4 are traditionally the insurance and core legal and accountancy sectors respectively. The total office stock in the City extends to approximately 69.0M sq ft (6.41M sq m) and comprises a broad spectrum of buildings from period properties to new, highly specified offices. Current occupiers in EC2 include Mayer Brown, Deutsche Bank and UBS.

The City of London (the City) remains at the centre of the UK’s banking and financial services industries, albeit the City has experienced increasing competition over the last decade or so from the Canary Wharf Estate in London’s Docklands, which now comprises over 37 Grade A office buildings offering a total of 16.0M sq ft (1.49M sq m), including the headquarters of Barclays, HSBC, Citigroup, JP Morgan and Credit Suisse. In addition to Canary Wharf, the area also faces increased competition for those more cost conscious and “footloose” occupiers from new Grade A office developments at Kings cross to the north west, as well as the more established Southbank and Midtown office markets to the south and west respectively.

It is notable that 83.5% of jobs in the City are in the Financial and Business Services Sector, which is well above the central London average of 59.1%. Banking and Finance accounts for 38.6%, with Information and communication accounting for 8.7% of employment and professional services at 26.8%.

There is not an abundance of tower buildings in the City, partly because of restrictive planning policies and the protection afforded to strategic views of St Paul’s Cathedral, although in recent years these have been relaxed to the Eastern Cluster of the City of London. There are eleven recognised tower buildings, the tallest of which are 110 Bishopsgate, the former Heron Tower or Salesforce Tower, (230 metres), 122 Leadenhall Street (the Cheesegrater), (225 metres) and Tower 42, the former NatWest Tower, (183 metres). CItyPoint is the seventh highest at 120 metres, or 36 storeys.

There is indeed now a trend towards tall building developments in the City, with 50 completed as at September 2014. There are ten tall buildings under construction of which three buildings are over 150m in height. Four tall buildings (75m and over) and 13 buildings (50m and above) have been permitted but construction has not yet commenced.

We enclose below a map that identifies the location of the subject property in the context of the City’s Square Mile.

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2.1.2. Communications

The area benefits from reasonable transport links. Moorgate Station, which provides mainline services to the northern Home Counties together with London Underground services (Circle, Metropolitan, Hammersmith & City and Northern lines), lies 50 metres to the south east of the property. Liverpool Street station is situated 500 metres to the east and provides mainline services to the eastern counties together with further London Underground services. Barbican London Underground lies 400 meters to the west and save for the Northern line provides the same services as Moorgate Station.

2.1.3. Crossrail / The Elizabeth Line

In addition to the existing communications, the local area is also set to benefit from the improvements associated with Crossrail, which will be named the Elizabeth line when the new service opens. Crossrail is the UK’s largest and most important infrastructure scheme currently under construction. Upon completion, which is currently scheduled for Q4 2018, it will provide a high frequency, high capacity service to 37 stations linking Reading and Heathrow in the west, to Shenfield and Abbey Wood in the east via 13 miles (21 km) of tunnels across Central London. The service will bring an additional 1.5M people within 45 minutes of London’s principal business districts and will provide 24 trains an hour for commuters during peak times.

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Crossrail Route Map

The principal City of London stop for the service will be at Liverpool Street station (i.e. within a few minutes walk to the east of the property). The station will provide new entrances and ticket halls at both Liverpool Street and Moorgate and new longer platforms and interchange routes through the station. The new ticket halls will relieve congestion, provide step-free access and seamless interchanges.

Liverpool Street Station Crossrail CGIs

When the route fully opens in December 2019, a train every two and a half minutes at peak time will allow passengers to travel all the way through to Paddington, Heathrow or Reading in the West and Shenfield or Abbey Wood in the east. It will be possible to directly connect with three of London’s five airports (with single interchange to the other two), providing a highly desirable railway connection between Heathrow and Gatwick.

The table below shows the anticipated reduced travelling times as a result of the Crossrail station at Liverpool Street:

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Destination Current Journey Time (Minutes) Crossrail Journey Time (Minutes) Canary Wharf 22 6 Paddington 23 10 Abbey Wood 42 18

2.1.4. Occupiers

Major buildings/occupiers in the vicinity of the property include Moor Place, 30 Crown Place, 20 Moorgate and Principal Place which are occupied by Pinsent Masons, Amazon, JP Morgan Chase Bank, and Tradeweb Europe Limited.

Ropemaker Place is to the north of the property and comprises a 20 storey office building designed by Arup Associates, with floor plates ranging from 10,422 to 42,539 sq ft (968 to 3,952 sq m). The building provides 609,775 sq ft (56,650 sq m) and is occupied by various international finance and investment companies, including, Liberum Capital, Macquarie Group (who moved from the subject property) and The Bank of Tokyo-Mitsubishi UFJ, along with three retail units.

Moor House, which lies a short distance to the south at the junction with Moorgate and London Wall is let to CLSA, Unicredit, Peel Hunt and Citadel Investment Group.

2.1.5. Local Developments

There are currently four schemes in the development pipeline within the immediate vicinity of CityPoint, which aggregate to a total area of 1.10M sq ft (102,387 sq m). The developments are due to complete from Q2 2017 onwards. We summarise the schemes as follows:

1 London Wall Place, EC2

1 London Wall Place comprises a 309,477 sq ft (28,751 sq m) headquarters office development by Brookfields and Oxford Properties in joint venture. The accommodation will be arranged over 12 storeys with floor plates ranging in size from 9,000 sq ft (836 sq m) to 42,000 sq ft (3,902 sq m). The scheme is entirely pre-let to Schroders Plc and is due to completed in Q1 2017. It is rumoured that Schroders have taken a 20 year lease at a blended rent of £61 per sq ft (£657 per sq m) along with a 30 month rent free period.

1 London Wall Place CGI 1 London Wall Place CGI

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2 London Wall Place, EC2

2 London Wall Place comprises a 191,659 sq ft (17,806 sq m) 16-storey office development by Brookfields and Oxford Properties in joint venture. The office tower will provide floor plates in the order of 12,000 sq ft (1,115 sq m) and is due to complete in Q2 2017. Approximately 60,000 sq ft (5,574 sq m) has been pre-let to law firm, Cleary Gottlieb Steen & Hamilton LLP for a term of 20 years at a rent of £65 per sq ft (£700 per sq m).

2 London Wall Place CGI 2 London Wall Place CGI

21 Moorfields, EC2

21 Moorfields was acquired by Land Securities in Q1 2015 and is being redeveloped to provide two high quality office buildings (East and West) with retail accommodation at ground floor, totalling circa 512,944 sq ft (47,654 sq m). The site extends 1.9 acres (0.77 hectares) and is located directly above Moorgate underground station. The East building will provide 418,000 sq ft (38,833 sq m) arranged over 16-storeys, while the West building will provide 94,944 sq ft (8,820 sq m) over 8-storeys. The scheme has been designed by Wilkinson Eyre and is due for completion in Q4 2019.

21 Moorfields CGI 21 Moorfields CGI

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101 Moorgate, EC2

The development at 101 Moorgate is situated adjacent to and above the proposed new western entrance to Crossrail’s Liverpool Street station and will comprise 88,000 sq ft (8,175 sq m) of office and retail accommodation. The over-site development will comprise six floors of office space over the ticket and entrance hall to the new station and a new office entrance will be located at the north end of the site with access provided via Moorgate and Moorfields. Retail accommodation will be provided at ground floor. The scheme has been designed by John Robertson Architects on behalf of Aviva Investors (Freeholder) and Crossrail (Developer) with construction due to commence on-site in 2017 once work to construct Liverpool Street Crossrail Station is complete. The scheme is anticipated to reach practical completion in 2020.

21101 Moorfields Moorgate CGI 21101 Moorfields Moorgate CGI

2.2. Situation

CityPoint, owing to its size and scale, being the largest and the seventh tallest building in the City, dominates the immediate surroundings and is a distinctive landmark on the City skyline.

The property occupies the majority of a broadly rectangular shaped island site of 2.49 acres (1.009 hectares) with the well defined boundaries of Ropemaker Street to the north and Moor Lane to the west. To the east, part of the site which includes the large piazza in front of the building, extends to Moorfield, with the balance of the boundary abutting Moorfields House and including Tenter House’s car park ramp. On the south side of the piazza is Tenter House and New Union Street, from which the subject property takes its service and vehicular access. Beyond Tenter House is 21 Moorfields, a land securities development which will form part of the western ticket office for Liverpool Street’s Crossrail station. Once complete the building will form 512,944 sq ft (47,654 sq m) of office and retail accommodation as well as a new public square.

The other dominant feature of this part of the City is the Grade II listed Barbican centre, which was developed in the 1960s and provides an extensive exhibition and conference centre along with approximately 2,000 residential apartments.

To the west of the property on the other side of Moor Lane is The Heron, a 36 storey residential tower which was developed between 2010 and 2013 by Heron International. The building forms part of a wider redevelopment of Milton Court, to include a new teaching and performance centre for the Guildhall School.

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The retail provision is limited, albeit improving and is centred along Moorgate and South Place, along with a number of eateries at the property itself. A more extensive offer is available at Paternoster Square and Cheapside, which lies approximately 800 metres south west of the property. The absence of a strong retail pitch in the vicinity of the property in part explains the facilities offered within CityPoint, which includes a leisure club at lower ground floor level, together with nine bars/restaurants/coffee shops, a barbers and a nightclub, arranged in gallerias/malls in and around the main tower.

We provide a Local Street Map below.

2.3. Description

2.3.1. Overview

CityPoint is a major landmark City office complex arranged on four basement levels, lower ground, ground and 34 upper floors. The ground floor is known as Level 1 and extends through to Level 36. There is no Level 13. Extending to 120 metres it is the seventh tallest building in the City and at 709,501 sq ft (65,915 sq m) is the largest building in the City, accessed via a grand public piazza. There are four plant levels, namely at Basement Levels B2 and B3, Level 14 and Level 36. A small amount of office accommodation is provided at the southern end of the building at Levels 14 and 36, albeit access is by staircase only from Level 12 (no Level 13) and Level 35 respectively.

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Main Entrance – East Elevation North Elevation

The floorplates of the main office tower are arranged around a central core and designed in the shape of an oil tanker with a bow and stern end, as the building was originally built as British Petroleum’s (BP) headquarters in the 1960s, then known as Britannic Tower. At that time, the property consisted of the main tower and a six storey building to the west.

In the late 1990s the building was stripped back to the structural frame and substantially extended and redeveloped by Wates, reaching practical completion in June 2001. This involved remodelling the tower including the provision of additional roof areas to house plant and extending the floorplates of the main tower by approximately 1 metre around the perimeter. The span from the central cores to the cladding on the tower floors is 7.8m.

Two wings were created to the east and west of the tower with malls or gallerias between and form the base of an atrium extending the full height of each wing housing the retail and restaurant units. The wings extend to nine upper floors and link to the tower at most of these levels to provide substantial up to 43,000 sq ft (3,995 sq m) floorplates up to Level 7, reducing to a typical tower floorplate of circa 12,500 sq ft (1,161 sq m), and with only 1,769 sq ft (164 sq m) and 2,711 sq ft (252 sq m) on the plant rooms at Levels 14 and 36 respectively. An entrance canopy feature links the wings from Level 9 to Level 12 of the tower, just below the plant room at Level 14.

Ninetieth Floor Plan Seventh Floor Plan

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Level 12 – Canopy Level

Separate entrance halls provide access to the offices – up to floor 9 from the wings, and from floors 10 to 35 from the reception of the main tower (floor 36 is accessed by staircase only). There are a total of 13 staircases serving the building and 35 lifts. Male and female wc facilities, to include a unisex wc for disabled use are provided on each floor level. The main entrance is through a domed three storey feature canopy on the east side of the building which leads to the main central double height reception area, which serves the tower and leads to three banks of high speed passenger lifts. Further lifts, goods lifts and fireman’s lifts are also provided and we elaborate on this under Specification below.

A separate reception area is provided for the anchor tenant in the building, Simmons & Simmons. A piazza area to the east of the building provides two kiosks and various ventilation shafts together with two further receptions in the east and west wings to the principal office tenants on the lower floors.

Approach to Main Entrance Main Reception

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There are in effect five basement levels which extend beneath this building and piazza and are broadly ‘L’ shaped in plan, and comprise lower ground, level 0 and levels B1, B2 and B3, which contain a mixture of tenanted areas, common areas and landlord areas. The lower ground floor contains bars, club and office areas; Level 0, the health club, which features an eight lane swimming pool, bar, storage, office areas and a loading bay; Level B1, the car park, storage areas and plant rooms, and Levels B2 and B3, plant rooms and storage areas.

Bar / Restaurant Unit Car Park

The retail units are arranged at ground and lower ground floor level, predominately to the south west of the site. A number of the units benefit from outdoor seating areas. The units range from 480 to 5,275 sq ft (45 to 490 sq m) on the ground floor, aggregating to circa 66,500 sq ft (6,174 sq m) in total. The lower ground floor bar is 11,695 sq ft (1,087 sq m) in total and has an entrance at ground floor level close to the main entrance to the office accommodation. There are two kiosk units located in the piazza which are let to Costa Coffee and a Newspaper kiosk.

Goad Plan

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Piazza Newspaper Kiosk

The car park at Level B1 provides 99 car parking spaces (including 10 disabled spaces), together with 99 motorcycle bays and 99 bicycle racks accessed via a single vehicle security controlled ramp from New Union Street, which also serves as the goods/service entrance, along with a second service entrance on Moor Lane, pictured below.

North on Moor Lane Service / Loading Area on Moor Lane

2.3.2. Construction

The property is formed principally of a cast in-situ reinforced concrete structural frame and floor slabs with steel frames added as part of the redevelopment works. The new floor perimeter extensions to the tower are of lightweight concrete construction, designed to the equivalent loading and acoustic properties as the existing structural slabs. A new structure was provided to the southern end of the tower comprising a structural steel frame and metal deck lightweight concrete floors.

The elevations comprise almost entirely storey height double glazed curtain walling with laminated inner panes and toughened solar controlled outer leaves, together with limited solid or perforated aluminium panels.

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There are two principal roof sections. The roof to the top of the tower above the plant is steel frame and features integral eaves gutters. Beneath this raised roof section is the flat roof areas to the tower, upon which the plant sits, and the roofs over the wings, which are all waterproofed concrete decks with either concrete slabs or ballast over insulation.

2.3.3. Specification

The individual office floors when practically completed to shell and core were offered with either a capital contribution for the ‘Category A’ fit-out or the landlord would undertake the works on behalf of the tenant. Accordingly, various floors have been fitted out on slightly different bases and reflected in the fit-out documentation. The fit-out documentation includes a Base Building Specification which sets out the performance criteria of the building and landlords installations.

Subject to individual tenant variations, the office accommodation has been delivered, or is deemed to be delivered, to a Category A specification which can be summarised as follows:

. Fully accessible raised floors with 100 mm deep nominal void with 65mm clear void on the office floors. . Underfloor power distribution, including compartmental floor boxes in the raised floors. . Carpet tiles. . Perforated white metal tile suspended ceilings with recessed fluorescent lighting up to 500 Lux with high efficiency low brightness Category 2 luminaries. . Slab to Slab height of 3.34 metres with minimum finished floor to ceiling height of 2.55m. . Air conditioning via ceiling mounted four-pipe fan-coil air conditioning systems, with ducted fresh air via linear grills. . Standard office loadings of 3.5KN per sq m. . Good provision of lifts throughout the building which can be summarised as follows: • 4 x 17 person lifts serving from level 1, express to level 7 and then all levels 9 to 12 and 15 to 17. • 4 x 17 person lifts serving from level 1 express to level 17 and all levels 18 to 24. • 4 x 17 person lifts serving from level 1 to level 17 and then express to 25 and all levels 26 to 31. • 3 x 13 person lifts serving from level 1 to level 17 and then express to level 32 and all levels 33 to 35. • A car park and health club area lift (scenic) is located to the north of the main entrance serving level B1 for the car park and level 0 for the leisure facility. • Two goods lifts are provided serving all floors from B2 to level 36, with fire fighting lifts. • Additional lifts in east and west wings in two blocks of 4, 24 person lifts and 1 block of 3 comprising 2, 24 person lifts and a 16 person lift, mainly serving basement level 1, the main lobby at level 1 and levels 2 to 8. The 16 person lift serves basement levels 2 and 3. . Lift lobby areas finished with granite with high quality finishes to the lift cars. . Sprinkler protection system in all areas with fire control centre. . Fully integrated Building Management System with standby generator systems. . Various high quality finishes, including doors and ironmongery etc. . Entrance and reception areas finished with limestone floors with polished marble and granite walls. . Solid blockwork walls within the basement and plant areas with drywalls to the office areas which are finished with plaster and paint. . Health club/retail/restaurant units demised in shell condition.

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2.3.4. Tenants’ improvements

The office floors have been fitted out by the various tenants whereby the space has been tailored to the individual occupiers’ requirements in order to incorporate inter alia tenant reception areas, cellular offices, meeting rooms, kitchen areas and open plan areas.

Office Fit-out Level 34 Internal Staircase Level 34

Kitchenette Simmon & Simmons Fit-out

2.3.5. Site Area

The site of the property is roughly rectangular in shape and is bounded by Ropemaker Street to the north, Moor Lane to the west, Moorfields to the east and Tenter House and New Union Street to the south from which the subject property takes its service and vehicular access. It has frontage of 135 metres onto Ropemaker Street. By reference to the Ordnance Survey Extract, we calculate that the property has an area of 2.39 acres (0.969 hectares). This area and the precise site boundaries should be confirmed by your legal advisers.

We attach an extract from the Ordnance Survey sheet below, showing the property edged in red and its immediate vicinity.

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Ordnance Survey Plan

2.4. Accommodation

We have been provided with three Area Measurement Surveys, both prepared by Plowman Craven dated May 2016 in connection with the proposed sale, one detailing the areas prepared in accordance with the RICS Property Measurement, 1st Edition, May 2015, i.e. the IPMS area in respect of the office element only; the second, the areas prepared in accordance with the RICS Code of Measuring Practice published in August 2007 (6th Edition) as updated; and the third, the retail areas prepared in accordance with the RICS Code of Measuring Practice. The former provides for an IMPS 3 – Office area of 666,905 sq ft (61,958 sq m). However, market evidence continues to be interpreted on a net internal basis, such that we valued the property on the floor area figures set out below, which we are assume are complete and correct.

We note that there is a small differential between our areas on a sq ft basis and those detailed by Plowman Craven and this is due to the rounding. In addition we have been unable to identify three small basement storage rooms noted in the vendor schedule of tenancies and our schedule of tenancies within the Plowman Craven measured survey, thus providing a small discrepancy of circa 2,000 sq ft between the area confirmed in the measured survey of 707,868 sq ft and the aggregate area adopted for the purpose of our valuation of 709,501 sq ft.

We summarise the floor areas confirmed in the measured survey below and a further breakdown of the floor areas as currently demised is summarised in our Schedule of Tenancies at Appendix 2.

Net Internal Floor Area Floor / Unit Use Sq Ft Sq M

36 Office 2,658 246.9

35 Office 12,992 1,207.0

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Net Internal Floor Area Floor / Unit Use Sq Ft Sq M

34 Office 13,267 1,232.5

33 Office 12,879 1,196.5

32 Office 13,044 1,211.8

31 Office 13,025 1,210.0

30 Office 12,617 1,172.1

29 Office 13,052 1,212.5

28 Office 12,983 1,206.1

27 Office 13,011 1,208.7

26 Office 12,557 1,166.5

25 Office 12,566 1,167.4

24 Office 12,772 1,186.5

23 Office 12,829 1,191.8

22 Office 12,801 1,189.2

21 Office 12,785 1,187.7

20 Office 12,756 1,185.0

19 Office 12,312 1,143.8

18 Office 12,276 1,140.4

17 Office 11,889 1,104.5

16 Office 11,933 1,108.6

15 Office 12,516 1,162.7

14 Office 1,784 165.7

12 Office 14,860 1,380.5

11 Office 16,001 1,486.5

10 Office 17,487 1,624.5

9 Office 17,748 1,648.8

8 Office 23,950 2,225.0

7 Office 40,454 3,758.2

6 Office 41,312 3,837.9

5 Office 43,071 4,001.3

4 Office 43,521 4,043.1

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Net Internal Floor Area Floor / Unit Use Sq Ft Sq M

3 Office 42,241 3,924.2

2 Office & BMA 19,357 1,798.3

1 Office/Reception 5,347 496.7

Grd Storage/Ancillary 18,075 1,679.2

LG Office/Storage/Ancillary 8,747 812.6

Basement 1 Total 5,086 472.5

Basement 2 Total 12,846 1,193.4

OFFICE TOTAL 641,406 59,586.6

R1A Retail 4,402 408.9

R1B Retail 1,553 144.3

R2A Retail 4,794 445.4

R2B Retail 5,276 490.1

R3 Retail 2,378 220.9

R4 Retail 595 55.3

R5 Retail 32,958 3061.8

R6 Retail 1,367 127

R6K Retail 90 8.4

R7 Retail 11,695 1086.5

R8 Retail 1,266 117.6

RK1 Retail 87 8.1

RETAIL TOTAL 66,462 6,174.3

OVERALL TOTAL 707,868 65,760.9

As noted above, there are 99 car parking spaces, 99 motor cycle spaces and 99 cycle spaces.

2.5. Condition

2.5.1. Building Condition Report

We have been provided with a Draft Building Inspection Report dated 15 November 2016 prepared by Watts on behalf of the Borrower. Watts conclude:

“Overall, the building is in good condition, and has been well maintained. A detailed ten year forecast is in place, and this captures the bulk of the works identified.”

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We summarise the main findings of the report below:

. Although the mechanical, electrical and lift services are only 16 years old, the building operates 24 /7 and the services do also, such that the rate of wear and tear is accelerated. The tenants are also demanding and the building management team have chosen to aim to achieve 100% availability. As a result, considerable expenditure is likely to be required over the next 10 years. . The mechanical services provision has been designed and installed to a good standard. The systems are very large and complex with more than 35 heating / cooling circuits and 3 separate BMS systems, but should be relatively simple to operate and maintain. Watts note that a programme of works to refurbish the central plant and the landlord’s primary BMS over the next 10 years is required. . The building sprinklers are certified to provide Ordinary Hazard Group III protection with life safety enhancements. It is not clear if life safety sprinkler heads are required in all parts of the building or just the shell and core areas. The original life safety sprinkler heads installed in the common parts and the office demises had a design fault and have been replaced, but the replacement heads installed are not life safety heads. The original building fire strategy and fire risk assessments offer no guidance as to what is required. In Watt’s opinion the sprinkler heads in reception and a few other shell & core areas will need to be replaced but a specialist review should be commissioned to confirm what is required in the office demise. . The electrical services provision has also been designed and installed to a good standard. Lighting in the common parts has been refurbished and the main plant / equipment is subject to rigorous testing and maintenance. Major expenditure is planned for the replacement of the fire alarm system and the security / CCTV equipment in the short term and two of the four standby generators in the medium term. Watt’s believe that no other major works are required. . The lifts are of good quality and are well maintained. However, due to their age and the 24/7operation as stated above, a 10 year rolling programme of modernisations are planned beginning in 2020. . A Health and Safety Inspection Report was drawn up in October 2016, albeit we have not had sight of this, and a concern raised that ladders were not appropriately marked and regularly inspected. This should be reviewed and undertaken as part of regular maintenance.

Additional points which were highlighted in the Building Inspection Report included:

. Watt’s note that other than the replacement of three double glazed units from the curtain walling, no significant repair work, in excess of normal maintenance is considered necessary for at least 10 years. . No issues were found to be of concern in the foundations . Costs may be accrued where tenants failures have resulted in the operator funding the refurbishment of floors to a CAT A standard . Drainage and water services pipework are routed through the landlord’s electrical riser, this is not considered good engineering practice . The emergency lighting, fire alarm system PA / VA system and the fire telephone system have been recently replaced . The fire alarm system panels are obsolete and need to be replaced. Watt’s were advised that cap ex has been budgeted for the works. . Works to the building have been completed very recently, and efforts should be undertaken by the legal team to ensure that all relevant warranties can be transferred to third parties.

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A Fire Risk Assessment (FRA) review document is updated on an annual basis, the most recent dated 4 October, albeit covers the common parts of the building only. The common parts are considered by the FRA to have no issues outstanding and that all shortcomings identified in the previous FRAs have been attended to. It should be noted that individual tenants must undertake their own statutory obligations with respect of their own demise.

Watt’s estimate that the likely value of repair works needed to place the building in repair will be in the region of £3.489M over the next three years and a total of £11.887M over the next 10 years. Significant costs include: replacement of 20% of paving, with approximately 40% taken up and re-laid in the correct alignment; replace glazed panels (£60,000); and the lifts, stairs and highwalk which once connected CityPoint to the Moorfields Highwalk remain in situ and should be removed and structure made good (£50,000). There is also a considerable allowance made for mechanical (£5.772M); electrical (£1.270M) and lift (£4.525M) services. Watts consider that the majority of this would be recoverable under the terms of a standard institutional lease.

2.5.2. General Condition

As instructed, we have not carried out a structural survey, nor have we tested any of the services. However, we would comment, without liability, that during the course of our inspection for valuation purposes, we observed that the property appears to be in good condition, commensurate with a landmark well let building in the City of London.

2.6. Environmental Considerations

2.6.1. Environmental Report

An Environmental Audit, dated 17 November 2016, prepared by Watts on behalf of the Borrower, forms an appendix to the Building Inspection Report referred to above.

With regards to historic uses, the Audit notes that as at the Map Survey Dates of 1880 & 1896 there were undescribed buildings considered to be of light industrial, commercial, retail and/or residential usage and church, and in 1953 this changed to undescribed building considered to be of commercial usage and cleared land, before Map Survey Dates in 1971 & 1991 showed the site as Britannic House and ponds.

The Audit also notes that a diesel above ground storage tank (AST) of 25,000 litre capacity was present at basement level supporting four diesel generators. However, no issues were identified with this and Watts comment that no issues of significant environmental concern were encountered during the site inspection.

It is highlighted that reference to the City of London website indicates the site has not been designated as contaminated land under Part IIA of the Environmental Protection Act 1990.

Following assessment of the information gathered within the Environmental Audit, it is Watt’s opinion that overall a low risk exists as a liability for the owner of the site for a continuation of existing usage.

2.6.2. Flooding

Watts note in their Environmental Audit that the Environment Agency (EA) classifies the site to be located in an area that has a ‘very low’ chance of flooding each year. Very low means that each year, this area has a chance of flooding of less than 1 in 1,000 (0.1%). This takes into account the effect of any flood defences that may be in this area.

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2.6.3. Asbestos

We have been provided with a Asbestos Re-inspection Report dated 18 February 2016, prepared by Alcumus SM&MS for CBRE on behalf of the Borrower. This is in addition to the Type 2 Asbestos Survey which was undertaken by RPS Consultants Ltd on 16 January 2006 and further updated in 2012, 2014 and 2015. In summary the 2006 Survey identified a number of asbestos containing materials that required monitoring to ensure that they remain in a safe condition. Additional updated were undertaken when there were any changes to the record.

Three Asbestos Containing Materials (ACMs) were found to be present in the survey, albeit these are all classed as ‘Very Low Risk’ and were found in gaskets to dry riser pipework. It has been recommended that the ACM is left in place and managed in situ rather than removing it.

2.6.4. Assumption

Our valuation has had regard to the contents of the above reports. We have formed an opinion of the market's perception of the issues involved and consider that whilst the property remains in its current use the risk of contaminated land liability is low. As a prospective lender, we would wish you clearly to understand the approach we have adopted, and satisfy yourselves that the approach is reasonable in all the circumstances.

2.6.5. Energy Act 2011

From April 2018, a new legal standard for minimum energy efficiency standards (“MEES”) will apply to commercial buildings. The MEES Regulations originate from the Energy Act 2011, and states that from 1 April 2018, landlords of buildings within the scope of MEES Regulations must now not renew existing tenancies or grant new tenancies if the building has a less than the minimum EPC Rating of E, unless the landlord registers an exemption.

We have been provided with an EPC issued on 7 May 2014 which confirms a rating of D (77).

2.7. Town Planning

2.7.1. Statutory Background

We have made enquiries of the local planning authority, The City of London, and understand that the statutory plan covering planning policy and development control for the area is detailed within the Local Plan which was adopted in January 2015. This sets out the City Corporation’s vision, strategy, objectives and polices for planning the in the City of London. It provides a framework that co-ordinated a range of strategies prepared by the City Corporation, its partners and other agencies and authorities. It provides the strategy and policies for shaping the City until 2026 and beyond.

The Local Plan has been developed in the context of a range of other plans and strategies operating at the City, London and national levels, and is also accompanied by a number of other planning documents that provide policies, guidance and feedback on how the City is developing, including;

. Policies Maps which show where the Local Plan’s policies apply to specific locations . Local Development Scheme . Statement of Community Involvement

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. Supplementary Planning Documents (SPDs) . Community Infrastructure Levy (CIL)

A wide range of regional strategies, including those for planning, transport, economic development, housing, energy and air quality are prepared by the Mayor of London, and brought together in the London Plan. The London Plan, together with the City’s Local Plan, form the ‘Development Plan’ for the City of London.

The building is not Listed nor does it fall within a Conservation Area. By reference to the Local Plan, the south eastern corner of the site falls within the London View Management Framework – Protected Vista Wider Setting Consultation Areas, and is affected by Policy No’s CS 13 & 14. The aim of Policy No. CS 13 is to protect and enhance significant City and London views of important buildings, townscape and skylines, making a substantial contribution to protecting the overall heritage of the City’s landmarks, so ensuring its Outstanding Universal Value, taking account of the Tower of London World Heritage Site Management Plan (2007). Policy No CS 14 ensures that Tall Buildings achieve a world class standard of architectural quality and that their context and location are carefully considered to enhance the skyline and provide a high quality public realm at ground level.

2.7.2. Planning History

The property was originally constructed pursuant to a consent granted on 1 June 1961 for “Comprehensive development of the area by the erection of 3 office buildings, with ancillary accommodation & access thereto & providing for areas of open space to be available to the public at: - (a) Area bounded by Moor Lane, Ropemaker Street, Moorfields & the Metropolitan Railway comprising 2/16 Ropemaker Street, 2, 3 & 4 Finsbury Street, 1/10 (inc.) & 21/27 (odd) White Street, 14/38 (even) Moor Lane, 19/41 (odd) Moorfields, Moorfields House & 10/18 (even) Tenter Street, 1/19 New Union Street & the highways or former highways of Finsbury Street, Whites Court, White Street, Tenter Street & New Union Street. (b) Site bounded by Ropemaker Street, Moorgate, the southern boundary of 165/171 Moorgate & Moorfields comprising 165/171 Moorgate.” (ref: 3350H).

Other planning decisions of note revealed by our enquiries are as follows:

Date of Decision Description of Development Decision Change of use of units 2B & 2C from Class A1(shop) and Class D2 (indoor golf club) 28 October 2014 to Class A1(shop) and/or Class A3 (food and drink) at ground floor and basement Approved levels(497 sq.m). (ref: 04/00671/FULL) Change of use of part of the ground floor reception area from offices (B1) to Retail 21 November 2013 (Class A1) use or Restaurant (Class A3) use total floorspace 118 sq.m (ref: Approved 13/00915/FULL) Retention of works commenced under planning permission 3350BE dated 9th 23 March 1999 December 1997 and completion of enlargement and redevelopment of existing Approved building to provide new offices, A1 retail A3 restaurant uses (ref: 3350BH). Partial demolition, enlargement and redevelopment of existing buildings to provide 9 December 1997 Approved new office, A1 retail and A3 restaurant uses (ref: 3350BE) Variation to condition 1 of planning permission granted 14.04.92 (91-3350BC) to extend period for commencement of works of re-cladding of the main tower building, 22 July 1997 partial demolition and rebuilding of the South Wing and podium building, partial Approved demolition and rebuilding of public walkways, remodelling of square and external spaces (ref: 3350BF)

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Date of Decision Description of Development Decision Re-cladding of the main tower building. Partial demolition and re-building of the 14 April 1992 South Wing and podium building. Partial demolition and re-building of public Approved walkways. Re-modelling of Square and external spaces (ref: 3350BC)

2.7.3. Summary

The Certificate of Title states the Existing Use as “Offices with retail, leisure and restaurant facilities and other ancillary uses”. In valuing the property we have assumed that the building is used in accordance with its present lawful uses and that the building complies with current planning laws and building regulations and that it is not subject to any adverse proposals or possible enforcement actions.

2.8. Taxation

2.8.1. Rates

From informal enquiries of the Valuation Office Agency Internet Rating List www.voa.gov.uk, we understand that the current rateable value for the property, based on the 2010 Valuation Roll is £22,048,850. The Uniform Business Rate for the 2016/2017 financial year is 49.7 pence in the Pound. For properties located in the City of London there is an additional Supplement of 0.5p, as well as a 2p Crossrail levy on properties in London where the Rateable Value is in excess of £55,000.

Rateable Values range from £10,000 on the Costa Limited unit on the 1st floor to £5,150,000 for the Simmons & Simmons on the ground to fifth floor office accommodation.

We calculate that the rates currently payable are £11,509,499.70 excluding any transitional or other relief.

The 2017 draft valuations have recently been released and as expected there is an increase across the entire building. For example, the Ground to fifth floor accommodation is due to increase from £5.15M to £6.38M, Level 33’s Rateable Value will rise from £39.50 per sq ft to £55.30 per sq ft (£425 to £595 per sq m), Level 23 from £39.50 to £50.65 per sq ft (£425 to £545 per sq m), Level 11 from £37.75 to £44.40 per sq ft (£406.30 to £478 per sq m) and Level 8 from £39.50 to £42.80 per sq ft (£425 to £460.75 per sq m). These increases in Rateable Value are likely to increase the Landlords shortfalls on any vacant accommodation in the building.

2.8.2. VAT

We are informed that the landlord has exercised its option to tax the property for VAT purposes. Our valuation is exclusive of VAT.

2.9. Tenure

We have been provided with a draft Certificate of Title prepared by Freshfields Bruckhaus Deringer LLP (FBD) (reference LON43336275-28/11/16) and a draft Overview Report prepared by Allen & Overy (reference EEMW/0012034-0004566 PY:4265052.1), both of which we have reviewed.

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2.9.1. Overview

The property is held Freehold under Title number NGL745546. There is a headlease between Wates CityPoint First Limited and Wates CityPoint Second Limited and Dreamclose Limited, together with an underlease dated 24 November 2000, between Dreamclose Limited and Wavegrange Limited. We understand that both these agreements relate to the structure of the JPUT owning the freehold and as such do not have an effect on our opinion of value of the property. We nonetheless comment upon each structure below. The Headlease is held under Title Number NGL794089 and the Underlease NGL794088.

2.9.2. Registered Title

Headlease The headlease is registered at HM Land Registry under title number NGL794089. Wates CityPoint First Limited and Wates CityPoint Second Limited, as trustees for and on behalf of Wates CityPoint Limited, granted Dreamclose Limited a headlease of the entire property, to include all that freehold land and buildings known as CityPoint, for a term of 250 years from 24 November 2000, expiring on 23 November 2250, at a peppercorn rent.

The lessee covenants to insure the premises in a sum not less than the full reinstatement cost against loss or damage by insured risks. The tenant is also to maintain insurance in respect of all plant in the nature of landlord’s fixtures and fittings.

The permitted use is not expressly dealt with save to say that the premises cannot be used or permitted to be used for any purpose not permitted by the insured policies in place, or to do or permit to be done any act of thing whereby such policies may be or become invalidated or cancelled.

There are no forfeiture provisions in the lease and the landlord covenants that the tenant may peaceably hold and enjoy the demised premises during the term of the lease without the interruption of the landlord.

Underlease The underlease is registered at HM Land Registry under title number NGL794088. Dreamclose Limited granted Wavegrange Limited an underlease of the entire property, to include all that freehold land and buildings known as CityPoint, for a term of 250 years less three days from 24 November 2000, expiring on 20 November 2250.

There is a turnover rent of 41% of the Gross Revenue, as defined below, which is subject to a minimum rent of £13,100,000 per annum for the first five years of the term. The minimum rent ceased to apply on 24 November 2005, after which time there is no longer a concept of minimum rent. The turnover rent is payable by quarterly payments in advance on 22 January, 22 April, 22 July and 27 October in each year.

Gross Revenue means all revenues derived by the tenant from underleases and actually received by the tenant and includes:

(i) Rents, licence fees or other monies of whatever description by way of income; (ii) Loss of rent insurance; (iii) Damages or other sums in respect of loss of mesne profits; (iv) Interest on Gross Revenue received by the tenant; and (v) Sums for the variation or surrender of an underlease;

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But does not include:

(vi) Contributions or reimbursements to the tenant of service charges, insurance premiums or outgoings, defrayed or to be defrayed by the tenant in relation to the demised premises and which are separately reserved and distinguished from other rent reserved by an underlease; (vii) Value added tax (or any other tax) on any item of Gross Revenue; (viii) Costs recovered in the course of pursuing legal remedies with respect to the demised premises; (ix) Management charges made by the tenant for the management of the premises, but to the extent only that they represent fair and competitive charges for the provision of services in and to the premises in accordance with market practice at the relevant time and the principles of good estate management; (x) Revenue to which the tenant may be entitled but which has not been received or recovered.

Gross Rent is to be treated as it was received by the tenant when it is received in clear funds notwithstanding any assignment, charges or other investment of income from the premises made by the tenant. The tenant is to deliver to the landlord a statement on the second rent payment date following the end of a year (which is defined as being a year of the term calculated from 24 November) which:

(i) Sets out with respect to that year Gross Revenue received, arrears of Gross Revenue, interest accrued on arrears of Gross Revenue, and any other relevant information with respect to the calculation of Additional Rent for that Year; (ii) Is certified by an accountant; (iii) Adjusts the aggregate amount paid by the quarterly instalments for the year,

And the tenant will pay or be credited with the amount of the adjustment shown to be necessary by the statement, as the case may be, with such interest as may also be payable or be due to be credited.

The tenant is to keep the premises in good and substantial repair and condition. In addition, the tenant is to insure the premises in a sum not less than the full reinstatement cost against loss or damage by the insured risks.

Again, the permitted use is not expressly dealt with save to say that the premises cannot be used or permitted to be used for any purpose not permitted by the insured policies in place, or to do or permit to be done any act of thing whereby such policies may be or become invalidated or cancelled.

2.9.3. Rights Benefiting the Title

The draft Certificate of Title confirms that the property has the benefit of various rights over the property. The rights granted under the transfers include inter alia the following material rights:

Tenter House Transfer (22 May 1962) By way of the Tenter House Transfer, the Corporation and the Fraternity transferred the land shown edged blue on Plan 4 appended to the draft Certificate (Tenter House) to Barranquilla. Rights were reserved in favour of the property largely relating to rights of way. The transfer does not contain obligations relating to the payment of any costs of the owner of Tenter House in relation to the exercise of the rights.

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Transfer of Part of the Western End of Tenter House (10 March 2000) The transfer between (1) Wates CP and (2) Metropolitan, transferred the Excluded Land out of the freehold title.

Transfer of Part (17 July 1987) Rights reserved in a transfer made between (1) BP and (2) The City of London Real Property Trust Limited. The transfer related to a parcel of leasehold land to the south of Ropemaker Street, to the west of Moorgate and to the east of Moorfields. Under this transfer the owners of the property and the land thereby transferred declared that neither had rights of light over the others; and that they were each free to redevelop.

Tenter House Rights of Light Deed (10 March 2000) Rights granted by a rights of light deed between (1) Wates CityPoint Limited and (2) Metropolitan Properties (City) Limited. The deed provides for the reciprocal grant of consent for the purposes of rights of light and air by Wates and Metropolitan over the other’s property. In consideration of a payment to Metropolitan of £100,000, Metropolitan granted its permission to Wates to construct CityPoint notwithstanding that this may interfere with the access of light and air to Tenter House. Wates granted Metropolitan the right, subject to compliance with the covenant in the transfer, to carry out any redevelopment of Tenter House, that this may interfere with the access of light and air to the property.

Party Structures Agreement (21 October 1970) A party structures agreement relating to Moorfields House made between (1) MHOA and (2) BP. The agreement provided for sharing of costs between the relevant land owners at the time of original construction by BP. In the event of a redevelopment resulting in either party making greater use of the party structures than previously, the London Building Acts will apply.

Party Structures Agreement (7 August 1973) A party structures agreement relating to Tenter House made between (1) BP (2) Barranquilla Investments Limited and (3) the Post Office. As with the 1970 party structure agreement, the agreement provided for sharing of costs between the relevant land owners at the time of original construction by BP. Again, in the event of a redevelopment resulting in either party making greater use of the party structures than previously, the London Building Acts will apply.

Transfer (31 December 1996) Rights reserved in a transfer made between (1) BP (2) Number 27/35 Cannon Street Limited (now Wates CP Limited) and (3) Wates City of London Properties plc. This is the transfer by means of which Wates CP acquired the freehold from BP. Under the transfer, BP granted to the transferee various rights for the benefit of the property over Moorfields House.

2.9.4. Incumbrances Burdening the Title

The Certificate of Title confirms that the following matters are incumbrances on the property:

Conveyance (6 May 1959) Conveyance made between the Church Commissioners for England (1) and the Fraternity (2). This conveyance relates to two areas of land over which the transferor was granted the right of free flow of water and soil through any drains and watercourses under said property.

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Conveyance (9 February 1956) Conveyance reserved out of this land to the British Transport Commission such parts of the retaining wall bounding the adjacent railway and the footings thereof, as extend under the land coloured pink, together with such other rights, powers, easements and privileges as were vested in the British Transport Commission under the London Passenger Transport Act 1933 and the Transport Act 1947. Freshfields state that they understand that this relates to part of the underground station at Moorgate and the London Underground and Network Rail lines.

Tenter House Transfer (22 May 1962) The Tenter House Transfer granted a number of rights for the benefit of Tenter House over the property including: the right of way over parts of New Union Street for the purpose of obtaining access from and to Moor Lane, a right of way from and to Moorfields along the ramp cross over and along such route allocated through the car park at basement level for the purpose of access to and from Tenter House, and a right of access over the land immediately adjoining the boundary of Tenter House for the purpose of the construction and maintenance, demolition and rebuilding of Tenter House.

(iv) The Transfer dated 10 March 2000 of the western end of Tenter House granted the right of support from the remainder of the land within Title Number NGL745546 and the right to enter this land for the purpose of inspecting, repairing, strengthening or reinstating the supporting structures and supporting piles below the surface land.

Deed of Grant for Sub-Station Works (21 August 1990) Under the deed for substation works the then owner, BP, granted to Lazard Brothers & Co Limited, as tenant of 21 Moorfields, rights enabling Lazards to enter the property via New Union Street in order to construct a reinforced concrete slab party wall within the basement of the adjoining property and party within the boundary of the property at basement level underneath New Union Street and for siting on that slab a new electricity transformer and all necessary and ancillary cabling. These rights expired on 24 June 2008, but the deed is still noted on the freehold title.

Deed (26 February 1998) The Deed made between (1) Wates CP Limited (2) London Underground Limited and (3) Hammerson UK Properties relates to rights of access and light and air in connection with certain building works. The deed further provides for the boundary in the basement areas under New Union Street between the property and the LUL/Hammerson land to be agreed. Under this deed, Wates CP grants Hammerson a right of access at all times during the period of the redevelopment of Moorgate Station and thereafter for the purposes of the inspection, maintenance and repair of Moorgate Station over that part of New Union Street within the property.

Hot Water Installation Agreement (10 March 2000) Agreement relating to Moorfields House provided for the installation by Wates CP of a new hot water system at Moorfields House at its expense. The vendor has stated that as far as it is aware the installation of this hot water system was never triggered and that the agreement has now fallen away and there are other arrangements in place.

Covenants under the Tenter House Transfer (22 May 1962) Under the terms of the Tenter House Transfer, the property is subject to a restrictive covenant which benefits Tenter House, given by the owner of the property, which provides that in the event of any redevelopment of specified land (being the whole of the property), the owners of the property will provide and maintain as open space an area or aggregate areas of at least 36,000 sq ft on the property.

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Moorfields Hot Water Supply Agreement A lease dated 6 November 1964 relating to parts of the basement of the property for the benefit of the owner of Moorfields House. The lease is for a term of 99 years from 25 December 1959 and provides for the supply of hot water by the owner of the property to Moorfields House.

Electricity Sub-Station Lease A lease dated 29 March 1999 relates to an electricity sub-station on the property for a term of 99 years.

Licence relating to Installation and Use of Telecommunications Apparatus (30 May 2006) A licence relating to the installation and use of telecommunications apparatus was granted by Wavegrange to AboveNet Communications UK Limited granting consent to AboveNet to enter certain common parts of the building in order to install and maintain equipment to provide electronic communication services to tenants and occupiers of the building. An annual licence fee of £2,000 is payable with this amount to be reviewed every third year on an upwards only basis in line with RPI.

FBD confirm that subject to any disclosures in the draft Certificate of Title, the Vendor “has a good and marketable title to the Property and is solely legally and beneficially entitled to the Property”, and we confirm that there is nothing contained therein which has an impact on our opinions of value.

2.10. Occupational Leases

CityPoint currently produces an aggregate gross income of £20,529,980 per annum, which is derived from 34 tenants under the terms of 51 leases. There are 16 office tenants which account for £19.195M per annum or 93.50% of the current income. The remaining 18 tenants are in respect of the retail and leisure space and ancillary areas to include basement storage accommodation. Seven of the leases, six in respect of the office accommodation and one in respect of a restaurant unit let to Wagamama Limited are currently subject to unexpired rent free periods. The committed rent reserved under these leases is £4,844,040 per annum such that the aggregate committed rent is some £25,366,020 per annum in aggregate.

We summarise the current and committed income as follows:-

Rent per annum

Aggregate Current Rent £20,521,980

Committed rents in rent free L35/36 SquarePoint Capital LLP from 1 November 2017 £1,095,000 L34 Flextrade UK Limited from 1 August 2018 £928,000 L33 Kaye Scholer LLP from 4 November 2017 £837,200 L31 Seyforth Shaw UK LLP from 22 April 2017 £364,800 L28 United Trust Bank from 19 January 2017 £754,010 L25 Wilkie Farr and Gallagher from 29 January 2018 £753,840 Unit 1A Wagamama Limited £110,000 Sub total of income in rent free period £4,844,040

Total / Average £25,366,020

There is currently vacant space within the building aggregating to 78,250 sq ft thus reflecting a vacancy rate of 11.03% against the total area of 709,500 sq ft. Key vacant areas include inter alia Level 32 (13,044 sq ft), part Level 30 (6,579 sq ft), Levels 16 to 18 (aggregating to 36,097 sq ft) and Level 11 (16,001 sq ft).

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CityPoint, One Ropemaker Street, London EC2Y 9AW

Some £23.93M of the aggregate committed rent is derived from the office leases and accounts for 94.34% of the aggregate income.

Aggregate Committed Rent by Use

3.73% 1.66% 0.25% 0.03% 0.01%

94.34%

Office Retail Leisure Storage Car Park Telecoms

Lease main use Leases sq ft Current Rent Committed Rent WAULT WAUTC

Office 25 556,834 sq ft £19,195,098 £23,929,138 7.04 years 5.33 years Retail 12 34,795 sq ft £835,364 £945,364 9.27 years 9.15 years Leisure 1 32,476 sq ft £419,928 £419,928 9.37 years 9.37 years Storage 10 7,144 sq ft £62,590 £62,590 0.50 years 0.50 years Car Park 2 0 sq ft £7,000 £7,000 - - Telecoms 1 0 sq ft £2,000 £2,000 - - Total / Average 51 631,249 sq ft £20,521,980 £25,366,020 7.14 years 5.53 years

The unexpired rent free periods are primarily in relation to the uppermost floors.

Office Level Leases sq ft Current Rent Committed Rent WAULT WAUTC

Levels 31 to 36 4 54,819 sq ft £0 £3,226,190 9.65 years 4.65 years Levels 26 to 30 5 58,946 sq ft £2,395,491 £3,149,501 8.17 years 3.81 years Levels 21 to 25 5 66,940 sq ft £2,643,598 £3,397,438 7.81 years 4.59 years Levels 16 to 20 2 26,190 sq ft £1,297,667 £1,297,667 5.88 years 5.88 years Levels 11 to 15 2 29,158 sq ft £1,032,500 £1,032,500 3.88 years 3.88 years Levels 6 to 10 5 140,947 sq ft £5,022,618 £5,022,618 3.29 years 3.29 years Levels 1 to 5 2 179,832 sq ft £6,803,224 £6,803,224 8.36 years 8.36 years Total / Average 25 556,834 sq ft £19,195,098 £23,929,138 7.04 years 5.33 years

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CityPoint, One Ropemaker Street, London EC2Y 9AW

Current and Committed Rent by Office Level

Levels 31 to 36

Levels 26 to 30

Levels 21 to 25

Levels 16 to 20

Levels 11 to 15

Levels 6 to 10

Levels 1 to 5

Aggregate Committed Rent Aggregate Current Rent

Current and Committed Rent by Office Tenant

SquarePoint Capital (L35/36) Flextrade UK (L34) Kaye Scholer (L33) Seyfarth Shaw (L31) Winston and Strawn (L29 & pt. L30) United Trust Bank (L28) Wilkie Farr and Gallagher (L25 & L26) Janus Capital (L26) Cravath Swaine & Moore (L23 & L24) Simpson Thacher & Bartlett (L19 to L22) CityPoint Centre / Regus (L9, 10, 12/14 & 15) Ebiquity Associates (L8) Morrison and Foerster UK LLP (L7) Mimecast Service (L6) Simmons & Simmons (L1 to L5) CityPoint - Management office (L2)

Aggregate Committed Rent Aggregate Current Rent

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On an overall basis the current committed income provides a weighted unexpired average unexpired lease term in the order of 7 years 2 months with the WAULT of the office income being in the order of 7 years. On a term certain basis having regard to tenant break options the WAUTC is in the order of 5 years 6 months with the WAUTC of the office space being in the order of 5 year 4 months term.

WAULT and WAUTC by Office Tenant

WAUTC WAULT

Rank Current Committed Office Level Leases sq ft WAULT WAUTC Rent Rent

Simmons & Simmons 1 1 179,036 sq ft £6,780,224 £6,780,224 8.37 years 8.37 years (L1 to L5) Simpson Thacher & Bartlett 2 4 54,021 sq ft £2,561,868 £2,561,868 5.88 years 5.88 years (L19 to L22) CityPoint Centre / Regus 3 4 64,392 sq ft £2,476,508 £2,476,508 3.88 years 3.88 years (L9, 10, 12/14 & 15) Morrison and Foerster UK 4 1 40,453 sq ft £1,528,613 £1,528,613 3.06 years 3.06 years LLP (L7) Wilkie Farr and Gallagher 5 2 25,576 sq ft £671,003 £1,424,843 9.59 years 4.59 years (L25 & L26) Cravath Swaine & Moore 6 2 26,544 sq ft £1,379,397 £1,379,397 8.62 years 3.40 years (L23 & L24) Mimecast Service 7 1 41,311 sq ft £1,320,361 £1,320,361 3.06 years 3.06 years (L6) SquarePoint Capital 8 1 15,650 sq ft £0 £1,095,500 9.97 years 4.97 years (L35/36) Winston and Strawn 9 2 19,479 sq ft £1,014,488 £1,014,488 6.58 years 1.58 years (L29 & pt. L30)

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Rank Current Committed Office Level Leases sq ft WAULT WAUTC Rent Rent

Flextrade UK 10 1 13,267 sq ft £0 £928,690 9.97 years 4.97 years (L34) Kaye Scholer 11 1 12,879 sq ft £0 £837,200 9.49 years 4.50 years (L33) United Trust Bank 12 1 13,901 sq ft £0 £754,010 8.19 years 8.19 years (L28) Ebiquity Associates 13 1 23,950 sq ft £729,637 £729,637 3.06 years 3.06 years (L8) Janus Capital 14 1 12,556 sq ft £710,000 £710,000 9.10 years 1.60 years (L26) Seyfarth Shaw 15 1 13,024 sq ft £0 £364,800 8.20 years 3.20 years (L31) CityPoint - Management 16 1 797 sq ft £23,000 £23,000 5.00 years 5.00 years office(L2) 25 556,834 sq ft £19,195,098 £23,929,138 7.04 years 5.33 years

Aggregate Rent run off

£30,000,000

£25,000,000

£20,000,000

£15,000,000

£10,000,000

£5,000,000

£0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 and beyond

WAULT income WAUTC income

2.10.1. Lease relating to Ancillary Parts of Tenter House

A lease was granted by The Fraternity to Barranquilla Investments Limited, the current landlord being Wavegrange Limited and the current tenant Metropolitan Properties Co. (City) Limited, of the following areas:

(i) The column of air above the land shown hatched black as part of the land edged red which excludes the lease of retail unit 3 to Pret a Manager. The tenant has the right to erect stays, stanchions or pillars on the land in order to support the extension of Tenter House. (ii) The basement area under the land shown cross-hatched black at basement level to a height of 47 feet 6 inches above mean sea level.

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(iii) The ramp shown diagonally cross-hatched blue leading from the basement to Moorfields and as to the part under the land diagonally cross hatched blue and edged red only up to a height of 47 feet 6 inches above mean sea level. The tenant has the right to pass over the land to obtain access to New Union Street. In addition, the tenant is also granted the right of way along the ramp through the car park at basement level under the land cross-hatched black. Furthermore the tenant has a right of access for the purposes of the maintenance, demolition and rebuilding of Tenter House.

The lease is for a term of 200 years from 25 December 1959 at a rent of £1 per annum payable on 25 December in each year. The premises are to be used only for the purposes of offices, showrooms, or banking premises and in relation to the basement extension only as a car park and the ramp only as a means of access to that car park.

The tenant is not to, by building or otherwise, to stop up or obscure the access of any light or air belonging to the property, and the tenant is to observe and perform provisions of the Open Spaces Agreement to the extensions to the demised premises and ramp.

If the tenant wishes to determine the lease it shall give the landlord at least 12 months’ notice and before expiry of the notice is required to demolish the extension above second floor podium level on the land hatched black and within the basement level and make good this land. In addition, the tenant may demolish the extension above podium level and if so the lease is to continue in full force and effect for the remainder of the term.

2.10.2. Airspace Lease

Wavegrange Limited granted The CLOUT Trustees a lease of “all that airspace above Newlyn Ordnance Survey Datum level 17.6” being the airspace located adjacent to Moorfields House, Moorfields, London EC2. The lease grants the tenants the right to:

(i) Build or carry out construction and other works on or to the demised premises. (ii) The right to erect scaffolding and any hoardings on such parts of the landlord’s adjoining land to the extent not exceeding an area of 3 metres from the demised premises in connection with the carrying out and completion of any works of construction, redevelopment, repair, maintenance, decoration or renovation to the demised premises and any building, erection or construction on them. (iii) The right to oversail such parts of the landlord’s land as may be necessary in connection with the carrying out of any works of construction or redevelopment to or of the demised premises and any building, erection or construction in or on them subject to minimising the time any crane is used in connection with any works. (iv) In cases where substantial works are involved, the above rights are subject to the approval of a method statement by the landlord.

The following rights are excepted and reserved to the landlord

(v) The right to oversail Moorfields House and the demised premises as may be necessary in connection with the carrying out of any works of construction or redevelopment to the landlord’s adjoining land. (vi) The right to develop their adjoining land and to erect scaffolding and hoardings during any period of redevelopment or construction is acknowledged.

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The lease is for a term of 244 years commencing on 20 January 2006 at a peppercorn rent. The lease may be assigned as a whole in conjunction with the tenant’s adjoining land. The tenant may only use the premises to carry out works and thereafter use the demised premises as offices, residential or retain accommodation or as airspace and uses ancillary thereto.

Nothing in the lease shall imply that either party has any rights of light over the other party’s land and to the extent either party has such rights these are relinquished. Neither party shall claim or allow to be claimed against the other for any compensation in respect of loss of rights of light caused as a result of the exercise of any rights.

2.10.3. Substation Lease

Wates CityPoint Limited granted London Electricity Limited a lease dated 29 March 1999 for a term of 99 years from the same date at a rent of 5 pence per annum. The lease granted the tenant the right to install and maintain a substation together with the right to lay, use and maintain electric lines, ducts and other apparatus as is necessary.

2.11. Strength of Tenants’ Covenant

As valuers, we are not qualified to interpret Company accounts nor provide a judgement on a tenant’s ability to meet its lease covenants, in particular the payment of rent, and we recommend the Bank satisfies itself as to the credit worthiness of the tenants and their ability to meet their lease commitments.

We outline below the details of the top eight tenants by the overall percentage of income.

Simmons & Simmons – D&B Rating 5A1 – ‘Minimal Risk’

Contracted Rent Per Annum: £6,780,224 per annum

Proportion of Aggregate Contracted Rent: 26.73%

Unexpired Term: 8.37 years

Unexpired Term Certain: 8.37 years

Simmons & Simmons is an international law firm headquartered in the UK. The firm operates across an array of service lines, with key sectors including asset management and investment funds, financial institutions, life sciences and technology, and media and telecommunications (TMT). Simmons & Simmons was founded in 1896 in the City of London by Percy and Edward Simmons. The group established its European presence with the opening of its first office outside the UK in Brussels in 1962. Since then Simmons & Simmons have continued their global expansion, establishing a presence in Asia in 1979 with the opening of their Hong Kong office, and expanding into the Middle East in 1994. Today the company has a global network of 21 offices across Europe, the Middle East and Asia, in key business hubs such as Paris, Rome, Tokyo, Shanghai, Abu Dhabi and Dubai.

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The company acts regularly on the most innovative cases and transactions in its chosen areas of specialism, and frequently receives recognition for the quality of its work from clients and others within these industry sectors. For example, Simmons & Simmons have received numerous prestigious awards including; Law Firm of the Year at the Global Investor Middle East Awards in 2012, 2013 and 2015, Best Regulatory Practice 2016 at the Hedge Fund Journal Awards and has been named as one of the eleven best performing employers in Stonewall’s Global Workplace Equality Index 2016. Major transactions handled by the firm include advising the UK Department of Health on a world-first global Dementia Discovery Fund, advising Mainstream Renewable Power on a $1.9bn joint venture in Africa and advising Adherium on a groundbreaking digital health technology agreement.

We have obtained a Dun & Bradstreet Report for Simmons & Simmons LLP which ascribes a credit rating of 5A 1, based on a tangible net worth of £58.3M and which represents a minimum risk of business failure. The report also provides the following financial summary:

Year Ended 30 April 2015 Year Ended 30 April 2014 Year Ended 30 April 2013 Sales Turnover £288.97M £268.60M £250.50M Profit/ (Loss) Before Taxes £77.20M £64.95M £58.30M Tangible Net Worth £58.30M £46.60M £30.56M Net Current Assets (Liabilities) £115.33M £98.68M £42.15M

We are of the opinion that the investment market would perceive Simmons and Simmons LLP to offer a Good covenant.

Simpson Thacher & Bartlett LLP – D&B Rating O2 – ‘Lower Than Average Risk’

Contracted Rent Per Annum: £2,561,868 per annum

Proportion of Aggregate Contracted Rent: 10.10%

Unexpired Term: 5.88 years

Unexpired Term Certain: 5.88 years

Simpson Thacher & Bartlett LLP is an international law founded in 1884, by John Simpson, Thomas Thacher and Willian Barnun. Today the firm employs more than 900 lawyers across a global network of 11 offices located in major international business hubs such as New York, Washington, London, Hong Kong, Beijing and Tokyo. Simpson Thacher & Bartlett LLP specialise in a wide variety of legal practices including banking and credit, capital markets, financial institutions, investment funds, mergers and acquisitions, restructuring and bankruptcy and tax. The firm is consistently ranked among the world’s leading law firms in a wide variety of publications including Bloomberg, Thomson Reuters, The Legal 500 and American Lawyer.

We have obtained a Dun & Bradstreet Report for Simpson Thacher & Bartlett which ascribes a credit rating of O2, representing an undisclosed financial strength and which represents a lower than average risk of business failure.

We are of the opinion that the investment market would perceive Simpson Thacher & Bartlett to offer a Fair covenant.

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London CityPoint Centre Limited (Regus UK Limited) – D&B Rating N4 – ‘High Risk’

Contracted Rent Per Annum: £2,476,508 per annum

Proportion of Aggregate Contracted Rent: 9.76%

Unexpired Term: 3.88 years

Unexpired Term Certain: 3.88 years

London CityPoint Centre Limited is a wholly owner subsidiary of Regus Plc. Regus is the world’s largest provider of flexible workspace solutions, providing a variety of office formats and a virtual office and workplace recovery business that enables people and businesses to work where they want, how they want at a range of different price points. The Regus customer base includes some of the most successful entrepreneurs, individuals and multi-billion dollar corporations.

The company was originally established in Brussels in 1989 and is listed on the London Stock Exchange. The Regus network spans 3,000 business centres across 900 cities in 120 countries worldwide.

We have obtained a Dun & Bradstreet Report for London CityPoint Centre Limited which ascribes a credit rating of N4, based on a negative tangible net worth of £(7.74M) and which represents a high risk of business failure. The report also provides the following financial summary:

Year Ended 31 December Year Ended 31 December Year Ended 31 December

2015 2014 2013 Sales Turnover £6.68M £6.13M £5.29M Profit/ (Loss) Before Taxes £(904,000) £(869,000) £(1.11M) Tangible Net Worth £(7.74M) £(6.84M) £(5.97M) Net Current Assets (Liabilities) £(7.74M) £(6.84M) £(5.97M)

We are of the opinion that the investment market would perceive London CityPoint Centre Limited to offer a Poor covenant.

Willkie Farr & Gallagher – D&B Rating O2 – ‘Lower Than Average Risk’

Contracted Rent Per Annum: £1,424,843 per annum

Proportion of Aggregate Contracted Rent: 5.62%

Unexpired Term: 9.59 years

Unexpired Term Certain: 4.59 years

Willkie Farr & Gallagher is an elite international law firm with approximately 650 lawyers across nine offices in six countries throughout the US and Europe, with offices in London, New York, Paris and Frankfurt. The firm has origins stretching back more than 125 years and operate across many service lines, with key areas of expertise including asset management, corporate and financial services, environment, health and safety, government relations, tax and insurance and reinsurance.

We have obtained a Dun & Bradstreet Report for Willkie Farr & Gallagher which ascribes a credit rating of O2, representing an undisclosed financial strength and which represents a lower than average risk of business failure.

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We are of the opinion that the investment market would perceive Willkie Farr & Gallagher to offer a Fair covenant.

Cravath, Swaine & Moore LLP – D&B Rating O2 – ‘Lower Than Average Risk’

Contracted Rent Per Annum: £1,379,397 per annum

Proportion of Aggregate Contracted Rent: 5.44%

Unexpired Term: 8.62 years

Unexpired Term Certain: 3.40 years

Founded in 1819, Cravath, Swaine & Moore LLP is recognised as one of the premier US law firms in the world. The firm is headquartered in New York but also has a secondary office in London which opened in 1973. Despite the firms limited global presence their work is often international in nature. The company’s primary business lines includes corporate, executive compensation and benefits, international capital markets, debt finance, financial restructuring and reorganisation, mergers and acquisitions, litigation and tax. Since its founding in 1819 Cravath, Swaine & Moore have been involved with some of the most important events in American history including handling the electric light bulb patent litigation for Thomas Edison and handling the telegraph patent litigation for Samuel Morse.

We have obtained a Dun & Bradstreet Report for Cravath, Swaine & Moore which ascribes a credit rating of O2, representing an undisclosed financial strength and which represents a lower than average risk of business failure.

We are of the opinion that the investment market would perceive Cravath Swaine & Moore LLP to offer a Fair covenant.

SquarePoint Capital LLP – D&B Rating 3A1 – ‘Minimal Risk’

Contracted Rent Per Annum: £1,095,500 per annum

Proportion of Aggregate Contracted Rent: 4.32%

Unexpired Term: 9.97 years

Unexpired Term Certain: 4.97 years

SquarePoint Capital is a global investment management firm with a diversified portfolio of systematic and quantitative strategies across financial markets that aim to achieve high quality, uncorrelated returns. The company’s primary investment offices are located in New York, London and Singapore, with additional offices located in Paris, Montreal, Geneva and Zug in Switzerland. The company was originally established as nQuant in 2000 and become SquarePoint Capital in December 2014.

We have obtained a Dun & Bradstreet Report for SquarePoint Capital LLP which ascribes a credit rating of 3A 1, based on a tangible net worth of £8.05M and which represents a minimum risk of business failure. The report also provides the following financial summary:

Year Ended 31 December 2015 Year Ended 31 December 2014 Sales Turnover £18.45M £180,046 Profit/ (Loss) Before Taxes £9.98M £(273,800) Tangible Net Worth £8.05M £1.05M Net Current Assets (Liabilities) £8.87M £226,388

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We are of the opinion that the investment market would perceive SquarePoint Capital LLP to offer a Good covenant.

Winston and Strawn London LLP – D&B Rating 3A2 – ‘Lower Than Average Risk’

Contracted Rent Per Annum: £1,014,488 per annum

Proportion of Aggregate Contracted Rent: 4.00%

Unexpired Term: 6.58 years

Unexpired Term Certain: 1.58 years

Founded in Chicago in 1853, Winston & Strawn LLP is an international law firm with over 850 lawyers across a global network of 18 offices in Europe, the Middle East, Asia and North America. The group is headquarters in Chicago where over 600 lawyers and professional staff are based. Winston & Strawn LLP entered the UK market in 2003 with the opening of their London office. The group operate across a wide range of business lines including corporate and finance, energy, environmental, healthcare, labour and employment, real estate and litigation. The UK business primarily focuses on cross- border mergers & acquisitions and finance, project and transportation finance, private equity and venture capital, tax, litigation and international arbitration.

We have obtained a Dun & Bradstreet Report for Winston and Strawn London LLP which ascribes a credit rating of 3A 2, based on a tangible net worth of £7.73M and which represents a lower than average risk of business failure. The report also provides the following financial summary:

Year Ended 31 January 2015 Year Ended 31 January 2014 Sales Turnover £8.30M - Profit/ (Loss) Before Taxes £151,683 - Tangible Net Worth £7.73M 0 Net Current Assets (Liabilities) £6.22M -

We are of the opinion that the investment market would perceive Winston & Strawn London LLP to offer a Fair covenant.

FlexTrade UK Limited – D&B Rating 2A1 – ‘Minimal Risk’

Contracted Rent Per Annum: £928,690 per annum

Proportion of Aggregate Contracted Rent: 3.66%

Unexpired Term: 9.97 years

Unexpired Term Certain: 4.97 years

Founded in 1996, FlexTrade Systems is a global leader in high performance execution management and order management systems for equities, foreign exchange, options, futures and fixed income. FlexTrade is a privately held company with buy and sell-side clients in 45 countries and operate to position more than 400 top software developers, industry experts and representatives across all trading regions with their clients. The company has an established global network with offices across the Americas, EMEA and Asia, including locations such New York, London, Paris, Singapore, Hong Kong, Tokyo and Sydney.

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FlexTrade is internationally recognised for introducing ‘FlexTRADER’, the world’s first broker-neutral, execution management trading system which allows clients to completely control and customise their proprietary algorithms while maintaining the confidentiality of their trading strategies.

We have obtained a Dun & Bradstreet Report for Flextrade UK Limited which ascribes a credit rating of 2A 1, based on a tangible net worth of £3.05M and which represents a minimum risk of business failure. The report also provides the following financial summary:

Year Ended 31 December Year Ended 31 December Year Ended 31 December

2015 2014 2013 Sales Turnover £8.31M £7.80M £6.98M Profit/ (Loss) Before Taxes £544,368 £511,220 £747,765 Tangible Net Worth £3.05M £2.60M £2.27M Net Current Assets (Liabilities) £2.75M £2.12M £1.64M

We are of the opinion that the investment market would perceive Flextrade UK Limited to offer a Fair covenant.

Summary

Overall, we consider that the tenants’ covenant strength offered at the property is commensurate with a multi-let predominantly office Central London building of a significant investment lot size.

2.11.1. Guarantor Covenant Strength

The lease to Winston & Strawn London LLP is guaranteed by Winston & Strawn, for whom we have also obtained a Dun & Bradstreet Report. This ascribes a credit rating of O2, representing an undisclosed financial strength and which represents a lower than average risk of business failure.

We are of the opinion that the investment market would perceive Winston & Strawn to offer a Fair covenant. The lease to London CityPoint Centre Limited (Regus UK Limited) is guaranteed by Regus Holdings (UK) Limited, for whom we have obtained a Dun & Bradstreet Report which ascribes a credit rating of B1, based on a tangible net worth of £255,000 and which represents a minimum risk of business failure.

The report also provides the following financial summary:

Year Ended 31 December Year Ended 31 December Year Ended 31 December

2015 2014 2013 Profit/ (Loss) Before Taxes £1,000 - £1,000 Tangible Net Worth £255,000 £254,000 £254,000 Net Current Assets (Liabilities) £255,000 £254,000 £254,000

We are of the opinion that the investment market would perceive Regus Holdings (UK) Limited to offer a Fair covenant.

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2.12. Marketing of Vacant Accommodation

We have spoken to JLL, the joint letting agents, and understand that the following accommodation is currently being marketed in the building. In total there is currently 72,100 sq ft (6,698 sq m) available to let in the building, including the 32 floor which is currently let to Seyfarth Shaw UK LLP and is available in Q1 2017. Their strategy has generally been to focus on letting the upper floors first due to the higher rental levels, and once these are let to then focus on the lower levels.

Size Quoting Rent Floor Timing Sq Ft £ per sq ft 32 13,024 £70.00+ Q1 2017 Pt 30 6,579 £70.00+ Available 18 12,275 £65.00 Available 17 11,889 £65.00 Available 16 11,933 £65.00 Q1 2017 11 16,001 £60.00 Available

The available office accommodation generally comprise of full floors, save for level 30 which has 6,566 sq ft (610 sq m) of accommodation available. We understand that interest from occupiers seems to be for smaller, or half floor plates rather than full floor plates, and that the landlord would consider splitting further floor plates, albeit not until the part 30 floor has been leased.

Floors 16 to 18 have been vacant since May 2016, when the previous lease expired and the landlord carried out a CAT A refurbishment. The letting agents anticipate a letting void in the order of 9 months following receipt of vacant possession.

Letting particulars have been produced and a live website, www.citypoint.org.uk has been created, where up to date availability and contact information are located. We understand that there are various heads of terms out at present which are being considered by potential occupiers.

We have been informed that the quoting rent ranges from £60.00 per sq ft on the lower floors to £70.00+ per sq ft (£646 to £753 per sq m) on the upper levels. This is assuming that the space has been refurbished to a category A specification. These rental levels were achieved on levels 34 to 36, which were recently leased to Flextrade UK Limited and SquarePoint Capital LLP for terms of 10 years with a break option in year 5. The agreed rent in these leases was £70.00 per sq ft (£753 per sq m). SquarePoint received a rent free period of 12 months from commencement with a further 10 months if the option to break is not exercised whilst FlexTrade received 21 months rent free from lease commencement. Recent agreed leases have also included a capital contribution from the landlord of £10.00 and £30.00 per sq ft (£108 and £323 per sq m) depending on the works required on the floors.

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3. Market Commentary

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3.1. Macro Economic And Property Market Overview

We enclose a Macro Economic and Property Market Overview at Appendix 3.

3.2. City of London Office Occupational Market

3.2.1. Overview

The City office market has been through its recovery phase, with take-up between 2013 to 2015 over 7.0M sq ft (650,322 sq m) per annum, which is set against a long term average of just over 5.0M sq ft (464,516 sq m) per annum.

In May and June 2016, in the run up to and following the Referendum result, the central London office market slowed, and we expect that this will continue over the remainder of 2016 as market conditions remain uncertain and caution remains in the market.

As at the end of 2015, the base case for the London occupational markets was relatively restrained. This base case was for a slowing in take-up from the very high levels of 2014/2015 to a more “normal” level. For example, the forecast for City of London take-up was that it would reduce from over 8.0M sq ft (743,218 sq m) in 2014 to 6.0M sq ft (557,414 sq m) in 2017 before a rise in lease events leads to a pick-up in leasing activity towards the back end of the forecast period. This in turn meant that our end 2015 forecasts for rental growth were also muted, with growth slowing to an average of 2.5% per annum over 2016-2020.

The City of London sub-market is defined as the City core, which encompasses the EC2, EC3 as well as the eastern areas within EC4 postcodes. Areas outside this core area are known as the city fringe as outlined below.

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Savills City Office Market Area

Source: Savills Research – as at end Q3 2016

3.2.1. Supply

At the end of 2015 total City supply stood at approximately 5.4M sq ft (501,700 sq m), of which Grade A supply represented 89%. This equated to a vacancy rate of 4.4%, which in a historic context is low, down on the long-term average of 9.7%. The constraint on supply has largely occurred due to the previous three years of take-up exceeding 7.0M sq ft (650,300 sq m), combined with a lack of new supply arriving to the market in 2015. Furthermore, the majority of office towers which have been delivered into the City market, such as The Leadenhall Building and 20 Fenchurch Street, are now either let in their entirety or substantially let, and they are often the origin of large amounts of space.

Total supply to the end of Q3 2016 was 6.8M sq ft (631,741 sq m), 89% of which was of a Grade A specification. This equates to a vacancy rate of 5.5%, up 1.1% on the same point last year. Furthermore, at the end of October, total City supply stood at 7.5M sq ft (696,773 sq m), thus the vacancy rate increased by 0.5% from Q3 and up by 1.3% on the same point last year.

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City Supply

Grade A Grade B V Rate 16 18%

14 16% 14% 12 12% 10 10% 8

M sq ft sq M 8% 6 6% Rate Vacancy 4 4%

2 2%

0 0%

Source: Savills Research - as at end Q3 2016

Over 500,000 sq ft (46,452 sq m) of new space is scheduled to have reached practical completion in Q1 next year, and will be added to supply next month, resulting in the vacancy rate beginning to slowly rise, especially if take-up remains slow, albeit the heightened risk-aversion by developers, funders and lenders following the Referendum result will lead to a reduction in development and refurbishment completions in 2018 and beyond which should alleviate this.

Total space under offer is currently at 1.4M sq ft (130,064 sq m), which is up on the long term average by 1%. We saw 320,129 sq ft (29,741 sq m) go under-offer in October alone, however, 49% of the remaining space under-offer has been in negotiation for over 3 months.

As expected, we are beginning to see an increase in sub-let space arrive to the market. As at the end of October 2016, tenant space accounted for 24% of total supply, equating to 1.7M sq ft (157,935 sq m). Whereas, at the end of Q2 this year, tenant space accounted for 18% of total supply, equating to 1.2M sq ft (111,484 sq m).

3.2.2. Development Pipeline

We detail below the amount of office space which is forecast to be completed over the next four years in the City.

Refurbished (sq ft) Development (sq ft) Total (sq ft) % pre-let 2017 2,635,452 2,246,280 4,881,732 46% 2018 982,389 3,856,345 4,838,734 36% 2019 1,065,109 2,779,644 3,844,753 1% 2020 471,000 694,000 1,165,000 0% Total 5,153,950 9,576,269 14,730,219 28%

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From 2017 onwards there is currently just two years of above average completions expected to arrive within the City, with the greatest amount anticipated for 2017 at a total of 4.8M sq ft (453,528 sq m) of which 2.25M sq ft (208,623 sq m) is already pre- let. In fact, 28% of the future development and refurbishment pipeline is already pre-let, a trend which we expect to continue as larger occupiers are forced to look into the future to guarantee their property requirements are successfully satisfied. Therefore, the pre-let factor is vital in estimating future supply as if pre-lets continue to happen frequently we could see the vacancy rate remain low for the foreseeable future.

Development and Refurbishment Completions Over the Next Five Years

Complete Development Refurbishment Average completions 9 8 7 6 5

4 m sq sq ft m 3 2 1

2011

1987 1989 1993 1995 1999 2001 2005 2007 2013 2017 2019 1991 1997 2003 2009 2015 1985 Source: Savills Research – As at Q3 2016

Development Pipeline – Pre-let and speculative forecast

Complete Speculative Pre-Let Average completions 9 8 7 6 5

4 m sq sq ft m 3 2 1

2011

1985 1987 1991 1993 1999 2001 2005 2007 2013 2017 2019 1995 1997 2003 2009 2015 1989 Source: Savills Research – As at Q3 2016

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Looking forward we do, however, anticipate the vacancy rate to remain low in historic context, but gently rise due to take-up returning to around average levels. We currently cannot envisage an oversupply in the City market based on the current expected completion figures, and a number of schemes are now likely to be delayed as a result of the Referendum. As illustrated below, the average annual completions for 2017 to 2019 does not surpass that of the 5 or 10 year average annual take-up in any postcode/submarket. Furthermore, we cannot foresee a drastic change in lending policy to make speculative lending more obtainable than it currently is, preventing any future supply-side shocks.

Average Annual Take-up against Average Speculative Completions

10-year Avg take-up 5-year Avg take-up Avg annual completions 2017-2019 4,500,000

4,000,000

3,500,000

3,000,000

2,500,000

Sq Ft Sq 2,000,000

1,500,000

1,000,000

500,000

0 E1 EC1 EC2 EC3 EC4 SE1 WC1 WC2 City City Core Fringe Source: Savills Research – As at Q2 2016

3.2.3. Take Up

City take-up successfully surpassed the long-term average for a third consecutive year in 2015, highlighting the strong demand we have seen for City office space in the recent past. Total take-up in 2014 amounted to 8.2M sq ft (761,798.6 sq m), which represented an all-time record high. Following this record year, we expected there to be a dip in take-up in 2015 due to a number of the large requirements already being satisfied, and the continually decreasing amount of supply possibly prohibiting moves. However, this reduction was not as large as we first envisioned with 2015 total take-up amounting to 7.4M sq ft (687,476 sq m), of which 86% was of a Grade A standard. This was just 14% lower than 2014, and still 40% higher than the long term average, and the third highest annual amount ever.

At the end of Q3 2016 take-up had reached 3.98M sq ft (369,397 sq m) which is 32% down on the same point last year but just 9% down on the 10 year average for take-up to the end of Q3.

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City Take up by quarter

Q1 Q2 Q3 Q4 LT Avg 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000

sq ft sq 4,000,000 3,000,000 2,000,000 1,000,000

2011

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014 2015 2016 2000

Source: Savills Research – As at Q3 2016

Take-up for October 2016 was 254,974 sq ft (23,688 sq m), bringing the year to date City total to 4.3M sq ft (399,483 sq m), which was 31% down on this point last year. 81% of all transactions to date this year have been of a Grade A standard, in comparison to the same point last year, for which take-up was 6.1M sq ft (567,496 sq m) of which 86% of take-up of a Grade A standard. October’s activity has brought the 12 month rolling take-up figure to 5.6M sq ft (520,258 sq m), 15% up on the long- term average. Rolling City Take-up

Rolling 12 month total take-up 10-year Average 10,000,000

9,000,000

8,000,000

7,000,000

6,000,000

5,000,000 Sq Ft Sq 4,000,000

3,000,000

2,000,000

1,000,000

95 16 02 09

95 98 09 12 02 05

10 96 03

98 01 15 94 05 08 12

01 04 94 97 08 11 15

93 07 13 99 00 06 14

04 07 93 97 00 11 14

- - - -

------

- - -

------

Jul Jul Jul

Apr Apr Apr

Oct Oct Oct Oct

Jan Jan Jun Jun Jan Jun Jan

Feb Feb Feb

Mar Mar Mar Mar

Dec Nov Sep Aug Dec Nov Aug Sep Aug Dec Nov Sep Aug

May May May May Source: Savills Research – As at Q3 2016

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In respect of the take-up by business sector, as at the end Q3 2016, Insurance & Financial services have accounted for the greatest amount of take-up at 21%. They are followed by Tech & Media (13%), Professional Services (10%) and Retail and Leisure and the Banking Sector both on 9%.

City Take-up by Business Sector 2016 2016

Distribution & Logistics 1% Charities & Association Extraction & Utilities 2% 3% Manufacturing & Industry Property 0% 4% Insurance & Financial Services Unknown 21% 7%

Business & Consumer Services 7%

Tech & Media Serviced Office Provider 13% 7%

Public Services, Education & Professional Health 10% Banking 7% Retail & Leisure 9% 9%

Source: Savills Research – As at Q3 2016

Historically in the City, the demand for office space has come from the Insurance & Financial services along with the Banking sector and Professional services. It is encouraging to see, however, the occupier base is now becoming increasingly diverse as new sectors such as Tech & Media and Serviced Office Providers are taking more space.

The real growth has come from Serviced Office Providers who accounted for 12% of take-up in 2015, up from 8% in 2014 and 2% in 2013. Whether this sector is sustainable at this rate of growth is yet to be seen, and obviously therefore has the potential to bring about a future supply-side shock if this space is suddenly dumped back onto the market with little notice.

3.2.4. Rental Levels

The average prime rent (average of the top 10% of letting transactions) increased to £69.52 per sq ft (£748 per sq m) for 2015 from £62.46 per sq ft (£672 per sq m) in 2014, showing an 11% increase. The average Grade A increased to £57.60 per sq ft (£620 per sq m) in 2015, up 18% from £48.95 per sq ft (£517 per sq m) in 2014. Furthermore, the average tower rent rose 15% from £59.72 per sq ft (£643 per sq m) in 2014 to £68.50 per sq ft (£737 per sq m) in 2015.

Rents have continued to rise throughout this year, despite the fall in take-up. The average prime rent for Q3 2016 equated to £81.00 per sq ft (£872 per sq m) which is the highest quarterly average prime rent ever in the City. However, this has been influenced by the £107 per sq ft (£1,152 per sq m) Kames Capital transaction at The Leadenhall Building, EC3. The City average Grade A rent for Q3 2016 was £61.29 per sq ft (£660 per sq m), which is also the highest ever. This highlights how occupiers are becoming increasingly more willing to spend more in order to acquire the “best” space

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City Rents

City Top Avg Prime Avg A 110 100 90 80 70 60 50

40 £ per per sq ft £ 30 20 10

2011

2000 2005 2006 2007 2008 2009 2014 2015 2016 2001 2002 2003 2004 2010 2012 2013

Source: Savills Research – As at Q3 2016

The graph below shows lettings by rent bracket since 2004 in the City. At the end of Q3 2016, 48% of the lettings complete have been in the £60.00+ per sq ft (£646+ per sq m) rent bracket, significantly up on last year (24%), and the previous market peak in 2007 (6%). Furthermore, historically the £40.00 to £49.99 per sq ft (£431 to £538 per sq m) bracket has accounted for the most lettings with a five year average of 31%.

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Number of Lettings by Rent Bracket

0-£19.99 £20-£29.99 £30-£39.99 £40-£49.99 £50-£59.99 £60-£69.99 >£70 100% 90% 80% 70% 60% 50% 40%

30% Number of LettingsNumber 20% 10% 0%

Source: Savills Research – As at Q3 2016

With regards to rent free periods, the average rent free period on a 10 year lease has risen from 17 months in Q2 2016 to 19 months for Q3 2016.

Our latest rental forecasts for the City which were revised downwards in July, following the result of the EU referendum, are below. The next forecasts are due to be released in January 2017:

Average Average Grade Average Prime Average Prime Average Grade Average Date Grade A B (£ per sq ft) (%) A (%) Grade B (%) (£ per sq ft) (£ per sq ft)

2016 £75.75 £56.00 £37.75 2.0% 1.8% 0.0%

2017 £75.75 £56.00 £37.75 0.0% 0.0% 0.0%

2018 £74.75 £55.00 £37.00 -1.3% -1.8% -2.0%

2019 £75.50 £55.00 £37.00 1.0% 0.0% 0.0%

2020 £77.00 £56.00 £37.75 2.0% 1.8% 2.0%

Average £75.75 £55.60 £37.45 0.74% 0.36% 0.0%

3.2.5. Outlook

2017 will likely see lower levels of take-up across the central London office markets in comparison to the 2013-2015 levels. There will also be a rise in businesses seeking to extend their leases for a short period to allow them to assess the needs of their business in a post- Brexit world.

We do not expect the decline in take-up to be ubiquitous across all sectors:

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. Banking: Will be the hardest hit in both the short, medium and long term. Questions around passporting will combine with pre-existing challenges such as ringfencing. However, it is important to note that the Banking sector has only accounted for 5.5% of central London take-up since the start of 2010.

Some questions have been raised as to whether the potential implementation of MiFID2 in 2018 means that if we can prove “equivalency” to the standards that are agreed while we are still in Europe, then we will automatically be able to passport out of London into the EU (as MiFID2 is a G20 agreement not solely an EU one). Lawyers have suggested that this will apply to all financial services other than retail banking across the G20, so if enacted will allow most broking, trading and commercial property lending businesses to remain in London and sell into the EU and the rest of G20.

. Insurance and Financial Services: Limited impact on the insurance and re-insurance markets. Hedge funds and similar businesses were widely supportive of a Brexit as they felt it would reduce legislation, particularly the AIFMD.

. Professions: Legal and accountancy firms are likely to see higher levels of business due to Brexit, and thus are likely to see stable or higher than expected levels of leasing.

. TMT: Stable around an already declining volume of activity. This sector is more likely to be challenged by unrelated global questions around valuations than Brexit. FM tech potentially hit by “brain drain” from UK and future funding issues.

. Business and Consumer services: Lower than expected in line with the UK economic outlook.

Following the adaptation period of 2016-2018, we believe that the net impact of all of this will be in the region of 5% lower than normal levels of take-up. This will fall more heavily on Banking dependant markets.

3.2.6. Rental transactions

We would highlight the following lettings, which we consider to be particularly relevant to the valuation of the subject property

Evidence within the Building

Term Size Rent £ Suite Tenant Date (Break) Rent Free Comment Sq Ft per sq ft years Floor 35 & 36 10 12 months plus SquarePoint Nov 2016 15,650 £70.00 10 months in £10.00 per sq ft capital contribution. Capital LLP (under offer) (5) year 6 Floor 34 10 Flextrade UK 21 months rent £30.00 per sq ft capital contribution. 9 Nov 2016 13,267 £70.00 Ltd free. months rental penalty if tenant breaks (under offer) (5)

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10 Kaye 18 months rent 8 month rental penalty if tenant breaks. Floor 33 May 2016 12,879 £65.01 Scholer LLP free £20 per sq ft dilapidations agreed (5) Wilkie Farr 10 and 19.5 months 9 month rental penalty if tenant breaks. Floor 25 Jun 2016 12,566 £59.99 Gallagher rent free Right of first refusal on level 24 (5) (UK) Ltd Morrison and 17 months rent Floor 7 Foerster UK Mar 2015 40,453 £37.79 4.5 Dilapidations limited to £100,000. free LLP

External Evidence

We summarise in the table below evidence of office lettings in the City of London over the course of 2016, which we consider to be comparables/indicators of the rental levels achievable at CityPoint:

Term Rent Size Rent Property Floor Date (break) Free Comments Sq ft £ psf years (months) New refurbishment. £74.50 per sq ft on Quoting 1 King William Street EC4 Bldg 100,000 Available - - 4th, £72.50 on lower. Under offer on £74.50 LG, G , 1 & 2 on confidential terms. 100 Cheapside EC2 2 11,247 Oct 2016 £67.50 15 20 New Grade A accommodation. 10 41 Moorgate, EC2 1 3,930 Oct 2016 £63.50 10 Refurbished Grade A accommodation. (5) 10 8 17 Moorgate, EC2 4 2,356 Oct 2016 c£61.50 Refurbished Grade A accommodation (5) (4) Equitable House, 47 King 3 6,185 Sep 2016 £71.50 15 William Street EC4 One New Ludgate Hill 10 Pt 6 5,177 Sept 2016 £70.00 9+7 EC4 (5) Cannon Bridge House, 25 15 Pt 4 20,999 Jul 2016 £53.00 24 Dowgate Hill EC4 (12) 120 Holborn EC1 7 11,705 Jun 2016 £67.50 10 17 Comprehensive refurbishment. Swan House, Bldg 37,301 Jun 2016 £60.00 20 33 Queen Street EC4 Part G, Newly developed and completed in Q2 8 Finsbury Circus EC2 23,035 May 2016 £71.20 15 26 4 2016. 10 5 Old Bailey EC4 1 & 2 22,409 May 2016 £59.00 14 (5) 120 Holborn EC1 1 19,205 May 2016 £61.50 10 18 Comprehensive refurbishment. Farringdon Place, 4 10,051 May 2016 £62.50 10 6 20 Farringdon Road EC1 100 Cheapside, EC2 1 11,289 Apr 2016 £67.50 10 18 New Grade A accommodation.

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Term Rent Size Rent Property Floor Date (break) Free Comments Sq ft £ psf years (months) Built in 1991. Refurbished on a floor by 55 Bishopsgate EC2 2 23,746 Apr 2016 £63.50 7 12 floor basis. 10 5 Old Bailey EC4 4 10,735 Apr 2016 £64.00 18 (5) Veritas House, 125 Finsbury Pavement 4 6,301 Apr 2016 £55.00 10 18 EC2 71 Queen Victoria Street Comprehensive refurbishment and 7, 8 41,463 Mar 2016 £63.21 17 n/a EC4 recladding of the building. Pt LG, Newly refurbished building. Built in 30 Gresham Street EC2 149,925 Mar 2016 £60.87 12 34 4-6 2003. 120 Holborn EC1 2, 3 37,259 Feb 2016 £60.00 10 18 Comprehensive refurbishment. Newly developed and reached practical 100 Cheapside EC2 4- 6 32,705 Feb 2016 £67.50 15 21 completion in H2 2015. Newly developed and reached practical 100 Cheapside EC2 3 11,247 Feb 2016 £67.50 10 19 completion in H2 2015. 10 Finsbury Square EC2 3 17,340 Feb 2016 £63.00 10 18 Newly developed in 2014. Alphabeta Building, 10 Pt 3 8,317 Feb 2016 £67.50 7.5 14 Finsbury Square EC2 (5) Alphabeta Building, 10 Pt 4 5,557 Feb 2016 £67.50 4.5 14 Finsbury Square EC2 (5) Park House, 16 Finsbury Pt G 5,285 Feb 2016 £60.50 10 6 Circus EC2 Veritas House, 10 125 Finsbury Pavement 5 5,654 Feb 2016 £57.00 16 (5) EC2 LG & 5- 8 Finsbury Circus EC2 74,113 Jan 2016 £69.73 17 27 Rathbones 8

Tower Building Evidence

Term Rent Size Rent Property Floor Date (break) Free Comments Sq ft £ psf years (months) 10 Expansion space for an existing tenant 35 10,845 Oct 2016 £90.00 6 plus 12 Salesforce Tower, 110 (Trailstone) (3) Bishopsgate, EC2 Pt 21 5,012 Jan 2016 £72.50 8.5 15 Proskauer Rose LLP

Rothesay Life acquired additional Leadenhall Building, Unknow accommodation in addition to level 25. 122 Leadenhall Street, 32 11,091 Jul 2016 Unknown Confidential n This was the last remaining floor in the EC3 building.

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Term Rent Size Rent Property Floor Date (break) Free Comments Sq ft £ psf years (months) 18 MS Amlin acquired this expansion 27 12,901 Jul 2016 £71.00 13 plus 8 accommodation in addition to level 19 (8, 13) to 24 Kames Capital who already occupy Floor 26 acquired additional 43 6,965 Jul 2016 £107.00 11 Confidential accommodation. This is a reported rental level

33 10,744 Jan 2016 £95.00 10 Confidential Quadrature Capital

Landlord is to complete the office 11-15 118,092 Mar 2016 £68.68 20 30 accommodation to shell & core finish with both tenants receiving a capital 100 Bishopsgate, EC2 contribution of £40.00 per sq ft (£431 per sq m) to fit out to a Grade A 1 – 5 & 7 246,943 Oct 15 £59.50 25 36 specification. Proposed lease commencement 30 Nov 2018.

125 Old Broad Street Pt 15 5,045 Jan 2016 £68.50 6.5 Confidential

The headline office letting evidence cited above, for external buildings illustrates rents between £53.00 per sq ft (£570 per sq m) and £107.00 per sq ft (£1,152 per sq m), with non tower buildings ranging from £53.00 and £71.50 per sq ft (£570 to £770 per sq m), and tower buildings substantially higher at £59.50 to £107.00 per sq ft (£640 to £1,152 per sq m).

The best evidence comes from within the building itself, with the most recent transactions being agreed at £65.00 per sq ft (£700 per sq m) on level 33 and £70.00 per sq ft (£753 per sq m) in two separate transactions on the uppermost three levels in November for 10 year leases with break options in year 5.

3.2.7. Office Market Rent Inputs

Following analysis of the evidence above and discussions with the marketing agents as well as our own in house office agents, we have applied a variable rent depending of the level within the building. We have applied £62.50 per sq ft (£673 per sq m) on the benchmark floors, which for the purpose of this exercise we have assumed are levels 15 to 24, we have then applied a premium of £2.50 per sq ft (£27 per sq m) on the upper floors in increments from level 25 to 31 and 33 to 36. We have also applied discounts to the lower floors where natural light and external views are compromised. We have outlined our opinion of Market Rent on the office accommodation below:

Floors £ per sq ft £ per sq m 33-36 £67.50 £727 25-32 £65.00 £700 15-24 £62.50 £673 9-14 £57.50 £619

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Floors £ per sq ft £ per sq m 2-8 £52.50 £565 LG £12.50 £135 Basement £16.00 £172

We further summarise our opinion of Market rent on a floor by floor basis in our approach to valuation section below and further summarise our opinion of Market Rent in the Schedule of Tenancies attached at Appendix 2.

3.3. Retail Occupational Market in Central London

Although the wider UK retail market has experienced considerable trading problems in recent years, the Central London retail market has remained buoyant, with many areas including Central London’s prime retail “villages” remaining largely immune to the wider economic fragility. The Capital’s role as an important retail destination for international high spending shoppers and tourists has been a major factor in underpinning healthy footfall levels and retail sales. The retail and restaurant provision in Central London is far more extensive and varied than in any other regional city in the UK, and the occupational market has witnessed consistent and sustained demand for retail and restaurant accommodation.

It is important to comment on the strength of the restaurant sector within Central London. In terms of new brands/trends in the restaurant sector, London has provided the main focus in what can only be described as a booming A3 market. We are seeing a plethora of new independents and pop-up brands emerge, especially throughout the more dynamic, “edgy”, locations in the West End and City. Much of this activity is centred around affordable, quick service bites in casual “back to basics” environments. Notable cuisine trends are Mexican offers such as Chipotle, Chilango and Tortilla, and pan-Asian concepts such as Pho, Rosa’s and Thai Pad, together with outfits offering authentic American burgers & steaks, such as Bubbledogs, Pitt Cue, Burger & Lobster and Honest Burger.

The influx of new brands coupled with continued demand from existing retailers and availability constraints is generating a supply/demand imbalance. In light of this, new entrants have looked to ‘new’ locations in order to satisfy demand. For example, new entrants since 2014 have located across 23 different retail ‘villages’ whereas historically new retail brands would have tended to concentrate within a relatively narrow selection of pitches. However, the expansion of retail locations across Central London is not just being driven by a availability constraints in the more established retail locations, but in some cases wider regeneration and mixed use projects plus enhanced ‘curation’ by a number of existing and emerging landed Estates within Central London has opened up new retail pitches retailers would not have considered historically.

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Rental Growth Forecasts

Source: Savills Research; RealFOR; MSCI – As at Q3 2016

The chart above details Savills research forecasts for rental growth over the next five years, with prime West End forecasts produced in-house with wider area forecasts produced by independent forecasting house RealFor. On the whole, forecasts suggest that while rental growth will remain robust it will be slower than that reported over the last three years but will be in line with the long run historical average (10yrs). Prime West End (Bond, Oxford, Regent Streets etc) will continue to be the lead performer with average growth per annum of 2.4% through to the end of 2021. The wider West End is also expected to report rental growth of 1.7% per annum. This will be in excess of the City & Midtown and the All London average.

The graph below notes that the City is in the top 3 retail centres in the UK, based on its rental growth projections. Average Annual Rental Growth (2016 - 2019) % Top 25 Retail Centres by Rental Growth Projections 2.50

2.00

1.50

Average Annual 1.00 Rental Growth (2016 - 2019) % 0.50

Source: Savills Research – As at end October 2016

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The property is located within the City of London retail submarket, which generally caters for the professional / business nature of the area. Nearby facilities include the Barbican, Old Street roundabout, Smithfield Market and Liverpool Street station, which provides additional leisure and restaurant facilities.

In terms of the occupier market, requirements within London are diverse and it is difficult to name potential occupiers in the absence of undertaking a marketing campaign.

The nature of the restaurant market in Central London is such that open market lettings are relatively scarce and a good deal of evidence is derived from rent reviews. It is often difficult to state the rent which would be achieved on an open market letting until it is actually tested. Nonetheless, the Central London market is witnessing unprecedented levels of demand at present and such if a well-located unit were to be available it is likely that a tenant would be willing to pay in excess of current provable rents, with limited rent free, and perhaps even a premium paid.

Leisure

The UK health and fitness industry continued its rapid expansion throughout 2015, with a 5.6% increase in the number of fitness facilities. This performance was once again driven by the low cost sector with the key operators still progressing an aggressive acquisition programme. PureGym, The Gym, Xercise4Less and Anytime Fitness proved the most active in the market and PureGyms acquisition of LA Fitness further enhanced their position as the market leaders.

Competition in the low cost sector has further increased with the larger operators often taking multiple gyms in a town or city to secure their customer base. This has resulted in some locations reaching saturation point with little scope for further occupiers to enter the market. There has been a direct impact on the membership fees in these locations with operators offering discounted rates in an attempt to secure improved market share.

The more established operators such as Virgin, Nuffields, David Lloyd and Fitness First have primarily focussed on their existing estate and have recognised the necessity to differentiate themselves from the low cost gyms by enhancing their wider health & fitness club offer. Their point of difference being the luxury element to their facilities including swimming pools, spas, treatment rooms, that are unsustainable products in the low cost sector.

The London market has further developed, new entrants are looking at smaller format gyms to broaden the scope of available properties and the high end operators have performed extremely well. 2015 also saw a further emergence of small studios dedicated to a specific offer, Bootcamp & Spinning studios continue to perform well and following success in the US exclusive kickboxing studios such as KoBox have now arrived in the central London market.

Tenant demand for the leisure sector is expected to remain strong in 2017, with the continuing ripple effect of fast growing new brands away from London continuing.

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3.3.1. Retail / Licensed Leisure Rental Transactions

We summarise in the table below recent rental evidence for retail and licensed leisure units in the City of London:

Lease Rent £ psf Property Tenant Event Date Term Rent pa Comments (weighted) (Break)

1 New Fetter Lane Fitness First RR Sept 2016 - £138,000 £14.45 ‘Dry’ gym

New letting at the subject Basement CityPoint Chop’d Limited OML Feb 2016 10 £7,400 £17.58 property

25 Moorgate, EC2 A3D2 Ltd RR May 2015 - £220,000 £47.88

Gatti’s March New letting at the subject 1st Floor, CityPoint OML 15 £100,000 £18.96 Restaurant 2015 property 11 Telegraph Street, Fuller Smith & LR Dec 2014 - £137,500 £40.26 EC2 Turner 131 Finsbury Pavement, Uplift from previous passing All Bar One RR Aug 2014 - £210,000 £42.50 EC2 rent of £160,000 per annum

23 Watling Street, EC4 Pavilion End LR Mar 2014 10 £135,000 £42.90 6 months rent free.

Review settled by third party 24 Cornhill, EC3 The Forge Bar RR Nov 2013 - £325,000 £52.00 determination. Aqua Shard The Shard, London £475,000 12 months rent free of each, Oblix OML Sept 2012 20 £50.00 Bridge per floor 8-10% turnover rent. Hutlong Salesforce Tower, 110 Drake and OML Mar 2011 25 £220,000 £36.70 Bishopsgate, EC2 Morgan

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3.4. City Investment Market Commentary

3.4.1. Overview

Following the EU Referendum decision, the equity markets fell, as would be expected with a major economy entering a period of uncertainty. Nonetheless, in spite of this the stock market indices have shown recovery and a degree of stability has returned to the market. The impact on consumer and business confidence is the more important driver and this will be lower in the short- term and there is continued uncertainty in this regard.

As the effects of the Brexit vote unwind and the property markets begin to feel the inevitable impacts, news flow was dominated by the restrictions placed on redemptions from the open ended retail funds. This created some forced selling of assets. Also, construction sentiment is at a seven-year low and finance directors and consumer confidence have both taken a severe knock, but also shown recovery.

An immediate impact of the vote to leave the EU has been the falling value to the pound. This has made UK real estate more attractive to overseas investors with pricing for some properties having effectively fallen by up to 20% over the last three moths, when currently devaluation is taken into account. This is clearly demonstrated in central London where overseas investors accounted for 78.0% of all purchasers in the three months to end October 2016. Moreover, investors are deploying significant amounts of capital with 39.0% of overseas transactions in the City for assets over £50.0M.

3.4.2. Turnover

City turnover in 2015 reached some £10.72Bn. Although this was 15.0% down on 2014, it still represented an 80% increase on the long-term annual average. Turnover for the first half of 2016 totalled £4.3Bn, which was only 15.0% lower than a strong first half in 2015 (which was a record year). Despite the Referendum being at the end of June, which could have delayed decisions, Q2 2016 investment turnover accounted for £2.6Bn, compared with £1.7Bn for Q1 2016.

Investment turnover in September 2016 was £398.2M across 11 transactions, bringing turnover as at end Q3 2016 to £5.4Bn, a decrease of approximately 20% from the same point last year.

City Investment Turnover by Quarter

Source: Savills Research as at end Q3 2016

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At the end of Q3 2016, we recorded assets with a WAULT exceeding 10 years accounting for 33.0% of turnover, while assets with 5 to 10 years WAULT accounted for slightly more at 34.0%. Assets with less than 5 years WAULT accounted for 22.0%, with vacant possession transactions representing 11.0% of turnover.

City 2016 Turnover by WAULT

Source: Savills Research as at end Q3 2016

In October 2016 we recorded turnover of £734.95M across 12 transactions, bringing the year-to-date total City turnover to £6.2Bn, which is only 16% lower than this point last year. In the City market, as at end October 2016, Savills were monitoring 84 investment opportunities totalling circa £4.5Bn. Of this, we were aware 23 were under-offer, totalling circa £0.77Bn and leaving an estimated £3.7Bn worth of available opportunities. As at the end of October 2016, the 12 month rolling turnover for the City was £9.5Bn, 28% higher than the long-term average.

City 12 Month Rolling Turnover

Source: Savills Research as at end October 2016

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Of the 126 transactions so far this year, up to end October 2016, the City fringe accounted for the largest number at 60 (42% of turnover volume). The City core accounted for 45 transactions (46% of turnover volume), Midtown recorded 16 transactions (9% of turnover volume), and the Docklands 5 transactions (3% of turnover volume).

3.4.3. Purchasers

At the end of 2015, UK purchasers accounted for the greatest proportion of turnover at 29.0%, up by 8.0% on 2014. They were followed by Asian purchasers who accounted for 26.0% of 2015 turnover, a decrease of 7.0% from 2014. US purchasers accounted for 17.0% of 2015 turnover, European 12.0%, Middle Eastern 6.0%, and 10.0% was recorded for other nationalities. The average lot size for UK purchasers was £39M, significant lower than Asian purchasers at £153.2M or US purchasers at £123.7M. This is due to the “sweet-spot” for a number of UK funds being £25.0M to £75.0M.

Up to end Q3 2016, Asian purchasers have accounted for the highest level of turnover (44.0%), followed by UK purchasers (21.0%) and European purchasers (20.0%). The percentage share for US purchasers was relatively low at 9.0%, whilst Middle Eastern purchasers have only accounted for 3.0% of City turnover.

City Turnover by Purchaser Nationality

Source: Savills Research as at end Q3 2016

With regards to City turnover by purchaser type, at the end of October 2016, the Institutions have accounted for 51.0% of total turnover, however, the UK Institutions have only accounted for 12.0% of the total turnover. Private Investors have accounted for 17.0%, significantly higher than last year where they only accounted for 3.0%.

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City Turnover by Purchaser Type

2015 2016

Source: Savills Research as at end October 2016

3.4.4. Yields

Savills benchmark prime City office yield hardened by 75 bps between January 2013 and May 2015 from 4.75% to a record low of 4.00%. Prime City yields stabilised at this level for the remainder of 2015 and early 2016, although wider market uncertainty had started to weaken investor sentiment. This was exacerbated by the potential risks to the City office market of a Brexit vote and in June 2016 the Savills benchmark prime City office yield was moved out by 25 bps to 4.25%.

Since we softened our prime yield in June 2016, Savills prime City yield has remained at 4.25% for the last five months. The spread between the City and West End is still at 75 bps with the West End prime yield currently at 3.50%.

City and West End Prime Yield Spread

Source: Savills Research as at end October 2016

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3.4.5. Outlook

In the immediate aftermath of the vote to leave the EU many indicators have been increasingly volatile with the MSCI all property capital growth index falling by around 3.0% in July and subsequently rebounding. The market should be braced for further volatility as the UK prepares to work through the process of triggering Article 50 and what that means for financial markets and the position of UK real estate in the global asset class hierarchy. A further layer of uncertainty has also been added with the election of Donald Trump as US President with a number of indices, such as the S&P 500, initially falling but subsequently rallying.

Despite this uncertainty, property remains a fundamentally safe asset class, giving strong income returns and in many cases is a refuge for capital preservation in the longer term. The sterling devaluation has made UK property particularly attractive for international investors pegged to the US Dollar or Euro, with activity in central London likely to continue to be dominated by non- domestic investors. Uncertainty, rising demands from pension funds, and low bond yields will continue to drive a global hunt for investments that deliver a secure income.

We would comment that the outlook for the City market is stable. Whilst there are obvious external factors which may adversely impact on the market the perception is that a degree of normality has retuned and Q4 2016 has seen good levels of activity so far, with an appetite amongst investors to transact before the year end. We perceive that demand will remain good for prime, well let secure income streams whilst secondary assets, or those which are geared more towards the occupational market, may witness a softening in yields/values. Much will depend on the strength of the occupational market and the outcome/progress of the Brexit negotiations.

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3.4.6. Investment Evidence

In the following section of the report we summarise a body of investment evidence. This includes a variety of prime office buildings located in the City of London that have transacted over the last few months and others that are currently under offer or available, with investment lot sizes between £80.0M and £715.0M, with the latter in respect of 110 Bishopsgate (Salesforce Tower) which was marketed although did not sell.

We summarise the investment evidence below and comment upon the pricing relative to the valuation of CityPoint.

Address NIY Key characteristics Sale price Comments It is rumoured that British Land are  One of London’s most iconic office speculatively marketing for sale their 50% buildings stake in the building at a quoting price of Leadenhall  Grade-A office building providing in excess £500.0M. The property comprises one of Building, 122 of 500,000 sq ft (46,452 sq m) of £500.0M London’s most prime office buildings, - Leadenhall accommodation over 43 storeys (50% stake) forming part of the ‘City of London office Street, EC3  Developed in 2014 cluster’. As such we would expect a  Fully let with record rents of £100 per sq ft discount in yield relative to CityPoint given achieved on the office accommodation the prime nature of the building and its location.  Located in the heart of the City of London Modern office building redeveloped in  Modern Grade A office building developed 2009. Inferior WAULT and WAUTC of circa in 2009 5 years and 4.5 years respectively, relative  Provides 77,652 sq ft (7,214 sq m) of to circa 7 years and 5 years 6 months office, retail and ancillary accommodation respectively at CityPoint. 10 Fenchurch £80.0M 4.44%  Multi-let to 7 tenants providing a WAULT of Street, EC3 Under Offer c.5 years and a WAUTC of 4.5 years. A slight discount in yield can be anticipated  Let off an average rent of £48.88 per sq ft relative to CityPoint given the absence of  Freehold reversionary income in the short term.  Transaction expected to complete Although nonetheless an attractive imminently freehold investment lot size. Unexpired term certain of 9.25 years at 1 Wood Street compared to a WAUTC of  Prime headquarters office building circa 5 years 6 months at CityPoint. extending 184,184 sq ft (17,111 sq m) Income secured against one office tenant;  Office accommodation is fully let to Eversheds with an option to further extend Eversheads Properties Limited, with a their lease in 2026 for a term of 7 years, surety provided by Eversheds LLP, expiring 2033. Held Long Leasehold with providing a term certain of circa 9.25 years an unexpired term of 149 years. 1 Wood  Tenant option to take a new lease of all £180.0M 4.22% Street, EC2 office floors at expiry of the current lease in Under Offer Currently under offer. Given the similar 2026 secured income in respect of the income  Office accommodation let off an average derived from Simmons & Simmons at rent of £46.41 per sq ft (£457 per sq m). CityPoint (8 years 4 months), we anticipate  Held Long Leasehold with an unexpired yield expectations to be broadly similar in term of c.149 years respect of CityPoint with the equivalent  Currently under offer yield having greater bearing in respect of the latter given the reversionary potential.

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Address NIY Key characteristics Sale price Comments  Grade A headquarters office building Modern office building located within close developed in 2011 proximity of the subject property. Provides  Entirely let to Pinsent Masons LLP on five a superior secured income stream in the co-terminus leases expiring December order of c.14 years, secured against one 30 Crown 2030 without break, providing an £200.7M office tenant; Pinsent Masons. c.4.50% Place, EC2 unexpired term certain of c.14 years. Under Offer  Let off an average rent of £47.92 per sq ft Under offer and pricing appears attractive, overall although nonetheless lot size is at the cusp  Freehold of where a yield softening in the current  Currently under offer market is warranted. Key benchmark evidence for a multi-let office building in the City of London. Moor Place occupies a site adjacent to the  Headquarters office building developed in subject property and provides a superior 2014 WAULT of c.17.4 years and WAUTC of  236,793 sq ft (21,999 sq m) of office, gym, c.16.9 years. A more modern office and ancillary accommodation development, being just 2 years old. A Moor Place, 1  Multi-let to five tenants providing a WAULT significant part of the income is derived £271.0M Fore Street, 4.86% of 17.4 years and a WAUTC of 16.9 years from WeWork who would be considered a Exchanged EC2  Majority of total income secured against inferior covenant to most of those within one office tenant; WeWork CityPoint.  Freehold  Exchanged with completion expected Exchanged with completion expected imminently imminently. Given the similar location and multi-let nature, yield expectations are likely to be broadly similar in respect of CityPoint. Key benchmark evidence. Grade A office  Located in the City of London’s traditional building located in close proximity of the business core, in close proximity of the subject property and developed in 2002. subject property Single-let to J.P Morgan and held long  Developed by MEPC in 2002 leasehold, while CityPoint is multi-let and  154,854 sq ft (14,387 sq m) of Grade A held Freehold. office, retail and ancillary accommodation

 Single let to J.P. Morgan Chase N.A. and Given the similarities in age of the 20 Moorgate, 4.17% - sub-let to the Bank of England on a lease £155.0M - buildings and prime location in the heart of EC2 4.30% expiring March 2019 £160.0M the City of London, we anticipate yield  The Bank of England have entered into a expectations related to CityPoint to lie reversionary lease from March 2019 for a within a similar range of 4.17% - 4.30%, term of c.7 years albeit with the equivalent yield forming a  Office accommodation let off a rent of key determinant at CityPoint given the £49.24 per sq ft active asset management nature of the  Held Long Leasehold until November asset relative to long term single let 2152, providing circa 136 years unexpired income.

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Address NIY Key characteristics Sale price Comments Modern office building located in the  Salesforce Tower comprises a 40-storey northeast quadrant of the City of London, office tower located in the northeast multi-let to 24 tenants providing a similar quadrant of the City of London WAULT of 10.5 years and WAUTC of 9  Developed in 2011 years and 2 months when compared to  Provides a net internal area of 458,007 sq CityPoint. ft (42,550 sq m)  Two bar/ restaurant units located at the top We understand the owners considered 110 and ground floor levels £715.0M disposing of Salesforce Tower in Q2 Bishopsgate, 2.18%  Multi-let to 24 separate tenants, with the Not Sold 2015, with two offers received at EC2 principle tenant being Salesforce who £715.0M and £730.0M. However the provide c.30% of aggregate rent vendors aborted the sale and decided to  WAULT of 10 years and 6 months and hold the asset. Given the property was WAUTC of 9 years and 2 months not openly marketed and the speculative  Let off an average rent of £34.97 per sq ft transaction did not proceed, we do not (£379 per sq m) overall consider 110 Bishopsgate to provide  Freehold material investment evidence for our valuation of CityPoint.

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3.4.7. Investment Evidence

We highlight below the following transactions, which we would consider to be particularly relevant to our valuation of the property.

Leadenhall Building, 122 Leadenhall Street, London EC3

Date On Market (British Land’s 50% stake)

sq ft sq m Size 573,590 53,288

Passing Rent £ per sq ft WAUTC Rent Details tbc tbc tbc

Capital Value Price Net Initial Yield Price/ per sq ft Yield £500.0M tbc £872

The Leadenhall Building, or ‘The Cheesegrater’ as it is more commonly referred to, forms part of the City of London skyline standing approximately 225m (736 ft) tall, positioned among the prime City of London office cluster. The Leadenhall Building occupies a prominent site located close to the Bank of England and directly opposite Lloyd’s of London, with other nearby occupiers including Deutsche Bank, Swiss Re Europe, AON, Clydesdale Bank, and Deutsche Pfandbriefbank AG.

The property is one of London’s most iconic office buildings designed by Rogers Stirk Harbour + Partners and developed in 2014. The Leadenhall Building provides 573,590 sq ft (53,288 sq m) of Grade-A office and retail accommodation arranged over ground, ground mezzanine and 42 upper floors. Retail accommodation is provided at ground and mezzanine levels, while the office accommodation is arranged over floors 4 - 42, with reception areas provided at Levels 1 & 2 and a restaurant let to Bob Bob Ricard on Level 3.

The office accommodation is fully let with occupiers including AON, Clydesdale Bank, OMERS, Banco Sabadell, AEGON, and Brit Insurance. Lettings in the building have achieved record rents for City of London offices, with a rent of £107 per sq ft (£1,152 per sq m) agreed in respect of the letting to Kames on the 43rd floor agreed earlier this year, post the EU Referendum.

It is rumoured that British Land are marketing for sale their 50% stake in The Leadenhall Building for a price in the region of £500.0M, reflecting a capital value of £872 per sq ft (£9,383 per sq m), albeit no formal marketing material has been produced.

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10 Fenchurch Street EC3

Date Under Offer

sq ft sq m Size 77,652 7,214

Passing Rent £ per sq ft WAUTC Rent Details £3,795,849 £48.88 4.5 years

Capital Value Price Net Initial Yield Price/ per sq ft Yield £80.0M 4.44% £1,030

10 Fenchurch Street is situated on the southern side of Fenchurch Street on the corner of Philpot Lane, 1.2 miles (1.9 km) east of the subject property. The property was redeveloped in 2009 and provides 77,652 sq ft (7,214 sq m) of office, retail and ancillary accommodation arranged over basement, ground and ten upper floors, floorplates range from 2,000 sq ft (186 sq m) to 7,164 sq ft (666 sq m). The building is finished to a full air-conditioned Grade A specification.

The property is held freehold and is let to seven tenants having a weighted average unexpired lease term of approximately 5.0 years to expiry and 4.5 years to breaks. The aggregate rent is £3,795,849 per annum equating to £48.88 per sq ft (£526 per sq m) overall. Passing rents on the offices range from £36.75 per sq ft (£396 per sq m) to £57.50 per sq ft (£619 per sq m). Passing rents on the two retail units are £70.21 per sq ft (£756 per sq m) and £131.10 per sq ft (£1,411 per sq m).

The property offers an opportunity for redevelopment at current lease expiries. A Feasibility Report illustrates a 25-storey commercial development providing a net internal area in excess of 175,000 sq ft, reflecting an increase of 125%.

10 Fenchurch Street is currently under offer for £80.0M, reflecting a net initial yield of 4.44% and a capital value of £1,045 per sq ft, with the transaction expected to complete imminently. The property was marketed with a guide price of £75.0M, reflecting net initial yield of 4.74% and a capital value of £980 per sq ft.

The quoting price of £75.0M, assuming 6.80% purchaser’s costs, equates to a net initial yield of 4.74% and a capital value of £965 per sq ft (£10,387 per sq m). The property was brought to the market at the beginning of September 2016 with the fist round of bids being called on 14 October. We understand the property is currently under offer in excess of the quoting level, at £80.0M, reflecting a net initial yield of 4.44% (assuming purchaser’s costs of 6.8%) and a capital value of £1,030 per sq ft (£11,090 per sq m). We understand the transaction is expected to complete imminently.

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CityPoint, One Ropemaker Street, London EC2Y 9AW

1 Wood Street, London EC2

Date Under Offer

sq ft sq m Size 184,184 17,111

Passing Rent £ per sq ft WAUTC Rent Details £7,736,329 £42.00 9.12 years

Capital Value Price Net Initial Yield Price/ per sq ft Yield £180.0M 4.22% £977

One Wood Street comprises a prime headquarters office building occupying a prominent site in the City of London, close to the Bank of England, St. Paul’s Cathedral and the London Stock Exchange. The property is prominently positioned on the eastern side of Wood Street with Cheapside running along the southern elevation of the building. Notable nearby occupiers include Investec, Goldman Sachs, Lloyds Banking Group and Bank of America Merrill Lynch.

The property was developed in 2007 by Land Securities and designed by renowned architects Fletcher Priest. One Wood Street provides 184,184 sq ft (17,111 sq m) of high quality office, retail and ancillary accommodation arranged over lower ground, ground and 7 upper floors. Retail accommodation is provided on the lower ground and ground floors, while the office accommodation is arranged over ground and 7 upper floors with typical floorplates in the region of 23,300 sq ft (2,165 sq m). Floor 7 benefits from an impressive roof terrace, whilst café facilities are provided on both the ground and sixth floors. The three retail units front onto the City’s principal retailing destination, Cheapside.

One Wood Street is fully let to one office and three retail tenants, with 90% of the income derived from the office accommodation, which is let to Eversheds Properties Limited, with a guarantee provided by Eversheds LLP. Eversheds occupy the building on eight separate co-terminus leases, expiring 12th February 2026 without break. There is a tenant option to take a new lease of all floors for a seven year term at expiry of the current leases. The total passing rent of the office accommodation equates to £7.82M, reflecting an average rent of £46.41 per sq ft (£457 per sq m). The retail accommodation is let to Ted Baker, Vision Express and Metro Bank, with the total rent amounting to £858,750 per annum, with ITZA rents ranging from £190 to £235 per sq ft. One Wood Street has a total gross passing rent of £8.67M per annum, reducing to £7.74M per annum after deduction of the head rent.

The property is held Long Leasehold from the Trust for London Trustee for a term expiring 24th March 2165, producing an unexpired term of c.149 years. The head rent is geared to 10.85% of rents received, subject to a minimum rent of £380,000 per annum. The current head rent is £941,550 per annum.

The property was initially marketed in March 2016 with the vendor seeking offers in excess of the asking price of £190.0M, equating to a net initial yield of 4.00% (assuming purchasers costs of 1.8%) and a capital value of £1,032 per sq ft (£11,104 per sq m). We understand that the property attracted good levels of interest from overseas investors, but was withdrawn from the market following the EU Referendum result. The investment was subsequently re-launched in late September 2016 and with a reduced asking price of £180.0M (-5%), reflecting a 25 bps outward movement in the net initial yield to 4.22% (assuming purchaser’s costs of 1.8%) and reflecting a capital value of £977 per sq ft (£10,520 per sq m). We are informed the property has recently gone under offer close to the guide price of £180.0M (4.22% NIY), albeit the exact details of the transaction remain confidential.

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CityPoint, One Ropemaker Street, London EC2Y 9AW

30 Crown Place, London EC2

Date Under Offer

sq ft sq m Size 191,896 17,827

Passing Rent £ per sq ft WAUTC Rent Details £9,195,000 £47.92 14.22 years

Capital Value Price Net Initial Yield Price/ per sq ft Yield £200.7M c.4.50% £1,046

30 Crown Place is a landmark office building occupying a prominent island site within the EC2 district of the City of London. The property benefits from excellent transport communications, located 100m from Liverpool Street station, 200m from Moorgate and 500m from Bank London Underground Stations. Local occupiers in the nearby area include Deutsche Bank, UBS, Bloomberg, Henderson Global Investors and RBS.

30 Crown Place was developed by Greycoat and completed in Q1 2011. The property provides a Grade A headquarters office building providing 191,896 sq ft (17,828 sq m) of office and ancillary accommodation arranged over two basements, ground and 16 upper floors. The office floor plates range in size from 5,518 sq ft (513 sq m) on the 16th floor and 14,144 sq ft (1,314 sq m) in respect of the 2nd and 4th floors. Landscaped roof terraces are provided on levels 8, 9, 15 and 16, while Level 1 has been designed to accommodate a trading floor and benefits from an enhanced specification.

The property is held Freehold and is entirely let to Pinsent Masons LLP on five separate co-terminus FRI leases for a term of 20 years, without break from 1 January 2011, expiring 24 December 2030. The current passing rent is £9,195,000 per annum, equating to a rent of £47.92 per sq ft (£516 per sq m) overall, and is subject to upwards-only rent reviews with the next scheduled for 2020.

We are informed that 30 Crown Place has recently gone under offer, having gone to bids in the last week or so. The property has been openly marketed with offers being sought in the region of £212.5M (assuming purchaser’s costs of 1.80%), reflecting a net initial yield of 4.25% and a capital value of £1,107 per sq ft (£11,920 per sq m). While details of the transaction remain confidential, we understand offers have been received close to 4.50%, reflecting a capital value of £200.7M, equating to £1,046 per sq ft (£11,259 per sq m), assuming purchaser’s costs of 1.80%.

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CityPoint, One Ropemaker Street, London EC2Y 9AW

Moor Place, 1 Fore Street, London EC2

Date Exchanged

sq ft sq m Size 236,793 21,998

Passing Rent £ per sq ft WAUTC Rent Details £13,415,711 £56.66 16.53 years

Capital Value Price Net Initial Yield Price/ per sq ft Yield £271.0M 4.86% £1,145

Moor Place is a landmark office building situated in the heart of the City of London, directly adjacent to the new Moorgate crossrail entrance. Moorplace comprises a headquarters office building developed in 2014 and designed by HKR Architects, providing 236,793 sq ft (21,999 sq m) of office, gym and ancillary accommodation arranged over basement, basement mezzanine, ground and eleven upper floors. The office accommodation has been completed to Grade A specification and provides regular shaped, highly flexible floorplates arranged around a central atrium, with typical floor plates ranging in size between 7,989 sq ft (742 sq m) and 24,053 sq ft (2,235 sq m).

The property is held Freehold on an island site extending to approximately 0.67 acres (0.27 hectares). Moor Place is multi-let to five tenants including WeWork, CHP Consulting, Tradeweb Europe, Caixa Geral De Depositos SA and Pure Gym by way of seven separate full repairing and insuring leases, providing a WAULT of 17.4 years and a WAUTC of 16.9 years. The total passing rent equates to £13.42M per annum, reflecting £56.66 per sq ft (£609.84 per sq m) overall. The total passing rent of the office accommodation is £13.17M per annum, while the gym accounts for £220,000 per annum. Approximately 73% of the total income is secured against WeWork who occupy 77% of the office accommodation by area on two co-terminus leases expiring 30 August 2035, thereby providing a term certain of 19.3 years.

Moor Place exchanged in October 2016, with completion anticipated imminently. The property has been acquired by Kingboard Chemical Holdings Limited from Brookfield Property Partners for a purchase price in the region of £271.0M, and a reflecting a capital value of £1,145 per sq ft (£12,327 per sq m) and a net initial yield of 4.86%, assuming purchasers costs of 1.80%.

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CityPoint, One Ropemaker Street, London EC2Y 9AW

20 Moorgate, London EC2

Date November 2016

sq ft sq m Size 154,854 14,387

Net Passing Rent £ per sq ft WAUTC Rent Details £6,784,852 £43.81 10.87 years

Capital Value Price Net Initial Yield Price/ per sq ft Yield £155.0M - £160.0M 4.17% - 4.30% £1,001 - £1,033

20 Moorgate is located at the centre of the City’s traditional core, less than 100 metres north of the Bank of England. The property occupies a prominent position on the east side of Moorgate, recognised as one of the city’s premier thoroughfares, and benefits from approximately 34 metres of prime frontage onto Moorgate.

20 Moorgate comprises a headquarter office property, developed by MEPC in 2002. The property provides 154,854 sq ft (14,387 sq m) of Grade A office, retail and ancillary accommodation arranged over lower ground, ground and seven upper floors. The office accommodation extends approximately 150,307 sq ft (13,964 sq m), while the retail accommodation comprises a self-contained unit on the lower ground and ground floors totalling 4,547 sq ft (422 sq m). Internally the office accommodation provides regular floor plates ranging in size from 6,837 sq ft (635 sq m) to 21,190 sq ft (1,969 sq m) allowing for both cellular and open plan occupation.

The entire office accommodation is single let to JP Morgan Chase Bank N.A on a FRI lease, expiring 23 March 2027 subject to a tenant break option which has been exercised with effect on 24th March 2019, at a rent of £7.40M per annum, reflecting an overall rent of £49.24 per sq ft (£530 per sq m). The property has been entirely sub-let to The Governor and the Company of the Bank of England on a lease expiring 23 March 2019, paying an annual rent equal to JP Morgan Chase. The Bank of England has entered into a reversionary lease from 23 March 2019, expiring on 30 June 2027. Both the occupational lease and sub-lease are subject to five yearly upwards only rent reviews, with the next scheduled for 25 December 2016. The retail accommodation is let to Fuller, Smith & Turner Plc until 24 December 2039, with a landlord only break option on 23 June 2027, at a current passing rent of £137,500 per annum. The property produces a total gross rental income of £7.54M per annum and a net income of £6.78M per annum, after deduction of the head rent of £753,872 per annum.

The property occupies a large site of approximately 0.63 acres (0.27 hectares) and is held Long Leasehold from the Master Wardens and Commonalty of Freeman of the Art or Mystery of Clothworkers of the City of London until 3 November 2152, subject to a head rent geared to the higher of 10% of rents received or a minimum rent, being the higher of 5% of open market rent reviewed every five years or £500,000 per annum.

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CityPoint, One Ropemaker Street, London EC2Y 9AW

The property was initially marketed in early 2016 to a number of selected parties, with the vendor seeking offers in the region of £106.0M, which reflected a net initial yield of 4.17%, assuming purchaser’s costs of 1.8%. We understand that bids were called in late May 2016 and offers were received in excess of the asking price, albeit these were not progressed and the property was temporarily withdrawn due to the uncertainty created by the UK EU Referendum. 20 Moorgate was subsequently re-launched in July 2016 and was openly marketed, with strong interest received from overseas investors. We understand multiple offers were received in the region of £150.0M to £160.0M, reflecting a net initial yield range of 4.25% to 4.5%, assuming purchaser’s costs of 1.8%. The exact purchase price has not been disclosed, albeit we understand it is in the range of £155.0M to £160.0M, reflecting a net initial yield range of 4.17% to 4.30%, and a capital value of £1,001 per sq ft (£10,774 per sq m) to £1,033 per sq ft (£11,121 per sq m), assuming purchaser’s costs of 1.80%.

110 Bishopsgate, London EC2

Marketed and bids received although not sold and Date refinanced.

sq ft sq m Size 472,482 43,895

Passing Rent £ per sq ft WAUTC Rent Details £26,750,608 £56.62 9.17 years

Capital Value Price Net Initial Yield Price/ per sq ft Yield £715.0M 2.18% £1,513

110 Bishopsgate, previously known as Heron Tower and now named Salesforce Tower is located to the northeast quadrant of the City of London, within the EC2 financial postal district, approximately 120 metres to the south of Liverpool Street Station and 650 metres to the north east of the Bank of England.

The property comprises a 40 storey tower building providing high quality office accommodation and three bar / restaurant units a the top and ground floor levels. The property was completed in March 2011 and provides a total net internal area of 458,007 sq ft (42,550 sq m). The office floor plates are broadly similar, each offering in the region of 12,000 to 13,000 sq ft (1,115 to 1,208 sq m). A total of three external roof top terraces are situated within the building, one of which is allocated for the office tenant at level 35 with the remainder for use by the top floor restaurant at level 38.

The property is multi-let on 44 individual leases to 24 separate tenants. The principal tenant is Salesforce who represent over 30% of the aggregate rent. There is a c. 5.0% vacancy rate in the building and the weighted average unexpired lease term is 10 years 6 months to expiry and 9 years 2 months to the breaks.

The total net income is £16,523,263 per annum which equates to £34.97 per sq ft (£379 per sq m) overall. The property is held on a Freehold basis.

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CityPoint, One Ropemaker Street, London EC2Y 9AW

We understand that in the second quarter of 2015 the owners considered disposing of the asset, albeit did not openly market the property, and thereafter received two offers of £730.0M, which equates to £1,545 per sq ft (£16,631 per sq m) and £715.0M which equates to £1,513 per sq ft (£16,289 per sq m) and a preferred bidder was selected, however, the vendor later aborted the sale and decided to hold the asset. On the basis of the net income of £16.5M, the above offers would reflect 2.14% and 2.18% respectively (based on 5.80% purchaser’s costs), or circa 3.75% on the basis of topped up rents, depending on date of offer and level of top-up required.

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4. Valuation Advice

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4.1. Principal Valuation Considerations

The principal matters that impact on the value of the property are as follows:

4.1.1. Location and Situation

The City of London is Europe’s pre-eminent financial centre and this role is likely to continue despite the recent EU Referendum result to leave the EU, albeit there is more uncertainty around the implications for the Banking sector with issues such as “passporting”. London has the characteristics to maintain its position as a world leading financial centre and the UK government continues to act proactively to protect the City’s status.

The central London office market continues to benefit from the strength and depth of interest from overseas investors, as illustrated by the sale of many large trophy assets in recent years. London continues to be regarded as a safe haven for wealthy international investors and boasts a liquid and transparent property market, a robust financial and legal system, and an economy that is recovering from the global financial crisis at least as fast as any of the major economies.

The property is situated in an improving edge of City core location. The extensive Barbican development acts as a barrier to the historic and traditional city core, although its listed status will ensure in the future that some of the views to the west from CityPoint are protected, albeit the immediate outlook on the Barbican Estate is in part “underwhelming” relative to the views to the east with provide views to the City tower cluster.

Aspect east to Finsbury Circus and the City tower Part of the aspect to the west towards and over the cluster Barbican Estate

The refurbishment of CityPoint and the piazza in 2000 together announcement of Crossrail services from Liverpool Street station brought renewed focus to the area east of Liverpool Street such that the immediate area has improved in the last 15 years or so with several key developments being delivered in this time to include, Moor Place (developed in 2014), 30 Crown Place (2011), Principle Place, scheduled for completion in Q1 2017, Finsbury Circus and the ongoing redevelopment of The Broadgate Estate immediate to the west of Liverpool Street station.

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There is a significant amount of development activity in the vicinity including substantial office buildings and infrastructure projects. Although there may be a significant amount of speculative development due to be delivered during the course of the next five years, the occupational fundamentals of the occupational market are considered to be good and within the context of annual take-up levels it is not considered that the market will be flooded with newly built vacant space. Conversely a considerable amount of the office space to be delivered is either under contract or forecast to be pre-let nearer to the time of practical completion.

Crossrail services are provided at Liverpool Street Station, with services commencing 2018, this is likely to further benefit the desirability for the immediate area for occupiers. Direct services from commuter belts to the west of London, such as Reading and Maidenhead, will greatly improve commutes for workers who at present cannot travel direct in to Liverpool Street / the City.

4.1.2. Building Quality and Condition

The building is currently ranked the seventh tallest building in the City of London. It is one of relatively few existing “Tower Buildings” and whilst it is not considered iconic in a similar vein as such City buildings as 30 St Mary Axe (aka “The Gherkin”), The Leadenhall Building, (the “Cheesegrater”), 20 Fenchurch Street (the “Walkie Talkie” and 110 Bishopsgate / Saleforce Tower it nevertheless presents a very well built and recognisable building enjoying a prominent position just off Moorgate and approached directly / visible from Liverpool Street station.

The office accommodation at 6 to 36 floors provide a comparatively uniform floorplate of 11,889 sq ft (1,105 sq m) to 41,311 sq ft (3,838 sq m) which is well configured with two service cores. The floorplates can be readily split in two to provide office suites of between 5,000 and 20,000 sq ft (465 to 1,858 sq m) with an aspect either to the west or the east. The lower floors at the Ground to fifth floors provide HQ style office space, which is currently let to a single tenant.

Twentieth floor floorplate Seventh floor floorplate

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Whilst the reconfigured / refurbished building is now circa 16 years old it presents well and is broadly commensurate with a modern contemporary office building in the City of London. Nonetheless parts of the common areas have a tired appearance with the overall visitor experience in to the piazza and retail areas being comparatively lacklustre. However, a degree of “under investment” in these areas can be attributed to the receivership structure which has endured in the past four years, although going forward a degree of sympathetic upgrading and “refurbishment” of the communal areas can be anticipated in order that the property remains attractive in the occupational market.

Watts have identified that repairs of circa £12.0M are required in the medium to long term, although have opinion that these costs should be reclaimed under the service charge provisions. In summary, the building fundamentals are good and assuming the building is proactively maintained, as is currently the case, and subject to the refurbishment of office floors, we consider that the accommodation will retain good lettability, subject to rent expectations and lease incentive expectations.

4.1.3. Tenure

Freehold which is the best form of tenure and a pre-requisite for many dominate City investors.

4.1.4. Leases

Furthermore we consider that the existing income also offers reversionary potential with the average rent on the let office areas being in the order of £46.30 per sq ft (£498 per sq m) versus the average Market Rent on this let space being in the order of £59.90 per sq ft (£645 per sq m).

4.1.5. Tenants’ covenant strength

The tenants’ covenant strength is considered mixed, but generally good, in particular the principal tenant, Simmons & Simmons. The tenants include several law firms with LLP status and with other tenants offering a parent company guarantee.

4.1.6. Market Rent

As detailed in our approach to valuation section below, we are of the opinion that the current aggregate headline Market Rent of the property is in the order of £37,290,000 per annum.

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4.1.7. The Development Pipeline and Occupational Market Value

With City investment yields at historically low levels albeit with adjustments of say circa 25bps +/- on a monthly/quarterly basis as appropriate depending upon economic sentiment at the time, and thus the implication that material capital growth is unlikely to be delivered in the short to medium term, the investment performance of real estate assets in the City to a large extent hinges on the occupational market. In the medium term aside from rental growth and its influence on headline rental values on re-letting and net effective rents at rent view, the development pipeline will also influence the retention of tenants in the building which in turn will influence the net income position and the extent to which income voids and irrecoverable expenses, to include rates and service charge, are incurred by the landlord.

Savills are currently monitoring a development pipeline in the City of circa 15.0M sq ft (1.40M per Sq M) which is capable of delivery in the next four years.

We attach at Appendix 4 a chart of the development pipeline. The development pipeline of circa 15.0M Sq Ft is arranged in 78 buildings/schemes and our current estimation is that around 28.0% of the development pipeline is pre-let space thus the speculative element is in the order of 10.80M Sq ft.

To what extent all schemes in the development pipeline are developed, or within the year currently planned is a moot point. Inevitably in a softening occupational market it can be anticipated that some redevelopments/refurbishments will be shelved for the time being as the projected rental values adopted at acquisition and which underwrite the viability of the development fail to materialise, at least in the medium term. In such circumstances developers can be anticipated to hold and wait for an improvement in rental values and manage the existing building/income profile whilst maintaining a watching brief in respect of the redevelopment. Similarly, some schemes in inferior positions are likely to be shelved/ delayed or where the scheme requires further design or “value engineering” in order to make the development viable. Thirdly, some schemes may require debt finance which may be unable to be provided or at least on terms which enable development. Finally, some schemes within the development pipeline are subject to planning consent and inevitably some may fall at this “first hurdle” or the size and scope of the development may have to be scaled back.

Having regard to the development pipeline it is possible to dissect the schemes into a probability of being delivered. There is some 5.07M sq ft (470,000 sq m) scheduled to be delivered in 2017, all of which we consider has a 100% prospect of being delivered. Thereafter in 2018, 2019 and 2020 the picture becomes more uncertain with question marks over the deliverability of some schemes such that it is possible to crudely band the schemes into groups having a 100%, 75%, 50% or 25% prospect of occurring. We summarise the development pipeline on this basis as follows:-

Prospect of current Year Total (sq ft) Pre-let (sq ft) Speculative (sq ft) scheme being delivered

2017 100.0% 5.07M 2.22M 2.85M

2018 100.0% 3.90M 1.67M 2.24M

75.0% - - -

50.0% 0.18M - 0.18M

25.0% 0.009M - 0.09M

2018 total 4.17M 1.67M (40.0%) 2.51M

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Prospect of current Year Total (sq ft) Pre-let (sq ft) Speculative (sq ft) scheme being delivered

2019 100.0% 0.63M - 0.63M

75.0% - - -

50.0% 1.01M - 1.01M

25.0% 1.30M - 1.30M

2019 total 2.94M - 2.94M

2020 100.0% 0.14M - 0.14M

75.0% 01.6M - 0.16M

50.0% 1.01M 1.01M

25.0% 2.22M - 2.22M

2020 total 3.54M - 3.54M

Total 2017 to 2020 100% 9.74M 3.89M 5.86M

75% 0.16M - 0.16M

50% 2.20M - 2.20M

25% 3.61M - 3.61M

Overall total 2017 to 15.71M 3.89M 11.83M 2020

Beyond the next two years, 2017 and 2018, we currently consider that of the “development pipeline” of 6.48m sq ft (2.94m in 2019 and 3.54M in 2020) only 770,000 sq ft (71,535 sq m) is certain to be developed.

The implication for CityPoint over the medium term is that whilst a degree of any softening in the occupational market may be encountered, albeit the extent of any softening will be determined by the terms of the UK withdrawal from the EU, a flood of newly developed space to the City market is not foreseen. Consequently there is unlikely to be a large selection of new competing buildings for tenants to commit to. Whilst some of the current occupiers may seek to pre-let space in new developments, these in the main are likely to be confined to Simmons & Simmons and Simpson who occupy 180,000 sq ft and 54,000 sq ft respectively, the respective leases have unexpired terms certain of 8 years, 4 months and 5 years, 10 months thus temporing the tenants ability/desire to enter pre-let agreements.

4.1.8. Lettability

CityPoint forms an active asset management opportunity and to a large degree the key determinant of value and the future investment performance of the property will be its ability to retain and attract new occupiers / tenants in respect of current vacant space or if existing occupiers opt to vacate.

In the medium term Savills are forecasting muted rental growth in the City office market and with rental values forecasted to contract in 2018. We summarise our current rental growth forecasts as follows:

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Prime City Rents at year end Average Grade A City Rents at year end Year per sq ft Rental growth per sq ft Rental growth 2016 £75.75 £56.00 1.8% 2017 £75.75 0.0% £56.00 0.0% 2018 £74.75 -1.3% £55.00 -1.8% 2019 £75.50 1.0% £55.00 0.0% 2020 £77.00 2.0% £56.00 1.8%

On the basis of rental performance of the office space anticipated for Average Grade A city rents, then there is unlikely to be any material growth in the rental value over the next four or so years. Notwithstanding this vacancy rates in the City office market are currently in the order of 5.20% and whilst there is an active development pipeline it can be anticipated that vacancy rates will not significantly widen further with largely speculative development proposals put on hold if vacancy rates were to materially increase. Our current forecast is that vacancy rates in the City will increase to 6.40% in 2020. To put these vacancy rates into context, following the GFC City vacancy rates stood at 7.80% and 10.40% in 2008 and 2009 respectively; in 2002 to 2004 the vacancy rate ranged between 12.40% and 15.50% and in the seven year period of 1990 to 1996 the vacancy rate ranged between 13.0% and 20.50%, the latter being recorded in both 1991 and 1992.

4.1.9. Investment Quality

The principal advantages and disadvantages of the quality of the investment are as follows:

Advantages:

. Located within central London, inside the City of London core. Thus forming part of a strong investment market, albeit with this strength in part driven by the general lack of supply of investment opportunities over the previous few years, in addition to weight of global money, and nonetheless in the main currently concentrated on lot sizes up to £150/£200.0M . A substantial sized tower building occupying a prominent site . Well positioned to Liverpool Street station and the opening of Crossrail services in 2018 . Freehold tenure . The property provides flexible office accommodation with floorplates in the region of 10,000 sq ft (929 sq m) to 13,000 sq ft (1,208 sq m) with the ability to sub-divide or let on a multi-floor basis and should capture a range of tenant demand profiles . WAULT 7 years 1 month reducing to 5 years 6 months on a term certain basis . A core income of 26.73% of the current gross committed rent derived from Simmons & Simmons in respect of the lower floors and having an unexpired term of 8 years 4 months without break . Overall considered reversionary and with reversionary potential in respect of let space . A generally good occupational market which appears to be weathering the Brexit referendum, which bodes well for the letting up of the property, should floors become vacant

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Disadvantages:

. Not a new building compared to more recent “iconic” Tower Buildings in the City, and thus not a “trophy asset” . A number of tenancies are non-income producing by virtue of active rent free periods . A 15 year old refurbishment and whilst capex works of circa £12.0M likely to be recovered under service charge provisions the works will require careful management in order that building is not “tagged” with a high service charge reputation . Defensive capex required in respect of some floors in order to achieve target rents . Significant lot size, and thus a limited pool of buyers

4.1.10. Liquidity

Albeit a substantially large lot size, there remains global appetite from a diverse range of sources to invest in real estate assets as the world generally continues to be flush with capital with a desperate need to secure attractive returns without straying too far up the risk curve. Large single assets, providing a diverse range of income and asset management opportunities in globally strong locations such as the City of London continue to be perceived as offering such an opportunity.

4.1.11. Purchasers and Marketability

There is likely to be a relatively small pool of potential purchasers for such an asset due to its lot size and the fact that is does not form a new “trophy asset” similar to the The Leadenhall Building. In the current market these are anticipated to be American based institutional wealth or a collective vehicle / consortium of north American purchasers and UK based investment houses and asset managers. In the present global market there is a general flight of capital from certain troubled economies which encourages Chinese, South American, and a handful of Middle and Far East based investors seeking to preserve wealth. This small but globally diverse pool of potential purchasers also presents a currency angle and the £Sterling performance against different currencies can affect where the interest is derived from.

4.2. Approach To Valuation

4.2.1. Current Market Rent - Offices

We summarise our opinion of Market Rent of the office accommodation, as currently demised, as follows:

Level Demise Office Area Storage Overall Area Parking Market Rent on office space and Area per annum overall Entire 35 / 36 15,650 sq ft 15,650 sq ft £70.00 per sq ft £1,095,500 floor Entire 34 13,267 sq ft 13,267 sq ft £70.00 per sq ft £928,700 floor Entire 33 12,879 sq ft 12,879 sq ft £70.00 per sq ft £901,500 floor Entire 32 13,044 sq ft 13,044 sq ft £65.00 per sq ft £847,800 floor Entire 31 13,024 sq ft 13,024 sq ft £65.00 per sq ft £846,600 floor Office Part 30 6,579 sq ft 6,579 sq ft £65.00 per sq ft £427,600 B Office Part 30 6,037 sq ft 6,037 sq ft £65.00 per sq ft £392,400 A

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Level Demise Office Area Storage Overall Area Parking Market Rent on office space and Area per annum overall Entire floor & 29 13,051 sq ft 391 sq ft 13,442 sq ft 2 £65.00 per sq ft £861,200 Store RB2.69 Entire floor 28 Store 12,982 sq ft 918 sq ft 13,901 sq ft 2 £65.00 per sq ft £864,600 RB1.67B Entire 27 13,010 sq ft £65.00 per sq ft £845,700 floor Entire 26 12,556 sq ft 12,556 sq ft 3 £65.00 per sq ft £826,600 floor Entire 25 12,566 sq ft 12,566 sq ft £65.00 per sq ft £816,800 floor Entire floor & 24 12,771 sq ft 944 sq ft 13,715 sq ft £62.50 per sq ft £812,400 Store RB2.56 Entire 23 12,828 sq ft 12,828 sq ft 3 £62.20 per sq ft £808,400 floor Entire floor & 22 pt. Store 12,800 sq ft 1,123 sq ft 13,923 sq ft 3 £62.50 per sq ft £827,400 RB2.30 Entire floor & 21 pt. Store 12,784 sq ft 1,123 sq ft 13,907 sq ft 3 £62.50 per sq ft £826,400 RB2.30 Entire floor & 20 pt. Store 12,755 sq ft 1,123 sq ft 13,878 sq ft 3 £62.50 per sq ft £824,500 RB2.30 Entire 19 12,312 sq ft 12,312 sq ft £62.50 per sq ft £769,500 floor Entire 18 12,275 sq ft 12,275 sq ft £62.50 per sq ft £767,200 floor Entire 17 11,889 sq ft 11,889 sq ft £62.50 per sq ft £743,000 floor Entire 16 11,933 sq ft 11,933 sq ft £62.50 per sq ft £745,800 floor Entire 15 12,515 sq ft 12,515 sq ft 3 £62.50 per sq ft £792,700 floor Entire 12 & 14 16,643 sq ft 16,643 sq ft 4 £57.50 per sq ft £971,000 floor Entire 11 16,001 sq ft 16,001 sq ft £57.50 per sq ft £920,000 floor Entire 10 17,486 sq ft 17,486 sq ft 3 £57.50 per sq ft £1,015,900 floor Entire 9 17,748 sq ft 17,748 sq ft 3 £57.50 per sq ft £1,031,000 floor Entire 8 23,950 sq ft 23,950 sq ft 2 £52.50 per sq ft £1,264,400 floor Entire 7 40,453 sq ft 40,453 sq ft 3 £52.50 per sq ft £2,134,300 floor Entire 6 41,311 sq ft 41,311 sq ft 5 £52.50 per sq ft £2,186,300 floor Entire 1 to 5 151,459 sq ft 27,577 sq ft 179,036 sq ft 17 £52.50 per sq ft £8,395,000 floors Management 2 797 sq ft 797 sq ft £35.00 per sq ft £27,900 Office Total and average on 595,355 sq ft 33,199 sq ft 628,554 sq ft 59 £58.48 per sq ft £35,518,100 office space

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4.2.2. Current Market Rent - Retail

Given that the retail units do not form part of an established retail pitch, the rents are ascribed on an overall per sq ft basis whilst also having a regard to the aggregate rent per annum. We consider that the majority of the units would command a rent of £35.00 per sq ft (£377 per sq m) on ground floor trading accommodation, with a 50% discount in respect of basement trading accommodation. However, the unit situated immediately to the front of the reception area which is arranged over ground and mezzanine floors is considered to command a rent of £52.50 per sq ft (£565 per sq m) on ground with a discount to 70% on the mezzanine accommodation.

Similarly, we consider that Unit 3 which benefits from a greater level of prominence than the majority of the units, not being situated within the Winter Garden, but arguably forming part of the terrace retail, would command a rent in the order of £80.00 per sq ft (£861 per sq m) on ground. The rent per sq ft shows a discount of circa 25 to 30% from the rents ascribed to the kiosk units as detailed below which we consider appropriate given the quantum of accommodation.

Given the extremely small nature of the kiosk units, the aggregate rent is the most relevant indicator of rental value, albeit the rents we have ascribed to these units reflects £110 per sq ft (£1,184 per sq m) on the ground floor accommodation.

Health Club rents are in the order of £15.00 to £20.00 per sq ft (£161 to £215 per sq m) and whilst it could be argued that the subject property would command a rent towards the higher end of the spectrum, offering “wet” facilities, the unit is extremely large and it could be argued that the layout is compromised, being irregularly shaped, such that we consider it appropriate to apply a rent towards the lower end of the spectrum.

Finally we have ascribed a rent of £20.00 per sq ft (£215 per sq m) to the nightclub accommodation.

We consider a letting void of six months would be sufficient to achieve a letting of one of the retail units with a rent free period of six months rent free.

We set out below our estimates of the current Market Rental Value of the retail units.

Headline Market Rent Unit Use Sq ft £ per sq ft Per annum 2,874 – Grd £35.00 Retail Unit 1A Retail and Storage £123,500 1,527 - Bst £15.00 1,553 – Grd £35.00 Retail Unit 1B Retail and Storage £60,800 432 – Bst £15.00 Retail Unit 2A Retail and Storage 4,794 – Grd £35.00 £167,800 1,792 – Grd £35.00 Retail Unit 2B & 2C Retail and Storage £123,700 3,483 – Bst £17.50 880 – Grd £80.00 Retail Unit 3 Retail and Storage £130,500 1,497 – Bst £40.00 291 – Grd £52.50 Retail Unit 4 Retail and Storage £26,600 305 – Mezz £36.75 994 – Grd £35.00 Retail Unit 6 Retail and Storage £41,300 374 – Bst £17.50

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Headline Market Rent Unit Use Sq ft £ per sq ft Per annum 189 – Grd £50.00 Retail Unit 7 Nightclub £239,600 11,506 £20.00

1,266 – Grd £40.75 Retail Unit 8 Retail and Storage £54,400 189 – Bst £15.00 87 – Grd £110 Kiosk 1 Retail and Storage £12,500 192 – Bst £15.00 Kiosk 2 Retail 90 – Grd £110 £10,000 Health Club Leisure 32,476 – Bst £15.00 £487,100

4.2.3. Current Market Value – Investment Value

CityPoint forms a multi-let “Tower office” building in the City which extends to 709,500 sq ft (588,559 sq m) of which circa 600,000 sq ft (47,833 sq m) forms office space arranged over ground (Level 1) and 34 upper floors (Levels 2 to 36, the building does not have a “Level 13”). The property provides a current gross income of £19,850,977 per annum, with current rent commitments aggregating to £25,366,020 per annum, albeit with the latter subject to several unexpired rent periods. The property currently has vacant space aggregating to 78,250 sq ft / 7,270 sq m thus reflecting a vacancy rate in the order of 11.03%. The current / committed income currently offers a WAULT of 7 years 2 months which reduces to 5 years 6 months on a term certain basis once tenant options to determine are taken in account. Finally, we consider the current income to be reversionary on a headline basis by around £7.26M per annum or 28.60%, i.e. passing / committed rents of £25.366M per annum versus an aggregate headline Market Rent on the let space of £32.629M per annum, and with a further potential £4.640M per annum of income to be derived from the letting up of current vacant space. In summary, the property forms an major multi-let office investment in the City of London, with value accretive asset management potential following inter alia letting up of vacant space.

We cite in the investment commentary at 3.4.6. a body of investment transactions to which we have had regard in arriving at our opinion of Market Value. In summary, the investments noted have traded at, or reflect pricing of, net initial yields ranging between 4.20%+/- and 4.86%, these yields relating to sales ranging between £80.0M and £271.50M. With the proposed sale of a 50.0% stake of the Leadenhall Building in the pipeline where pricing is believed to be in the order of £500.0M for a 50.0% stake, reflecting an net initial yield in the order of 4.0%.

In arriving at our opinion of value we have adopted the investment method of valuation whereby we have applied an all risks yield to the current net income having regard to all the factors detailed herein, relative to the investment evidence cited, and after allowing for non-recoverable costs. It is Savills’ house view that the prime benchmark yield for the City is 4.25%.

We summarise the prime criteria as follows:

 City core location  New / modern building offering Grade A quality accommodation arranged in well configured floorplates  Freehold tenure  Rack rented  Let for a minimum term of 10 years  Tenants in occupation and offering a good / strong covenant commensurate with a City investment property

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Investor demand for City investments continues to be good, albeit sentiment has softened marginally over the course of 2016. As a result, Savills’s in house view is that the benchmark yield for prime City investments has softened by 25bps over the course of 2016 from 4.0% in the first half of the year to the current benchmark of 4.25%. There has also been increased investor focus on the occupational market given that buildings will compete for tenant requirements and with little, if any rental growth to be derived in the City market over the next few years, all as highlighted in our current rental growth forecasts at 4.1.7 above.

Investor appetite at the benchmark yields is therefore keenest, particularly for good quality buildings which offer long term income propositions and not too much exposure to the occupational market, be this in the form of short unexpired terms, income subject to break clauses or rent review risk, i.e. investors paring back bid levels on “reversionary” income with is dependant on rental growth and adopting conservative and prudent assumptions to rent review settlements. Nonetheless properties which offer strong property fundamentals and where there are genuine asset management opportunities capable of being realised in the short to medium term continue to be sought after. However, there is often resistance from investors to attributing full value to the reversionary development potential with the net initial yield / day one return acting as a brake on value.

The assumptions adopted at lease expiry / break are an area of considerable debate and thought in any valuation, in particular multi-let “tower buildings” in the City, such as CityPoint. The valuer has to counter balance allowing for break clauses and lease expiries against the prospect of lease extensions / renewals been entered into, i.e. the implication in the former scenario of the landlord incurring an income downturn and costs versus a proactive landlord securing a lease renewal and therefore minimising income voids and unrecovered costs to include for example:

 empty service charge  business rates while the floor / unit is vacant and available to let  capex refurbishments costs, as appropriate  tenant fit out contributions, together with  marketing costs, and  letting agent costs

In addition the inclusion of these costs and void periods are of lesser significance in the longer term, i.e. they have less impact on the equivalent yield the further out in time they are. Consequently, such costs are rarely explicitly allowed for in leases where the income is secure for 10+ years and often in the case of heavily multi let assets, such as large office buildings, in respect of income which is secure for 5+ years or so, although the valuer will balance these explicit assumptions against equivalent yield expectations.

In respect of CityPoint these factors are of particular relevance as almost 40.0% or £9.785M per annum of the income is a risk over the next four years or so, i.e. derived from leases with a tenants break option or lease expiry. This potentially increases to in excess of half, 55.57% or circa £14.10M per annum of the income over the next five years or so.

We have “valued to the break”, i.e. we have assumed that all tenants will exercise their respective break options. Upon the lease break or lease expiry we have explicitly allowed for a letting void and rent free period to an incoming occupier. In respect of all floors / units and areas where the unexpired term certain is less than five years we have also allowed for refurbishment costs, empty rates during the letting void together with landlords unrecovered service charge during the letting void.

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We have varied the letting void assumptions in respect of the various office levels insofar that we have adopted an all inclusive refurbishment / letting of 12 months in respect of the upper floors, i.e. Levels 19 to 36 and have increased this to 18 months in respect of the lower levels, Levels 1 to 18, on account of the slightly inferior lettability of these floors and the size of the lower most floorplates thus reflecting the scale of the refurbishment works, although nonetheless balanced against prudent target rent aspirations of £52.50 to £57.50 per sq ft (£565 to £619 per sq m).

The void, rent free periods and landlords refurbishment contributions together with the empty rates and irrecoverable service charge noted above are arguably bearish in terms of valuation and under writing assumptions in that the assumptions have been adopted to all floors at break or lease expiry. However, we have not explicitly allowed for marketing costs, letting agent fees, and fit-out contributions and allowances commensurate with office space such as carpet allowances and floor box contributions. In respect of the former comment evidence published by MSCI (formerly IPD) confirms that the outcome of break clauses in City office leases are broadly in line with the All Property average in that around two thirds of break clauses are not exercised.

Lease break clause outcomes – weighted by percentage of passing rent

All Property 69 6 25

Other 97 21

All Industrial 69 3 27

Offices - Rest of UK 64 0 36 Offices - Rest of South East 44 5 51 Offices - West End 78 0 22 Offices - City 65 5 30

Retail Warehouses 79 17 4 Shopping Centres 85 9 6 Standard Retail - Rest of UK 55 32 12 Standard Retail - South East 81 3 16 All Retail 79 14 7 0 10 20 30 40 50 60 70 80 90 100 Not exercised Relet Vacant Source: MSCI UK Lease Events Review 2016

Having regard to the research it is arguably a bearish assumption to “value to the break” given around two thirds of break clauses in the City are not exercised and that in 5.0% of cases the break clause offers the catalyst of a lease renewal. Nonetheless the potential impact on a cashflow can be dramatic, although the multi-let scenario of CityPoint assists in maintaining a positive cashflow.

In respect of the vacant office space we have adopted the following assumptions:

Level Refurbished / Refurbishment / Letting Rent free incentive assuming 5 Un-refurbished Void years term certain Level 32 – 13,044 sq ft In refurbishment 9 months 12 months Level 30 pt. – 6,579 sq ft Refurbished 6 months 12 months Levels 17 to 18 – 24,164 sq ft Un-refurbished 18 months 12 months Levels 16 – 11,933 sq ft In refurbished 9 months 12 months Level 11 – 16,001 sq ft Un-refurbished 18 months 12 months

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In respect of refurbishment costs we have adopted a cost of £73 per sq ft (£785 per sq m) being in line with the refurbishment cost currently being incurred. We have allowed for empty rates within letting and refurbishment period, save for the statutory three months empty rates relief, together with landlords irrecoverable service charge costs.

We have considered the valuation on two scenarios. Firstly, the “as is income stream” with the rent free periods unexpired, i.e. the income profile which is being acquired. Our valuation on this basis, adopting SDLT of 5.0%, is £557.30M predicated off an equivalent yield of 5.50%, actual 5.49% and reflecting a capital value of £785 per sq ft (£8,450 per sq m). The net initial yield is in the order of 3.15% - 3.25% based on the net income after uncovered costs on vacant space, although this yield measure is not the driver of value. We attach at Appendix 5 our valuation calculations assuming the “as is income stream”.

Secondly, and commensurate with market practice when offering and agreeing pricing where multi-let properties have leases / income with unexpired free periods we have considered the property in the scenario where the unexpired rent free periods are topped up. In is debatable to what extent the property could be topped and in order to maximise the appeal of the property a vendor may consider offering guarantees in respect of the vacant space, i.e. rent guarantees on vacant space, empty rates on vacant space and empty service charge on vacant space. We have not considered the property with rents and guarantees on the vacant space although nonetheless it can be anticipated that the value would net back to a similar position. We calculate the cost of topping up the unexpired rent free periods is in the order of £5.0M.

Our valuation calculations gross of the top-up cost is £562.30M, which inter alia reflects an NIY of circa 4.0% (actual 3.95%) which is broadly maintained for the first 18 / 20 months, and which therefore acts as a break on value, the equivalent yield is 5.50% (actual 5.48%) and the capital value is in the order of £800 per sq ft (actual £793 per sq ft), which forms a further key benchmark / reference point to the valuation. Net of the rent top up costs of £5.0M our valuation is £557.30M, i.e. £562.30M less top up costs of £5.0M. We attach at Appendix 6 our valuation calculations assuming the “topped up income” position.

4.2.4. Current Market Value – Vacant Possession Value

We summarise the inputs to our vacant possession value as follows:

 Average two year letting void, empty rates and service charge during the letting programme.  Letting fee of 15.0%  Refurbishment of un-refurbished floors at £73 per sq ft (£785 per sq m)  Target rents of £52.50 – £70.00 per sq ft as per Market Rent inputs  Explicit profit allowance of £75.0M reflecting circa 15% profit on cost  VPV calculations adopt equivalent yield of 6.0%

Calculated vacant possession value assuming SDLT at 5.0% of £350.0M reflecting a capital value of £493 per sq ft (£5,307 per sq m) which is in line with expectations.

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4.3. Valuations

4.3.1. Current Market Rent

As stated above and on the basis outlined above, in our opinion the current Market Rent of the property is in the order of:

£37,269,000 per annum (THIRTY SEVEN MILLION TWO HUNDRED AND SIXTY NINE THOUSAND POUNDS PER ANNUM)

4.3.2. Current Market Value

Having carefully considered the property, as described in this report, we are of the opinion that the current Market Value of the freehold interest, subject to and with the benefit of the existing leases and otherwise with vacant possession, is:

£557,300,000 (FIVE HUNDRED AND FIFTY SEVEN MILLION THREE HUNDRED THOUSAND POUNDS)

We consider that a period of up to nine months is a reasonable period within which to negotiate completion of a sale by private treaty of the property at the level of our valuation, taking into account the nature of the property and the state of the market.

This valuation is based on an equivalent yield of 5.50%, which reflects a net initial yield in the order of 3.15% and a reversionary yield in the order of 6.3%, all net of purchaser’s costs of 6.0%. In addition, it reflects £785 per sq ft (£8,455 per sq m) overall.

Our valuation is on the basis of the real estate with a transfer attracting Stamp Duty at 5.0%. The property is to be held by way of shares in a Property Unit Trust registered in Jersey, i.e. a “JPUT” structure. We are not qualified to value properties held in this structure although assuming the company structure has no other assets or liabilities on a like for like basis the value of the property can be anticipated to be in the order of £585.0M. We are advised that the JPUT structure will attract nil Stamp Duty, such that we have adopted purchase costs at 1.0% to comprise agent acquisition fees at 0.5% and legal fees at 0.35% together with VAT. The yield profile is consistent with that noted above i.e. a net initial yield in the order of 3.15% and an equivalent yield in the order of 5.50%.

4.3.3. Current Market Value – Vacant Possession Value

Having carefully considered the property, as described in this report, we are of the opinion that the current Market Value of the freehold interest, on the special assumption of full vacant possession, is:

£350,000,000 (THREE HUNDRED AND FIFTY MILLION POUNDS)

We consider that a period of up to 12 months is a reasonable period within which to negotiate completion of a sale by private treaty of the property at the level of our valuation, taking into account the nature of the property and the state of the market.

This valuation reflects an equivalent yield of 6.0% and a reversionary yield in the order of 10.0%, both net of purchaser’s costs of 6.80%. In addition, it reflects £493 per sq ft (£5,310 per sq m) overall.

Our valuations below have been carried out on the basis of the various specific assumptions referred to in the text of this report, and are on the basis of the General Assumptions and Conditions listed in Section 6.0.

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4.4. Indication of Reinstatement Cost

You have sought from us an indication for insurance purposes of the current reinstatement cost of the property in its present form. This we are pleased to provide below but it is given solely as a guide as a formal estimate for insurance purposes can only be given by a quantity surveyor or other person with sufficient current experience of replacement costs. We confirm that the property has not been inspected by such a person, and therefore the cost estimate below is provided without liability.

On this basis, therefore, we would estimate the reinstatement cost on a day-one basis as follows:

Reinstatement Costs

Estimated Gross Internal Area (1) 1,020,000 sq ft Building Reinstatement Cost at an estimate of £300 per sq ft (£3,229 sq m) £306,000,000 Demolition and Site Clearance Costs at 8.0% £24,480,000 Fees @ 15.0% £45,900,000 Total Estimate Reinstatement Cost (Exc VAT) £376,380,000 VAT £75,276,000 TOTAL £451,656,000 Say £452,000,000

(1) Net internal area of the lettable areas is circa 710,000 sq ft. We have added circa 60,000 sq ft to reflect the basement car parking to arrive at an estimated aggregate net internal area of 850,000 sq ft and have assumed that the gross internal area is 20% larger thus producing a gross internal area of 1.02M sq ft.

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5. Loan Security

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5.1. Suitability As Loan Security

5.1.1. Lender’s Responsibility

It is usual for a valuer to be asked to express an opinion as to the suitability of a property as security for a loan, debenture or mortgage. However, it is a matter for the lender to assess the risks involved and make its own assessment in fixing the terms of the loan, such as the percentage of value to be advanced, the provision for repayment of the capital, and the interest rate.

In this report we refer to all matters that are within our knowledge and which may assist you in your assessment of the risk.

5.1.2. Property Market and Property Specific Risks

Property Market Risks

These are particular risks applied to the property market within the context of the wider economic environment, some of which are highlighted above. These include: i. Future Economic Environment

Changes to the macro and micro economic environment directly impact on the value of investment property, particularly any movements within the money markets and/or the relative returns available from competing investments as well as market uncertainty caused by the Brexit negotiations. In particular, any interest rate movements beyond those currently anticipated by the wider market may have a detrimental impact on the investment value. Our valuations are made against the present economic background which, barring any external shocks, we consider to be relatively stable in the medium term, notwithstanding the volatility in the world’s equity markets and the ongoing threats of terrorism and instability in the Middle East. Indeed, the volatility in the equity markets has indirectly benefited property as an asset class where there has been a flight to quality in uncertain times, particularly to those buildings which produce strong bond style income returns and real estate in core locations such as the City of London.

One of the key drivers of value is the cost of finance, and the value of the property can be expected to rise and fall depending on movements in interest rates. The asset will be competing against other investment media and this may influence yield expectations, both positively and negatively. ii. Future Changes in Property Taxes

Property as an asset class has always attracted the interest of incumbent Chancellors of the Exchequer as an avenue for raising increased taxation. This was seen in the early years of the Labour Government when Stamp Duty Land Tax was increased from 1% to 4% for transactions above £500,000 over the period July 1997 to March 2000, and in the March 2016 budget stamp duty was increased by effectively a further 1% on most commercial property. Measures have continually been taken to tighten SDLT avoidance. Governments have also sought to raise taxes on betterment from the development process.

The introduction of new property taxes, increases in existing taxes and tightening of anti-avoidance all potentially have an impact on the value of property.

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iii. Liquidity

The City investment market remains strong with a wide range of purchasers active in the market, although they are being frustrated by a shortage of investment stock, and is nonetheless currently being buoyed by overseas investors who are reappraising real estate investment opportunities in London given the revaluation of the pound post the EU referendum vote. The weight of money into property has encouraged greater liquidity with pressure applied by vendors for rapid exchange and completion of sale contracts. In a more shallow market place, the period needed for disposal may increase. iv. Pricing

Property as an asset class is not a homogeneous product and pricing has traditionally been linked to historic evidence from relevant comparable transactions. Such evidence can be scarce and this, coupled with liquidity issues, may affect the pricing of an asset. Over the medium term, the increasing trend for discounted cashflow approaches to pricing and valuation should further alleviate this difficulty. There is evidence that property as an asset class over the last few years has been re-rated and the drive towards this sector has led to the compression in yields. Yields are now however at historically low levels and there is therefore some downside risk, particularly given political uncertainty.

Property Specific Risks

The specific property risks in this instance include: i. Wasting or Appreciating Asset

CityPoint is a substantial landmark office building which was completed to a high specification in 2001. Whilst the property is 15 years old, it has been well maintained by the current tenants and the landlord management team, and does not display any significant signs of obsolescence.

Like all office buildings, the property will suffer from physical and economic obsolescence over the medium to long term. In the longer term, more extensive refurbishment and maintenance to the mechanical and electrical services may be required to maintain the value of the asset. We would not expect this to be necessary for at least a further 5-10 years, although nonetheless the M&E services have been proactively maintained by the management team and landlord refurbishment works have been undertaken on a rolling basis to various floors in order to optimise rental value and asset performance.

The rental income derived from the property is secured on a multiple number of leases offering a WAULT in the order of 7 years, 2 months which reduces to 5 years, 5 months on a term certain basis once tenants break options are taken into account. In the short term there is the opportunity to enhance the longevity of the income by letting up vacant space although the occupation of the building is generally now stabilised and it can be anticipated to offer a relatively stable WAULT over the term of the loan with the churn of tenants and new lettings influencing a comparatively nominal variation in the overall WAULT at any particular time. All other things being equal, we would expect the value of the property to increase marginally in the short to medium term, firstly as existing rent free periods “burn off” and secondly as existing vacant space is let up and becomes income producing.

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ii. Market Risks

The risks in this respect are twofold. Firstly, there is a risk that the economy falters, leading to a reduction in rental values as a result of weakening business confidence and tenant demand. This would adversely affect the rental growth and relettability prospects of the property. We have highlighted within report the outlook for the City occupational market whilst there is a degree of uncertainty as to the outlook and chiefly the impact of the “Brexit vote” headline rents have hitherto held up albeit subject to a marginal increase in incentive periods. There are numerous development schemes planned within the next five years although on closer examination it can be expected that the market will remain healthy with vacancy levels not anticipated to increase significantly.

Secondly, there is a market risk in respect of the capitalisation rate adopted in our valuations. It is possible that investment yields may move out over the course of the next few years. Any movement is likely to be in line with money market rates generally and is impossible to predict with any certainty. This risk is inherent in any property investment. We would also point out that the value of the subject property is heavily dependent upon the prevailing cost of debt finance and the returns available on competing investments. iii. Tenant Default

The property is multi-let with the income secured against covenants, and their guarantors who we generally consider to offer a good/strong covenant. The risks of tenant default in this instance are relatively limited. iv. Rental Growth

The investment yield adopted is growth implicit (i.e. it anticipates future rental growth). The exact levels of future rental growth are not certain, but are dependent upon a variety of factors, including economic background, tenant demand at any one time, and provable rental values.

As summarised in our principal valuation considerations Savills are predicting average Grade A office rents within the City will remain relatively flat over the next few years. On this basis the investment performance of the property will largely be determined by the landlords/borrowers ability to actively manage the existing portfolio of tenants vis a vi their occupational requirements and attract new tenants to vacant space.

5.1.3. Suitability As Loan Security

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Furthermore, capital expenditure is required in order to re-let some of the existing vacant accommodation and further refurbishment capex may be required in the medium term if tenants seek to exercise break options and or do not renew at lease expiry. Within our valuation calculations we have made allowances for refurbishment based upon the current refurbishment cost which is typically incurred by the landlord. At lease break and expiry the landlord can be anticipated to recover some costs under dilapidations. Dilapidation settlements arguably end up as a “horse deal” and it may be that dilapidations recovery is less than anticipated, thus impacting on the net spend incurred by the landlord in respect of refurbishment expenditure. We recommend that the Bank monitors major planned works, as well as dilapidation negotiations, which may have an impact on the capital expenditure required by the Borrower.

We would comment that we have considered the principal risks associated with this property within the context of the wider investment market and that they are reflected in our valuation calculations and reported figures as appropriate.

Overall, we consider that the property provides good security for a loan secured upon it, which reflects the nature of the property, our reported opinions of value and the risks involved.

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6. General Assumptions & Conditions to Valuations

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6.1. General Assumptions and Conditions

General Assumptions

1. Unless otherwise stated in this report, our valuation has been carried out on the basis of the following General Assumptions. If any of them are subsequently found not to be valid, we may wish to review our valuation, as there may be an impact on it.

2. That the property is not subject to any unusual or especially onerous restrictions, encumbrances or outgoings contained in the Freehold Title. Should there be any mortgages or charges, we have assumed that the property would be sold free of them. We have not inspected the Title Deeds or Land Registry Certificate.

3. That we have been supplied with all information likely to have an effect on the value of the property, and that the information supplied to us and summarised in this report is both complete and correct.

4. That the building has been constructed and is used in accordance with all statutory and bye-law requirements, and that there are no breaches of planning control. Likewise, that any future construction or use will be lawful (other than those points referred to above).

5. That the property is not adversely affected, nor is likely to become adversely affected, by any highway, town planning or other schemes or proposals, and that there are no matters adversely affecting value that might be revealed by a local search, replies to usual enquiries, or by any statutory notice (other than those points referred to above).

6. That the building is structurally sound, and that there are no structural, latent or other material defects, including rot and inherently dangerous or unsuitable materials or techniques, whether in parts of the building we have inspected or not, that would cause us to make allowance by way of capital repair (other than those points referred to above). Our inspection of the property and this report do not constitute a building survey.

7. That the property is connected, or capable of being connected without undue expense, to the public services of gas, electricity, water, telephones and sewerage.

8. That in the construction or alteration of the building no use was made of any deleterious or hazardous materials or techniques, such as high alumina cement, calcium chloride additives, woodwool slabs used as permanent shuttering and the like (other than those points referred to above). We have not carried out any investigations into these matters.

9. That the property has not suffered any land contamination in the past, nor is it likely to become so contaminated in the foreseeable future. We have not carried out any soil tests or made any other investigations in this respect, and we cannot assess the likelihood of any such contamination.

10. That the property does not suffer from any risk of flooding. We have not carried out any investigation into this matter.

11. That the property either complies with the Disability Discrimination Acts and all other Acts relating to occupation, or if there is any such non-compliance, it is not of a substantive nature.

12. That the property does not suffer from any ill effects of Radon Gas, high voltage electrical supply apparatus and other environmental detriment.

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13. That the tenants are capable of meeting their obligations, and that there are no arrears of rent or undisclosed breaches of covenant.

6.1.1. General Conditions

Our valuation has been carried out on the basis of the following general conditions:

1. We have made no allowance for any Capital Gains Tax or other taxation liability that might arise upon a sale of the property.

2. Our valuation is exclusive of VAT (if applicable).

3. No allowance has been made for any expenses of realisation.

4. Excluded from our valuation is any additional value attributable to goodwill, or to fixtures and fittings which are only of value in situ to the present occupier.

5. Energy Performance Certificates (EPCs) are required for the sale, letting, construction or alteration of all residential buildings on non-domestic residential buildings over 538 sq ft (50 sq m) in England and Wales and on all buildings in Scotland. The effect of EPCs on value is as yet unknown, given that the market has yet to respond to their introduction. Therefore, we have not considered the property’s EPC rating in forming our opinion of value. However, should this position alter, we reserve the right to reconsider our opinion of value.

6. Our valuation is based on market evidence which has come into our possession from numerous sources. That from other agents and valuers is given in good faith but without liability. It is often provided in verbal form. Some comes from databases such as the Land Registry or computer databases to which Savills subscribes. In all cases, other than where we have had a direct involvement with the transactions, we are unable to warrant that the information on which we have relied is correct although we believe it to be so.

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Appendices

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Appendix 1.0 Instructions

Morgan Stanley December 2016 121 14 December 2016

bc Morgan Stanley Bank, N.A. 201 South Main Street 5th Floor Salt Lake City Edward Shakespeare UT 84111-2215 E: [email protected] United States DL: +44 (0)20 7409 9914

33 Margaret Street London W1G 0JD T: +44 (0) 20 7499 8644 For the attention of: Dominic Rea savills.com

Dear Sirs

BORROWER: BSREP CITYPOINT BIDCO LIMITED PROPERTY: CITYPOINT, ONE ROPEMAKER STREET, LONDON EC2Y 9AW

Confirmation of terms of engagement for the provision of valuation advice

1. Thank you for your email to us dated 4 November 2016 confirming your kind instructions to us. The purpose of this letter is to confirm the terms upon which Savills Advisory Services Limited (Savills, we or us) will provide Morgan Stanley (you) with a valuation report (the Valuation or Report) in respect of the above property or properties (each being a Property).

2. Our Valuation will be undertaken on the terms set out in this letter, including its appendices.

3. Please sign and return a copy of this letter to us to confirm your acceptance of the terms set out herein. In particular, we draw your attention to the fact that when signing this letter you are confirming your agreement to the limitation of our liability set out at paragraphs 7 - 12.

4. Please note we will be unable to formally issue our final Report to you, and you will be unable to rely upon the contents of our Report, until such time as we have received your signed copy of this letter.

5. To the extent that there is conflict or inconsistency between this confirmation of instruction letter and your instructions referred to above, this confirmation of instruction letter will prevail.

RICS Red Book

6. We shall prepare our Valuation in accordance with the RICS Valuation – Professional Standards (January 2014 Edition) (the Red Book) using the reasonable skill, care and diligence to be expected of a properly qualified and competent valuer. In addition, and in accordance with the requirements of Valuation Practice Statement 1 of the Red Book, we confirm the following:

(a) Identification and status of the Valuer

(i) The Valuation will be undertaken, and the Report will be signed by Edward Shakespeare and Charlotte Aschan (the Valuers). The Valuer will work with colleagues as appropriate;

(ii) We are not aware of any conflict of interest in us accepting your instruction to value the Property and the Valuer is in a position to provide an objective and unbiased valuation.

Offices and associates throughout the Americas, Europe, Asia Pacific, Africa and the Middle East.

Savills Advisory Services Limited. Chartered Surveyors. A subsidiary of Savills plc. Registered in England No. 6215875. Registered office: 33 Margaret Street, London, W1G 0JD

For the sake of good order we confirm that we have previously valued the property, in May 2007 on behalf of Morgan Stanley Mortgage Servicing Limited, and more recently in April 2013 on behalf of DG Hyp, who held a number of notes, albeit this formed an indication of value only. Our colleagues in various departments have also historically provided advice in relation to the property, to include acquisition services on behalf of tenants, rating and rent review advice.

We have a wider corporate relationship with Brookfield, to include IDI Gazeley.

We do not consider any of this prior involvement or the wider relationships this firm has with Brookfield to constitute a conflict of interest and confirm that we will be acting as an “External Valuer” as defined in the Red Book.

(iii) The Valuer has the necessary market knowledge, skills and understanding to undertake the Valuation competently.

(b) Identification of the client and other related parties

The client is the addressee of this letter.

The client is the addressee of this letter. We agree that the Report will be addressed as follows and that the following parties (together, the Addressees) shall be entitled to rely upon our Report:

“This report is addressed to and capable of being relied upon by:

(together, the Addressees) provided that, in relying on this report, each of the Addressees acknowledges and agrees that:

Morgan Stanley Page 2 CityPoint, One Ropemaker Street, London EC2

(c) this report is subject to the terms and conditions set out in our letter of engagement with Morgan Stanley dated 14 December 2016”.

Our invoice will be addressed to Morgan Stanley & Co. International plc, 20 Bank Street, Canary Wharf, London E14 4AD.

The Valuation is required for Loan Security – new lending purposes. It is important that the Report is not used out of context or for the purposes for which it was not intended. We shall have no responsibility or liability to any party in the event that the Report is used outside of the purposes for which it was intended, or outside of the restrictions on its use set out at sub- paragraph (j) below.

(d) Identification of the asset or liability to be valued

(i) The Property address is CityPoint, One Ropemaker Street, London EC2Y 9AW.

(ii) The interest to be valued is freehold. The Property will be valued subject to the occupational leases / licences and / or with vacant possession, details to be confirmed in our Report.

(iii) The interest to be valued comprises a landmark City of London office building and is held for investment purposes.

(e) Basis of value

The basis of our Valuation will be Market Value and Market Rent, the definitions of which are set out at Appendix 1 (attached). You also seek the Market Value on the Special Assumption of full vacant possession and a Mortgage Lending Value.

(f) Valuation date

The Valuation date will be the date of our inspection. You will appreciate that in providing you with our Valuation, we shall have regard to market conditions as at the Valuation date. Naturally, these are subject to change and it is therefore important that the Addressees take account of any such change in conditions that may occur from the Valuation date before making any binding decision in relation to the Property. Please do not hesitate to contact us ahead of making any binding decision which takes account of our Valuation if you have any concerns in this respect.

(g) Extent of investigation

We will carry out an inspection of the Property and or investigations to the extent necessary to undertake the Valuation. We will not carry out a structural survey or test the services and nor will we inspect the woodwork and other parts of the structures which are covered, unexposed or inaccessible.

(h) Nature and source of information to be relied upon

(i) We will carry out our Valuation on the information provided, together with responses to queries raised.

Morgan Stanley Page 3 CityPoint, One Ropemaker Street, London EC2

(ii) To the extent that you have provided us with information and / or instructed us to obtain it from a third party you agree, unless it is otherwise agreed by us in writing, that we can safely rely upon the accuracy, completeness and consistency of this information without further verification and that you will not hold us responsible in the event that any dispute regarding the Valuation arises from the accuracy of such information. (iii) We will not be measuring any part of the Property.

(iv) We will not make formal searches with local planning authorities, but shall rely on the information provided informally by the local planning authority or its officers. We recommend you instruct lawyers to confirm the position in relation to planning and that the Report is reviewed in light of advice from your solicitors in this respect.

(v) For the avoidance of doubt, we accept no liability for any inaccuracy or omission contained in information disclosed by you or any other third party or from the Land Registry or any database to which we subscribe. We will highlight in our Report where we have relied on such information.

(i) Assumptions and Special Assumptions

Unless otherwise agreed, our Valuation will be reported on the basis of the general assumptions attached at Appendix 2.

(j) Restrictions on use, distribution or publication

(i) Our Report shall be confidential to, and for the use only of, the Addressees and no responsibility shall be accepted to any third party for the whole or any part of its contents.

(ii) Notwithstanding the foregoing, we confirm that we consent in principle to our Report or a summary of our Report being included in a prospectus/offering memorandum/any ongoing investor materials (the Materials) in connection with any securitisation or repackaging transaction of the senior or mezzanine debt, provided that:

a. the Report or any summary shall not be published until such time as we have first approved the form and context in which the Report or summary appears (such approval not to be unreasonably withheld or delayed) and are satisfied that the Report has been accurately reproduced or the summary is sufficiently accurate and comprehensive (as the case may be);

b. the Materials shall make clear that, with the exception of the Report or summary, Savills does not accept any responsibility for any part of the Materials or any other information issued by [insert issuer name] or any other person in connection with the Proposed Transaction;

c. such Report or summary complies in all respects with the requirements of the Red Book and any applicable regulations or directives; and

d. if, in our opinion, any part of our Report becomes misleading or inaccurate between the date of issue of the Report and the date of issue of any Materials we reserve the right to withdraw our consent to your use of our Report or the summary unless and until we have made such amendments to it as we (acting reasonably and without undue delay) deem necessary or desirable, notwithstanding that our doing so may necessitate deferral of publication of the relevant materials.”

Morgan Stanley Page 4 CityPoint, One Ropemaker Street, London EC2

(iii) Subject to the six month period referenced in paragraph 6(j)(ii)(d), where any Addressee is a lender, in the event of a proposal to place the loan on the Property in a syndicate, you must notify us so that we can agree the extent of our responsibility to further named parties. If this is not done or we do not agree to be responsible to further named parties, we shall have no responsibility to any party other than the Addressee.

(k) Confirmation that the Valuation will be undertaken in accordance with the International Valuation Standards (IVS)

We confirm that our Valuation will be carried out in compliance with the IVS.

(l) Description of Report

Our Report will meet the requirements of VPS 3, Valuation Reports, which sets out the mandatory minimum terms of reporting and includes all the matters addressed in this confirmation of instruction letter.

(m) The basis on which the fee will be calculated

(i) The agreed fee for the provision of the Valuation is £117,500 plus VAT and is payable in pounds sterling. Unless otherwise agreed in writing, all reasonable expenses incurred will be added to the agreed fee. Such expenses shall include (but not be limited to) the cost of travelling, photography, plans, artwork for preparation of Report appendices, town planning documents, copying charges, faxes, couriers and subsistence.

(ii) Our agreed fee and any expenses, together with any VAT (at the prevailing rate) on such amounts, shall become due and payable by you to us within 30 days of us issuing you with a valid VAT invoice in respect of such amounts. In the event that our fee is not paid by the date for payment we reserve the right to charge default interest at a rate of 4% above the Barclays Bank base rate for payment.

(iii) In the event of our instructions being terminated at any time prior to completion of our work, a fee will become payable on a time basis (at our prevailing rates) for work carried out up to the date of termination, subject to a minimum of 50% of the agreed fee, together with all expenses incurred.

(iv) If we incur any expenditure on solicitors or other third parties in order to recover the fee due, such amounts will be payable by you.

(v) If we perform any additional services for you, we will agree an additional fee with you in respect of such services and such fee shall be payable in the manner set out above.

(vi) You acknowledge that you shall not be entitled to rely upon our Report until such time as our fees have been paid in accordance with this sub-paragraph (m).

(n) Savills complaints handling procedure

Savills (UK) Limited is registered for regulation by the RICS and a copy of our client complaints handling procedure can be made available to you on request. (o) Monitoring under RICS conduct and disciplinary regulations

Compliance with the standards set down in the RICS Red Book may be subject to monitoring by the RICS under its conduct and disciplinary regulations.

Morgan Stanley Page 5 CityPoint, One Ropemaker Street, London EC2

Limitations on liability

7. Subject to paragraph 12 below, our aggregate liability to any one or more or all of the Addressees or any other party who otherwise becomes entitled to rely upon the Report under or in connection with this agreement and our Valuation, however that liability arises (including, without limitation, a liability arising by breach of contract, arising by tort, including, without limitation, the tort of negligence, or arising by breach of statutory duty) shall be limited to the lower of:

(a) 33% of the Value (as defined below) of the Property stated in our Report; and

(b) £75M.

8. In paragraph 7, Value means:

(a) where more than one value is stated for the same Property on different bases, the highest valuation figure recorded in our Report; and

(b) in the case of valuations of portfolios, estates, shopping centres and other multi-unit properties within one Report, the aggregate of our valuations included in the one Report.

9. You acknowledge and agree that we shall not be liable under or in connection with this agreement and the provision of our Valuation in tort (including negligence), breach of contract, breach of statutory duty or otherwise due to, under and/or arising out of or in connection with this agreement to the extent such loss or damage is consequential, indirect, special or punitive.

10. If you suffer loss as a result of our breach of contract or negligence, our liability shall be limited to the lesser of the limitation of liability set out above at paragraph 7 or a just and equitable proportion of your loss having regard to the extent of responsibility of any other party. Our liability shall not increase by reason of a shortfall in recovery from any other party, whether that shortfall arises from an agreement between you and them, your difficulty in enforcement, or otherwise.

11. You acknowledge and agree that none of our employees, partners or consultants individually has a contract with you or owes you a duty of care or personal responsibility. You agree that you will not bring a claim against any such individuals personally in connection with our services.

12. Nothing in this agreement shall exclude or limit our liability for death or personal injury caused by our negligence or for any other liability that cannot be excluded by law.

Insurance

13. During the period that we are producing our Valuation and for a period of six years thereafter, we will maintain in force, with insurers or underwriters approved by the RICS, professional indemnity insurance in an amount not less than the amount of our liability cap, as calculated pursuant to clause 7 above and shall, on your request, produce confirmation of the same from our insurance broker.

Morgan Stanley Page 6 CityPoint, One Ropemaker Street, London EC2

Reliance

14. As stated above, we accept responsibility for our Report only to the Addressees and no third party may rely on our Report. We do not accept any responsibility to, and shall have no liability in respect of, any third parties unless otherwise agreed writing even if that third party pays all or part of our fees, or is permitted to see a copy of our Valuation. In addition, the benefit of our Report is personal and neither you nor any other Addressee may assign the benefit of our Report to any third party without our prior written consent (with such consent to be given or withheld at our absolute discretion). You acknowledge that if we agree to extend reliance on our Report to any third party or to the benefit of our Report being assigned, we will require the relevant third party or assignee to enter into a reliance letter before such party is entitled to rely upon our Report. We will provide you with a copy of our reliance letter on request. If we agree to any such extension or assignment, we may charge you an additional fee. We will not unreasonably withhold or delay our consent to extend reliance on our Report to any additional primary syndicate lenders of the loan granted under the Facility Agreement (subject to them signing up to our standard reliance letter), during a period of 6 months following the date of issue of our Report. We shall be entitled to withhold consent (at our absolute discretion) to any further extensions of reliance in all other cases.

Confidentiality

15. Neither party shall disclose any confidential information relating to the affairs, business, customers or clients of the disclosing party to any other party without the disclosing party’s prior written consent except to those of the disclosing party’s employees, officers, representatives and/or advisors who need to know the information for the purposes of carrying out the receiving party’s obligations under this agreement (save to the extent that the receiving party is compelled to disclose such information by law).

16. Our Report is confidential to and for the use only of the Addressees, but the Addressees may disclose the Report on a non-reliance and without liability basis to the following parties provided the relevant Addressee procures any person to whom our Report is disclosed pursuant to this paragraph 16 keeps the Report confidential and does not disclose it to any other party:

Reinstatement costs

17. If you have instructed us to report on the reinstatement cost of the Property for insurance purposes, we will provide you with an approximate opinion of such cost only. You acknowledge and agree that the provision of our opinion of the reinstatement cost is provided to you strictly without liability and on a non- reliance basis. If you require a reinstatement cost figure on which you may rely, please let us know and we will ask our building surveying colleagues to provide a fee estimate.

Sub-contracting

18. We may sub-contract the provision of any services to be performed by us pursuant to this agreement (including, without limitation, to other companies that are direct or indirect subsidiaries of Savills plc) provided that we will remain responsible to you for the provision of those services and the provision of our Report. We may request that you pay any sub-contractor directly for those of our fees which relate to work carried out by the sub-contractor. In these circumstances, the fees in question are to be paid by you directly to the sub-contractor and we will be entitled to assign to the sub-contractor any rights that we have in respect of those fees.

Morgan Stanley Page 7 CityPoint, One Ropemaker Street, London EC2

Money Laundering

19. You shall promptly, upon request, provide us with any information reasonably required to enable us to comply with our obligations under the Money Laundering Regulations 2007 and our internal compliance policies relating to the same. For the avoidance of doubt, searches may also be conducted on your directors and “beneficial owners” as is required by the legislation. You agree that we may retain such information and documentation for these purposes and make searches of appropriate databases electronically. If such information is not provided within a reasonable time or you do not meet the requirements set out in our relevant internal policies, we may terminate this instruction immediately upon written notice to you.

Health and Safety

20. If we are undertaking physical inspections of the Property, you shall take reasonable steps to procure that the owner and/or occupier of the Property:

(a) advises us of any hazards to which our staff may be exposed at the Property;

(b) provides us with any relevant health and safety policies; and

Jurisdiction

21. This agreement and any dispute arising from the Valuation is subject to English jurisdiction and law.

Appendices

22. Your attention is drawn to the attached appendices which form part of the agreement between us and on which our Valuation will be reported. By signing a copy of this letter you are also confirming your agreement to them.

Yours faithfully

Edward Shakespeare MRICS Registered Valuer Director

Morgan Stanley Page 8 CityPoint, One Ropemaker Street, London EC2

Appendix 1: Basis of Valuation - definitions

Depreciated Replacement Cost: The current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation.

Existing Use Value: The estimated amount for which an asset or liability should exchange on the Valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing and where the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business and disregarding potential alternative uses and any other characteristics of the asset that would cause its market value to differ from that needed to replace the remaining service potential at least cost.

Existing Use Value is to be used only for valuing property that is owner occupied by a business, or other entity, for inclusion in financial statements.

Fair Value: Valuations based on Fair Value will adopt one of two definitions – depending upon the purpose, namely:

The International Valuation Standard’s 2013 definition: The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties, or

The International Financial Reporting Standard’s 2013 definition: The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date.

Gross development value (GDV) - The aggregate Market Value of the proposed development assessed on the special assumption that the development is complete as at the Valuation date in the market conditions prevailing at that date.

Investment value: Investment value is the value of an asset to the owner or prospective owner for individual investment or operational purposes.

Market Rent: The estimated amount for which an interest in real property should be leased on the Valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion.

Market Value: The estimated amount for which an asset or liability should exchange on the Valuation date between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgably, prudently and without compulsion.

Morgan Stanley Page 10 CityPoint, One Ropemaker Street, London EC2

Appendix 2: General assumptions and conditions applicable to all Valuations

Unless otherwise agreed in writing, our Valuation will be carried out on the basis of the following general assumptions and conditions in relation to each Property that is the subject of our Report. If any of the following assumptions or conditions are not valid, this may be that it has a material impact on the figure(s) reported and in that event we reserve the right to revisit our calculations.

1. That the Property is not subject to any unusual or especially onerous restrictions, encumbrances or outgoings contained in the Freehold Title. Should there be any mortgages or charges, we have assumed that the property would be sold free of them. We have not inspected the Title Deeds or Land Registry Certificate.

2. That we have been supplied with all information likely to have an effect on the value of the Property, and that the information supplied to us and summarised in this Report is both complete and correct.

3. That the building(s) has/have been constructed and is/are used in accordance with all statutory and bye-law requirements, and that there are no breaches of planning control and any future construction or use will be lawful.

4. That the Property is not adversely affected, nor likely to become adversely affected, by any highway, town planning or other schemes or proposals, and that there are no matters adversely affecting value that might be revealed by a local search, replies to usual enquiries, or by any statutory notice (other than those points referred to above).

5. That the building(s) is/are structurally sound, and that there are no structural, latent or other material defects, including rot and inherently dangerous or unsuitable materials or techniques, whether in parts of the building(s) we have inspected or not, that would cause us to make allowance by way of capital repair (other than those points referred to above). Our inspection of the Property and our Report do not constitute a building survey or any warranty as to the state of repair of the Property.

6. That the Property is connected, or capable of being connected without undue expense, to the public services of gas, electricity, water, telephones and sewerage.

7. That in the construction or alteration of the building(s) no use was made of any deleterious or hazardous materials or techniques, such as high alumina cement, calcium chloride additives, woodwool slabs used as permanent shuttering and the like (other than those points referred to above). We have not carried out any investigations into these matters.

8. That the Property has not suffered any land contamination in the past, nor is it likely to become so contaminated in the foreseeable future. We have not carried out any soil tests or made any other investigations in this respect, and we cannot assess the likelihood of any such contamination.

9. That any tenant(s) is/are capable of meeting its/their obligations, and that there are no arrears of rent or undisclosed breaches of covenant.

Morgan Stanley Page 11 CityPoint, One Ropemaker Street, London EC2

10. In the case of a Property where we have been asked to value the site under the special assumption that the Property will be developed, there are no adverse site or soil conditions, that the Property is not adversely affected by the Town and Country Planning (Assessment of Environmental Effects) Regulations 1988, that the ground does not contain any archaeological remains, nor that there is any other matter that would cause us to make any allowance for exceptional delay or site or construction costs in our Valuation.

11. We will not make any allowance for any Capital Gains Tax or other taxation liability that might arise upon a sale of the Property.

12. Our Valuation will be exclusive of VAT (if applicable).

13. No allowance will be made for any expenses of realisation.

14. Excluded from our Valuation will be any additional value attributable to goodwill, or to fixtures and fittings which are only of value in situ to the present occupier.

15. When valuing two or more properties, or a portfolio, each property will be valued individually and no allowance will be made, either positive or negative, should it form part of a larger disposal. The total stated will be the aggregate of the individual Market Values.

16. In the case of a Property where there is a distressed loan we will not take account of any possible effect that the appointment of either an Administrative Receiver or a Law of Property Act Receiver might have on the perception of the Property in the market and its/their subsequent valuation, or the ability of such a Receiver to realise the value of the property(ies) in either of these scenarios.

17. No allowance will be been made for rights, obligations or liabilities arising under the Defective Premises Act 1972, and it will be assumed that all fixed plant and machinery and the installation thereof complies with the relevant UK and EEC legislation.

18. Our Valuation will be based on market evidence which has come into our possession from numerous sources, including other agents and valuers and from time to time this information is provided verbally. Some comes from databases such as the Land Registry or computer databases to which Savills subscribes. In all cases, other than where we have had a direct involvement with the transactions being used as comparables in our Report, we are unable to warrant that the information on which we have relied is correct.

Morgan Stanley Page 12 CityPoint, One Ropemaker Street, London EC2

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Appendix 2.0 Schedule of Tenancies

Morgan Stanley December 2016 123 CityPoint, One Ropemaker Street, London EC3 Appendix 2

Schedule of Tenancies at November 2016 a

Reference Level Demise Tenant Main accommodation area Ancillary storage area to main Total area Car Parking Lease Start Lease Expiry Lease Term Lease Break Lease Unexpired Unexpired Term Rent Review Committed Rent per annum Current Passing Rent Commencement Date Percentage of Market Rent Market Rent main Percentage of Unexpired Rent Top Up Cost accommodation Spaces (years) Term (yrs) Certain (yrs) Rent per annum if in Rent Free Period Commited Rent accommodation * Markert Rent Free Period

1 35 / 36 Entire floor SquarePoint Capital LLP 15,650 sq ft 1,453.90 sq m 15,650 sq ft 1,453.90 sq m 1 November 2016 31 October 2026 10.00 years 1 November 2021 9.97 years 4.97 years 1 November 2021 £1,095,500 £70.00 per sq ft £0 1 November 2017 4.32% £1,095,500 £70.00 per sq ft 2.94% 356 days £1,067,756

2 34 Entire floor Flextrade UK Limited 13,267 sq ft 1,232.50 sq m 13,267 sq ft 1,232.50 sq m 1 November 2016 31 October 2026 10.00 years 1 November 2021 9.97 years 4.97 years 1 November 2021 £928,690 £70.00 per sq ft £0 1 August 2018 3.66% £928,700 £70.00 per sq ft 2.49% 629 days £1,599,305

3 33 Entire floor Kaye Scholer LLP 12,879 sq ft 1,196.50 sq m 12,879 sq ft 1,196.50 sq m 11 May 2016 10 May 2026 10.00 years 11 May 2021 9.49 years 4.50 years 11 May 2021 £837,200 £65.01 per sq ft £0 4 November 2017 3.30% £901,500 £70.00 per sq ft 2.42% 359 days £822,874

4 32 Entire floor Vacant 13,044 sq ft 1,211.80 sq m 13,044 sq ft 1,211.80 sq m 0.00 years - - - £0 - £0 0.00% £847,800 £65.00 per sq ft 2.27% 0 days £0

5 31 Entire floor Seyfarth Shaw UK LLP 13,024 sq ft 1,210.00 sq m 13,024 sq ft 1,210.00 sq m 22 January 2015 21 January 2025 10.00 years 21 January 2020 8.20 years 3.20 years 21 January 2020 £364,800 £28.01 per sq ft £0 22 April 2017 1.44% £846,600 £65.00 per sq ft 2.27% 163 days £162,799

6 Part 30 Office B Vacant 6,579 sq ft 611.20 sq m 6,579 sq ft 611.20 sq m - - - £0 - £0 0.00% £427,600 £65.00 per sq ft 1.15% 0 days £0

Winston and Strawn Property 7 Part 30 Office A 6,037 sq ft 560.90 sq m 6,037 sq ft 560.90 sq m 10 June 2013 9 June 2023 10.00 years 10 June 2018 6.58 years 1.58 years 10 June 2018 £328,050 £54.34 per sq ft £328,050 1.29% £392,400 £65.00 per sq ft 1.05% 0 days £0 (London) Limited

Entire floor & Winston and Strawn Property 8 29 13,051 sq ft 1,212.50 sq m 391 sq ft 36.30 sq m 13,442 sq ft 1,248.80 sq m 2 10 June 2013 9 June 2023 10.00 years 10 June 2018 6.58 years 1.58 years 10 June 2018 £686,438 £51.61 per sq ft £686,438 2.71% £861,200 £65.00 per sq ft 2.31% 0 days £0 Store RB2.69 (London) Limited

Entire floor & 9 28 United Trust Bank Limited 12,982 sq ft 1,206.10 sq m 918 sq ft 85.30 sq m 13,901 sq ft 1,291.40 sq m 2 19 January 2015 18 January 2025 10.00 years - 8.19 years 8.19 years 18 January 2020 £754,010 £56.48 per sq ft £0 19 January 2017 2.97% £864,600 £65.00 per sq ft 2.32% 70 days £144,506 Store RB1.67B

Wilkie Farr and Gallagher (UK) 10 27 Entire floor 13,010 sq ft 1,208.70 sq m 13,010 sq ft 1,208.70 sq m 5 June 2013 14 June 2026 13.02 years 15 June 2021 9.59 years 4.59 years 5 June 2018 £671,003 £51.57 per sq ft £671,003 2.65% £845,700 £65.00 per sq ft 2.27% 183 days £198,852 Limited

Janus Capital International 11 26 Entire floor 12,556 sq ft 1,166.50 sq m 12,556 sq ft 1,166.50 sq m 3 18 December 2000 17 December 2025 25.00 years 18 June 2018 9.10 years 1.60 years 18 December 2020 £710,000 £55.71 per sq ft £710,000 2.80% £826,600 £65.00 per sq ft 2.22% 0 days £0 Limited

Wilkie Farr and Gallagher (UK) 12 25 Entire floor 12,566 sq ft 1,167.40 sq m 12,566 sq ft 1,167.40 sq m 15 June 2016 14 June 2026 10.00 years 15 June 2021 9.59 years 4.59 years 15 June 2021 £753,840 £59.99 per sq ft £0 29 January 2018 2.97% £816,800 £65.00 per sq ft 2.19% 445 days £918,436 Limited

Entire floor & 13 24 Cravath Swaine & Moore LLP 12,771 sq ft 1,186.50 sq m 944 sq ft 87.70 sq m 13,715 sq ft 1,274.20 sq m 6 April 2000 23 June 2025 25.21 years 6 April 2020 8.62 years 3.40 years 24 June 2015 £611,127 £46.74 per sq ft £611,127 2.41% £812,400 £62.50 per sq ft 2.18% 0 days £0 Store RB2.56

14 23 Entire floor Cravath Swaine & Moore LLP 12,828 sq ft 1,191.80 sq m 12,828 sq ft 1,191.80 sq m 3 6 April 2000 23 June 2025 25.21 years 6 April 2020 8.62 years 3.40 years 24 June 2020 £768,270 £59.07 per sq ft £768,270 3.03% £808,400 £62.20 per sq ft 2.17% 0 days £0

Entire floor & Simpson Thacher & Bartlett 15 22 12,800 sq ft 1,189.20 sq m 1,123 sq ft 104.33 sq m 13,923 sq ft 1,293.53 sq m 3 29 September 2000 28 September 2022 22.00 years - 5.88 years 5.88 years 29 September 2015 £632,580 £47.28 per sq ft £632,580 2.49% £827,400 £62.50 per sq ft 2.22% 0 days £0 pt. Store RB2.30 LLP

Entire floor & Simpson Thacher & Bartlett 16 21 12,784 sq ft 1,187.70 sq m 1,123 sq ft 104.33 sq m 13,907 sq ft 1,292.03 sq m 3 29 September 2000 28 September 2022 22.00 years - 5.88 years 5.88 years 29 September 2015 £631,621 £47.27 per sq ft £631,621 2.49% £826,400 £62.50 per sq ft 2.22% 0 days £0 pt. Store RB2.30 LLP

Entire floor & Simpson Thacher & Bartlett 17 20 12,755 sq ft 1,185.00 sq m 1,123 sq ft 104.33 sq m 13,878 sq ft 1,289.33 sq m 3 29 September 2000 28 September 2022 22.00 years - 5.88 years 5.88 years 29 September 2015 £630,517 £47.29 per sq ft £630,517 2.49% £824,500 £62.50 per sq ft 2.21% 0 days £0 pt. Store RB2.30 LLP

Simpson Thacher & Bartlett 18 19 Entire floor 12,312 sq ft 1,143.80 sq m 12,312 sq ft 1,143.80 sq m 29 September 2000 28 September 2022 22.00 years - 5.88 years 5.88 years 29 September 2015 £667,150 £54.19 per sq ft £667,150 2.63% £769,500 £62.50 per sq ft 2.06% 0 days £0 LLP

19 18 Entire floor Vacant 12,275 sq ft 1,140.40 sq m 12,275 sq ft 1,140.40 sq m - - - £0 - £0 0.00% £767,200 £62.50 per sq ft 2.06% 0 days £0

20 17 Entire floor Vacant 11,889 sq ft 1,104.50 sq m 11,889 sq ft 1,104.50 sq m - - - £0 - £0 0.00% £743,000 £62.50 per sq ft 1.99% 0 days £0

21 16 Entire floor Vacant 11,933 sq ft 1,108.60 sq m 11,933 sq ft 1,108.60 sq m - - - £0 - £0 0.00% £745,800 £62.50 per sq ft 2.00% 0 days £0

London CityPoint Centre 22 15 Entire floor 12,515 sq ft 1,162.70 sq m 12,515 sq ft 1,162.70 sq m 3 13 April 2010 27 September 2020 10.46 years - 3.88 years 3.88 years 24 June 2015 £442,065 £34.48 per sq ft £442,065 1.74% £792,700 £62.50 per sq ft 2.13% 0 days £0 Limited

London CityPoint Centre 23 12 & 14 Entire floor 16,643 sq ft 1,546.20 sq m 16,643 sq ft 1,546.20 sq m 4 13 April 2010 27 September 2020 10.46 years - 3.88 years 3.88 years 24 June 2015 £590,435 £34.63 per sq ft £590,435 2.33% £971,000 £57.50 per sq ft 2.61% 0 days £0 Limited

24 11 Entire floor Vacant 16,001 sq ft 1,486.50 sq m 16,001 sq ft 1,486.50 sq m 0.00 years - - - £0 - £0 0.00% £920,000 £57.50 per sq ft 2.47% 0 days £0

London CityPoint Centre 25 10 Entire floor 17,486 sq ft 1,624.50 sq m 17,486 sq ft 1,624.50 sq m 3 13 April 2010 27 September 2020 10.46 years - 3.88 years 3.88 years 24 June 2015 £716,758 £40.39 per sq ft £716,758 2.83% £1,015,900 £57.50 per sq ft 2.73% 0 days £0 Limited

London CityPoint Centre 26 9 Entire floor 17,748 sq ft 1,648.80 sq m 17,748 sq ft 1,648.80 sq m 3 13 April 2010 27 September 2020 10.46 years - 3.88 years 3.88 years 24 June 2015 £727,250 £40.39 per sq ft £727,250 2.87% £1,031,000 £57.50 per sq ft 2.77% 0 days £0 Limited

27 8 Entire floor Ebiquity Associates Limited 23,950 sq ft 2,225.00 sq m 23,950 sq ft 2,225.00 sq m 2 29 September 2013 1 December 2019 6.17 years - 3.06 years 3.06 years £729,637 £30.17 per sq ft £729,637 2.88% £1,264,400 £52.50 per sq ft 3.39% 0 days £0

28 7 Entire floor Morrison and Foerster UK LLP 40,453 sq ft 3,758.20 sq m 40,453 sq ft 3,758.20 sq m 3 25 March 2015 1 December 2019 4.69 years - 3.06 years 3.06 years £1,528,613 £37.53 per sq ft £1,528,613 6.03% £2,134,300 £52.50 per sq ft 5.73% 0 days £0

29 6 Entire floor Mimecast Service Limited 41,311 sq ft 3,837.90 sq m 41,311 sq ft 3,837.90 sq m 5 7 August 2013 1 December 2019 6.32 years - 3.06 years 3.06 years 7 August 2018 £1,320,361 £31.54 per sq ft £1,320,361 5.21% £2,186,300 £52.50 per sq ft 5.87% 0 days £0

30 1 to 5 Entire floors Simmons & Simmons 151,459 sq ft 14,071.00 sq m 27,577 sq ft 2,561.99 sq m 179,036 sq ft 16,632.99 sq m 17 25 March 2000 24 March 2025 25.00 years - 8.37 years 8.37 years 25 March 2020 £6,780,224 £41.64 per sq ft £6,780,224 26.73% £8,395,000 £52.50 per sq ft 22.53% 0 days £0

31 2 Management Office CityPoint (Jersey) Unit Trust 797 sq ft 74.00 sq m 797 sq ft 74.00 sq m 10 November 2016 9 November 2021 5.00 years - 5.00 years 5.00 years £23,000 £28.88 per sq ft £23,000 0.09% £27,900 £35.00 per sq ft 0.07% 0 days £0

Office sub total 595,355 sq ft 47,833.50 sq m 33,199 sq ft 3,084.29 sq m 628,554 sq ft 58,394.59 sq m 59 7.04 years 5.33 years £23,929,138 £19,195,098 94.34% £35,518,100 £58.48 per sq ft 95.30% £4,914,528

32 Lower Ground Leisure Facility MSCP Wellbeing Ltd 32,476 sq ft 3,017.12 sq m 32,476 sq ft 3,017.12 sq m 25 March 2001 24 March 2026 25.00 years - 9.37 years 9.37 years 25 March 2021 £419,928 £12.93 per sq ft £419,928 1.66% £487,100 £15.00 per sq ft 1.31% 0 days £0

33 1 Unit 1A Wagamama Limited 4,401 sq ft 408.87 sq m 4,401 sq ft 408.87 sq m 25 March 2002 28 September 2026 24.51 years - 9.88 years 9.88 years 25 March 2022 £110,000 £24.99 per sq ft £0 9 April 2017 0.43% £123,500 £28.06 per sq ft 0.33% 150 days £45,175

Unit 1B 34 1 Noble Bars and Diners Ltd 1,553 sq ft 144.28 sq m 432 sq ft 40.13 sq m 1,985 sq ft 184.41 sq m 2 August 2004 1 August 2019 15.00 years - 2.72 years 2.72 years £66,500 £38.65 per sq ft £66,500 0.26% £60,800 £35.00 per sq ft 0.16% 0 days £0 RB0.60

Corney & Barrow Wine Bars 35 1 Unit 2A 4,794 sq ft 445.38 sq m 4,794 sq ft 445.38 sq m 29 September 2001 28 September 2031 30.00 years - 14.88 years 14.88 years 29/092021 £143,600 £29.95 per sq ft £143,600 0.57% £167,800 £35.00 per sq ft 0.45% 0 days £0 Limited

36 1 Unit 2B and 2C Gatti's Restaurant 5,275 sq ft 490.06 sq m 5,275 sq ft 490.06 sq m 23 March 2015 22 March 2030 15.00 years - 13.36 years 13.36 years 23 March 2020 £100,000 £18.96 per sq ft £100,000 0.39% £123,700 £23.45 per sq ft 0.33% 0 days £0

Pret A Manger (Europe) 37 1 Unit 3 2,377 sq ft 220.83 sq m 2,377 sq ft 220.83 sq m 24 June 2001 23 June 2026 25.00 years - 9.62 years 9.62 years 24 June 2016 £122,500 £51.54 per sq ft £122,500 0.48% £130,500 £54.90 per sq ft 0.35% 0 days £0 Limited

Lawrence Edward Weimer (t/a 38 1 Unit 4 596 sq ft 55.37 sq m 596 sq ft 55.37 sq m 27 December 2003 16 December 2023 19.97 years 17 December 2018 7.10 years 2.10 years 29/092018 £22,500 £37.75 per sq ft £22,500 0.09% £26,600 £44.63 per sq ft 0.07% 0 days £0 Gentleman's Barbers)

39 1 Unit 5 MSCP Wellbeing Ltd 480 sq ft 44.59 sq m 480 sq ft 44.59 sq m 27 March 2006 24 March 2026 19.99 years - 9.37 years 9.37 years £0 - £0 0.00% £0 £0.00 per sq ft 0.00% 0 days £0

40 1 Unit 6 Costa Limited 1,368 sq ft 127.09 sq m 1,368 sq ft 127.09 sq m 1 November 2000 24 December 2020 20.15 years - 4.12 years 4.12 years 25 December 2015 £77,500 £56.65 per sq ft £77,500 0.31% £41,300 £30.19 per sq ft 0.11% 0 days £0

41 1 Unit 7 (Lwr Grd) A3D2 Limited (t/a Amber) 11,695 sq ft 1,086.50 sq m 11,695 sq ft 1,086.50 sq m 24 June 2002 23 June 2027 25.00 years - 10.61 years 10.61 years 24 June 2017 £217,194 £18.57 per sq ft £217,194 0.86% £239,600 £20.49 per sq ft 0.64% 0 days £0

Unit 8 & 42 Notes Music and Coffee 1,266 sq ft 117.62 sq m 189 sq ft 17.56 sq m 1,455 sq ft 135.18 sq m 27 May 2014 26 May 2029 15.00 years - 12.54 years 12.54 years 4 July 2019 £53,570 £40.07 per sq ft £53,570 0.21% £54,400 £40.73 per sq ft 0.15% 0 days £0 Store RB0.96

News Kiosk 1 43 1 Fritz Mitha and Salirn Mitha 279 sq ft 25.92 sq m 279 sq ft 25.92 sq m 7 December 2011 6 December 2016 5.00 years - 0.07 years 0.07 years £14,000 £50.18 per sq ft £14,000 0.06% £12,500 £44.80 per sq ft 0.03% 0 days £0 RB0.43

44 1 Coffee Kiosk Costa Limited 90 sq ft 8.36 sq m 90 sq ft 8.36 sq m 6 February 2002 24 March 2020 18.13 years - 3.37 years 3.37 years £18,000 £200.00 per sq ft £18,000 0.07% £10,000 £111.11 per sq ft 0.03% 0 days £0

* Market Rent rent adopts £15 per sq ft per annum in respect of storage space and £3,500 per space per annum in respect of car parking.

F:\LOAN SECURITY VALUATIONS\Morgan Stanley\CityPoint\Due Diligence\9. Leases - Lease Summaries\CP Schedule of Tenacies CityPoint, One Ropemaker Street, London EC3 Appendix 2

Schedule of Tenancies at November 2016 a

Retail sub total 66,650 sq ft 6,192 sq ft 621 sq ft 57.69 sq m 67,271 sq ft 6,249.68 sq m 9.30 years 9.22 years £1,365,292 £1,255,292 5.38% £1,477,800 £22.03 per sq ft 3.97% £45,175

RLGO.16 and Ultimate Security Services 45 Basement 521 sq ft 48.40 sq m 521 sq ft 48.40 sq m 12 September 2014 11 September 2017 3.00 years - 0.84 years 0.84 years £9,220 £17.70 per sq ft £9,220 0.04% £7,815 0.02% 0 days £0 RGL.14 Limited

46 Basement B1.94 Cofely Limited 178 sq ft 16.50 sq m 178 sq ft 16.50 sq m 26 May 2012 25 May 2017 5.00 years - 0.54 years 0.54 years £3,203 £18.04 per sq ft £3,203 0.01% £2,665 0.01% 0 days £0

47 Basement B1.97 Finsbury Enterprises 420 sq ft 39.02 sq m 420 sq ft 39.02 sq m 16 September 2013 15 September 2019 6.00 years - 2.84 years 2.84 years £6,720 £16.00 per sq ft £6,720 0.03% £6,300 0.02% 0 days £0

48 Basement RB1.79 Ebiquity Associates Limited 117 sq ft 10.90 sq m 117 sq ft 10.90 sq m 1 May 2015 30 April 2018 3.00 years - 1.47 years 1.47 years £1,936 £16.50 per sq ft £1,936 0.01% £1,760 0.00% 0 days £0

49 Basement RB1.05 Landlord Storage Area 888 sq ft 82.50 sq m 888 sq ft 82.50 sq m 10 November 2016 9 November 2021 5.00 years - 5.00 years 5.00 years £0 - £0 0.00% £13,320 0.04% 0 days £0

50 Basement RB1.85 Vacant 90 sq ft 8.40 sq m 90 sq ft 8.40 sq m - - - £0 - £0 0.00% £1,355 0.00% 0 days £0

51 Basement RB1.86 Vacant 85 sq ft 7.90 sq m 85 sq ft 7.90 sq m - - - £0 - £0 0.00% £1,275 0.00% 0 days £0

Fabric Solutions London 52 Basement RB1.16 576 sq ft 53.50 sq m 576 sq ft 53.50 sq m 1 February 2012 31 January 2017 5.00 years - 0.22 years 0.22 years £7,488 £13.00 per sq ft £7,488 0.03% £8,640 0.02% 0 days £0 Limited

53 Basement RB1.67A Vacant 1,833 sq ft 170.30 sq m 1,833 sq ft 170.30 sq m - - - £0 - £0 0.00% £27,495 0.07% 0 days £0

54 Basement RB1.89 Vacant 404 sq ft 37.50 sq m 404 sq ft 37.50 sq m - - - £0 - £0 0.00% £6,055 0.02% 0 days £0

55 Basement RB 2.11 Mimecast Services Limited 442 sq ft 41.10 sq m 442 sq ft 41.10 sq m 6 December 2013 1 December 2019 5.98 years - 3.06 years 3.06 years £7,088 £16.02 per sq ft £7,088 0.03% £6,635 0.02% 0 days £0

56 Basement RB2.54A Vacant 1,530 sq ft 142.10 sq m 1,530 sq ft 142.10 sq m - - - £0 - £0 0.00% £22,945 0.06% 0 days £0

57 Basement RB2.54B The British Red Cross Society 1,447 sq ft 134.40 sq m 1,447 sq ft 134.40 sq m 15 August 2012 14 August 2017 5.00 years - 0.76 years 0.76 years £19,535 £13.50 per sq ft £19,535 0.08% £21,700 0.06% 0 days £0

58 Basement RB2.54C Building Management Area 2,134 sq ft 198.30 sq m 2,134 sq ft 198.30 sq m 10 November 2016 9 November 2021 5.00 years - 5.00 years 5.00 years £0 - £0 0.00% 0.00% 0 days £0

59 Basement RB2.53 Chop'd Limited 421 sq ft 39.11 sq m 421 sq ft 39.11 sq m 5 February 2016 12 March 2026 10.10 years - 9.33 years 9.33 years £7,400 £17.58 per sq ft £7,400 0.03% £6,315 0.02% 0 days £0

60 Basement RB2.57 Vacant 1,130 sq ft 105.00 sq m 1,130 sq ft 105.00 sq m - - - £0 - £0 0.00% £16,955 0.05% 0 days £0

61 Basement RB2.02 Vacant 1,459 sq ft 135.50 sq m 1,459 sq ft 135.50 sq m - - - £0 - £0 0.00% £21,880 0.06% 0 days £0

62 Basement Car Parking Vacant 26 - - - £0 £0 0.00% £91,000 0.24% 0 days £0

63 Basement Car Parking Disabled / Landlord spaces 12 10 November 2016 9 November 2021 5.00 years - 5.00 years 5.00 years £0 £0 0.00% 0.00% 0 days £0

Car parking spaces Winston and Strawn Property 64 Basement 2 1 November 2014 31 October 2017 3.00 years - 0.97 years 0.97 years £7,000 £7,000 0.03% £7,000 0.02% 0 days £0 85 and 87 (London) Ltd Telecoms 65 Basement AboveNet Comms UK 30 May 2006 29 May 2021 15.00 years - 4.55 years 4.55 years £2,000 £2,000 0.01% £2,000 0.01% 0 days £0 Equipment area Ancillary sub total 13,675 sq ft 1,270.43 sq m 13,675 sq ft 1,270.43 sq m 40 0.44 years 0.44 years £71,590 £71,590 0.28% £273,110 0.73%

Overall Total / Average 662,005 sq ft 54,025.49 sq m 47,495 sq ft 4,412.41 sq m 709,499 sq ft 65,914.70 sq m 99 7.14 years 5.53 years £25,366,020 £20,521,980 100.00% £37,269,010 £52.53 per sq ft 100.00% £4,959,702

* Market Rent rent adopts £15 per sq ft per annum in respect of storage space and £3,500 per space per annum in respect of car parking.

F:\LOAN SECURITY VALUATIONS\Morgan Stanley\CityPoint\Due Diligence\9. Leases - Lease Summaries\CP Schedule of Tenacies

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Morgan Stanley December 2016 124

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Appendix 3.0 Macroeconomic and Property Market Overview

Morgan Stanley December 2016 125

Report & Valuation CityPoint, One Ropemaker Street, London EC2Y 9AW

Appendix 3 Economic and Property Overview November 2016

Global Economic Overview

Global growth remained tepid in the first half of 2016. An estimate produced by FocusEconomics shows that the world’s GDP increased 2.4% year-on-year in Q2 2016, which followed a 2.5% rise in Q1. According to the estimate, global economic activity has been slowing uninterruptedly since Q1 2015 and Q2’s result marked the weakest rate since Q1 2013. This deteriorating trend is mainly the result of a deceleration in emerging economies, particularly in China and in commodity-dependent economies in Latin America, the Middle East and North African region, as well as Sub-Saharan Africa.

Advanced economies managed to fare better in that period as they mostly resorted to expansionary monetary policies to jumpstart their faltering economies. Yet despite the initial successes, they too are now struggling to maintain growth momentum. There is a growing perception that monetary policy in several developed economies is reaching its limits and that more structural changes are needed to ensure a more sustained growth trajectory in the mid–term. Although a new round of fiscal stimulus is on the agenda, this will fuel fears about sovereign debt crises as public debt remains at very high levels in most developed nations.

In the developed world, interest rates remain at (or close to) record lows and several central banks continue to experiment with pioneering monetary policy—zero interest rate policies, negative interest rates and quantitative easing—in the hope of bolstering demand by lowering the cost of borrowing as much as possible. While these policies have supported growth, they have also introduced distortions in the global financial markets and asset prices. There is also widespread concern among analysts and policymakers that developed economies will struggle to withdraw from such generous conditions. The possibility of using expansionary fiscal policy has been tabled recently, but it is still all talk with very little action.

While, like Brexit, there is much uncertainty over what the future holds for the US economy and policy, it would appear that the dollar has avoided the fate that befell the UK after June so there will be no easy wins for Trump on currency competitiveness. An expected December rate hike from the fed should keep the dollar from depreciating significantly. Mr Trump had said that his victory would be “Brexit plus, plus, plus” but the initial reaction of financial markets has been the opposite of that which followed the EU referendum.

The MSCI World Index (below) closed at 1,667 on November 3rd 2016, in line with the level recorded before the European Referendum on June 22nd 2016. After hitting $53 per barrel during October 2016, Brent Crude Oil has seen a fall to $46 per barrel as at November 3rd.

Figure 1 MSCI World index 1,900 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000

900 Index(Dec 1969=100) 800 700

600

Oct 2011 Oct

Jun 2011 Jun

Oct 2009Oct 2010Oct 2012Oct 2015Oct 2016Oct Oct 2013Oct 2014Oct

Jun 2009Jun 2010Jun 2012Jun 2015Jun 2016Jun Jun 2013Jun 2014Jun

Feb 2011 Feb

Feb 2009Feb 2012Feb 2013Feb 2014Feb Feb2010 Feb2015 Feb2016

Source: MSCI Note: The MSCI World Index captures large and mid-cap equity market representation across 23 developed markets countries. With 1,610 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

Morgan Stanley November 2016 1

Report & Valuation CityPoint, One Ropemaker Street, London EC2Y 9AW

The global economy is expected to grow at a slower pace this year than in 2015, with a modest uptick projected in 2017. The analysts surveyed this month left their 2016 global growth forecast unchanged from the previous month and expect it to expand 2.5%. The outlook suggests that the period of tepid growth observed in the first half of the year has taken root. Signs of weakness have begun to appear in some advanced economies, while the economic deterioration in some emerging economies has slowed. Next year, the Consensus view among analysts is that the global economy will pick up momentum and GDP will increase 2.9%.

Among the major economies, this month’s global outlook for 2016 reflects an unchanged GDP growth projection for the Euro area. Meanwhile, analysts raised the forecasts for Japan and the United Kingdom (as they had already taken into account the consequences of the Brexit vote in previous publications) whereas they cut the projections for Canada and the U.S. economy.

Among emerging economies, the outlook for most regions (Asia ex-Japan, Eastern Europe, Latin America and the Middle East and North Africa) remained unchanged. The only region for which analysts cut the 2016 growth forecast was Sub-Saharan Africa, which continues to be threatened by a slow recovery in commodities prices and security concerns.

UK Economic Overview

Growth continues to hold up well in the UK and the latest survey data show a further improvement in the manufacturing sector, with the PMI increasing in September. Moreover, consumer confidence recovered in the same month after the post-referendum downturn. Following nearly four months of little or no news regarding the formal Brexit timeline, in early October, Prime Minister Theresa May announced her intention to trigger Article 50 of the Lisbon Treaty before the end of March 2017 and also outlined plans to remove all European laws from the British statute book on the day of exit. Her speech suggested that the UK is heading for a “hard” Brexit, which would broadly mean no tariff-free access to the European market and restrictions on labour movement. Escalating concerns of a severe separation from the EU caused Sterling to hit a historic low on 11th October.

Uncertainty stemming from the Brexit vote will continue to deter investment, but accommodative policy action taken by the Bank of England (BoE) will soften the impact. This month, the Focus Economics panel upgraded the GDP forecast for the third consecutive time. The economy is expected to grow 1.8% in 2016, which is up 0.2 percentage points from last month’s estimate. For 2017, the panel projects that the economy will grow 0.7%.

Inflation jumped from 0.6% in August to 1.0% in September, the highest reading in nearly two years. Analysts see average inflation at 0.7% in 2016 and at 2.3% in 2017.

In September, the manufacturing sector recovered the ground it had lost after the EU referendum. The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) increased from 53.4 in August to 55.4 in September, which marked the highest reading in nine months. This has brought the index further above the 50-threshold that separates expansion from contraction in business conditions.

In October, the GfK NOP consumer confidence indicator tallied minus 3, down on the -1 recorded the previous month, but well above the -12 recorded during July (Figure 2). October's decline mainly reflects a fall in the value of Sterling and the impact it will have on living standards next year. Focus Economics Consensus Forecast panellists expect private consumption to expand 2.6% in 2016, which is 0.4% up on last month’s estimate. For 2017, the panel sees private consumption expanding 0.9%.

In September, jobless claims increased by 700 from the previous month, according to the Office for National Statistics (ONS). The figure came in below the revised increase of 7,100 in jobless claims recorded in August (previously reported: 2,400 increase) and undershot the 3,000 increase in jobless claims the markets had expected.

The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose from from 52.6 in September to 54.5 in October, signalling the fastest expansion since January. Faster growth of total business activity was driven by a stronger expansion of incoming new business. New contracts rose at the fastest rate in nine months. Firms linked new work to new business opportunities, rising international demand linked to weaker Sterling, improving market confidence and promotional campaigns.

Morgan Stanley November 2016 2

Report & Valuation CityPoint, One Ropemaker Street, London EC2Y 9AW

Figure 2 UK retail sales and consumer confidence Retail Sales Consumer Confidence Indicator 8% 20

10 6% 0

4% -10

-20 month moving average) - 2% -30

-40 0% Consumerconfidence -50

Retail salesRetail(12 -2% -60

Jul 11 Jul

Jul 98 Jul 99 Jul 01 Jul 02 Jul 03 Jul 05 Jul 06 Jul 07 Jul 10 Jul 14 Jul 15 Jul Jul 00 Jul 04 Jul 08 Jul 09 Jul 12 Jul 13 Jul 16 Jul

Jan 11 Jan

Jan 00 Jan 01 Jan 04 Jan 05 Jan 08 Jan 09 Jan 12 Jan 13 Jan 16 Jan Jan 99 Jan 02 Jan 03 Jan 06 Jan 07 Jan 10 Jan 14 Jan 15 Jan Jan 98 Jan Source: Office for National Statistics / GfK

The UK savings ratio, as shown in Figure 3 below, (Q2 2016) at 5.1%, is well below the 10-year quarterly average of 7.4%. This shows that UK workers are spending approximately 95% of earnings. This bodes well for the retail market but does provide a degree of unease that money is not being put aside to deal with future events.

Figure 3 UK saving ratio 14%

12%

10%

Ratio 6%

2011 Q2 2011

1997 Q2 1997 Q2 1998 Q2 2000 Q2 2002 Q2 2003 Q2 2005 Q2 2007 Q2 2008 Q2 2010 Q2 2012 Q2 2013 Q2 2015 1999 Q2 1999 Q2 2001 Q2 2004 Q2 2006 Q2 2009 Q2 2014 Q2 2016

Source: Office for National Statistics

In October, house prices in the UK saw no change over the previous month, which followed the 0.3% increase observed in September, according to the Nationwide Building Society (NBS). October's figure marked the end of 15 consecutive months of positive growth. On an annual basis, house prices rose 4.6% (September: +5.3% year-on-year). The average house price was £205,904 (Sep 2016: £205,715).

Morgan Stanley November 2016 3

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According to the NBS, over the past 18 months annual price growth has remained in a fairly narrow range between 3% and 6%, broadly consistent with earnings growth over the longer term. While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand. According to the Q2 2016 quarterly release, NBS data showed that, geographically speaking, the strongest increases in prices are in Outer Metropolitan London, where the average house price rose 9.6% year-on-year. This is markedly higher than the 5.4% rise that has been recorded in the UK as a whole. The regions other than the Outer Metropolitan that saw higher-than-average price increases were London, Outer South East, and East Anglia.

Affordability, as shown in Figure 4 below, is still achieving new highs for London, now over ten times earnings. The chart presents the highest and lowest current regions. Scotland remains the lowest price to earnings ratio at 3.4 times earnings.

Figure 4 First-time buyer house price to earnings ratio 11 10 UK Scotland (current lowest area) 9 London (current highest area) 8 7

6 Ratio 5 4 3 2

2011 Q3 2011

1983 Q3 1983 Q3 1984 Q3 1986 Q3 1988 Q3 1989 Q3 1990 Q3 1991 Q3 1993 Q3 1995 Q3 1996 Q3 1998 Q3 2000 Q3 2001 Q3 2003 Q3 2005 Q3 2006 Q3 2008 Q3 2010 Q3 2013 Q3 2015 Q3 2016 1987 Q3 1987 Q3 1992 Q3 1994 Q3 1997 Q3 1999 Q3 2002 Q3 2004 Q3 2007 Q3 2009 Q3 2012 Q3 2014 1985 Q3 1985 Source: Nationwide

UK Property Market

Occupational Market

Retail

Retailers will be facing more challenges than just rising import costs in 2017, with the minimum wage and rating revaluation both squeezing margins over the next few years in an environment of potentially volatile consumer confidence and behaviour. While trading in central London is expected to be buoyed by more tourism due to the weak pound, this will be the area that sees the largest rises in business rates.

However, early indications for 2017 are that retailers, particularly those at the value-end of the spectrum, are still broadly expansionary. This makes sense, with the value and aspirational segments of the market having been the strongest performers during the global financial crisis. Tenant demand from the leisure sector is expected to remain strong in 2017, with the continuing ripple effect of fast growing new brands away from London continuing (as highlighted in our recent report on casual dining).

One sector that has been relatively quiet for some years is food retail. However, we have noticed recently that while the major supermarkets are still offloading surplus land, there are also some selective acquisitions underway after a sustained period of consolidation amongst the majors.

While there are undoubtedly operating challenges ahead for retailers in the UK in 2017, the property market is moving in their favour. Rents, outside central London, are unlikely to see any upward pressure in 2017 and 2018, and given the generally more uncertain environment we expect landlords to swing into a more tenant-friendly negotiating stance next year.

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That having been said, the availability of prime units on prime pitches will remain limited. Indeed, as developers become more cautious and delay planned scheme expansions this undersupply will become even more intense in some locations. This will lead to some competitive bidding amongst retailers, and hence some site-specific rental growth.

Office

The initial response by investors has been mixed. While some deals that were under offer have gone through with price adjustments, other buyers and even sellers have withdrawn from the market entirely. Larger deals are more likely to be deferred and delayed, and this will affect the City of London more negatively than the West End.

It is likely to become harder or more expensive for investors to borrow money in London for asset purchases or development in London. Investors were already moving away from a capital growth driven strategy to an income-focused one, and we expect this trend to be intensified. Our end 2015 forecast was for a steady decline in investment volumes over 2016-2020, as the return being produced by London office property also reduced. The referendum result will reinforce this, and central London office investment volumes will undoubtedly be lower than expected in 2016 and 2017. We expect that this year’s volume may be around £10bn - £12bn (down from £18bn in 2015). However, this is less of a fall that was seen in the GFC, a reflection of the stronger occupational market this time around.

2017 will see lower than expected levels of take-up across the central London office markets. There will also be a rise in businesses seeking to extend their leases for a short period to allow them to assess the needs of their business in a post Brexit world.

As well as reduced levels of take-up there will be small releases of tenant-controlled space onto the market, again primarily from the Banking sector. Generally we do not expect vacancy rates to rise significantly, as the heightened risk-aversion amongst developers, funders and lenders will lead to a reduction in development and refurbishment completions in 2018 and beyond. We were also already expecting that investment volumes would fall over 2016-2020, as the return being produced by property reduced. Investment volumes will undoubtedly be lower than expected in 2016 and 2017, but not as low as in the GFC as the occupational markets are less weak. 2017’s investment market will depend on how much prices adjust. Logically there will be upward pressure on prime and secondary yields; however the scale of this will depend heavily on how much distressed selling we see, and how many opportunistic investors focus on this distress.

Our discussions post the referendum indicate that there is a significant volume of opportunistic capital targeted at the UK from the US, Middle East, and Asia Pacific. We think that the regional markets should will be more ‘cushioned’ compared to the London markets as they are less reliant on inward investment and more reliant on local economic dynamics.

Northshoring will help support demand levels going forward. With companies nervous about spending capital, there could be even more reason for occupiers to take their back (or middle) office functions to regional cities. Even if London rents start to fall, the gap between Manchester and London is still wide and if you factor in staff costs, the savings may be significant.

Another positive is the development pipeline in the regions; this is still manageable and the majority of regional cities still have an undersupply. Manchester’s pipeline up to 2018 for example is 47% pre-let.

Industrial (warehousing)

Driven by structural change in the retail market, as consumers move to making more online purchases, the UK logistics market has confirmed itself to be extremely robust in the aftermath of the Brexit vote.

Indeed, the third quarter of 2016 has seen the highest volume of warehouse space ever transacted reaching 10.45m sq ft and ensuring that more space has been transacted by the end of the third quarter in 2016 compared with all of 2015.

For companies involved in warehouse project delivery three trends are having a clear impact on costs and timescales. 47% of all warehouse space transacted this year has been for build to suit units, meaning that the construction market was already in buoyant mood in the run up to the Brexit vote.

The supply of warehouse units has decreased by 22% in just one year meaning occupiers have little choice to satisfy their requirements. Looking into 2017, should the retail market remain buoyant, we would then expect warehouse demand to also remain strong, meaning that unless developers start to replenish stocks with further speculative starts build to suit will remain many occupiers only option.

With take-up at a record high and supply at a record low there is a clear need for more units to come forward on a speculative basis. With costs and timescales in the sector currently static there is a window of opportunity to act and deliver more units before a period of uncertainty arrives in 2017 with the triggering of Article 50.

Morgan Stanley November 2016 5

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Investment Market

There were some yield readjustments within the commercial property sectors between August and October 2016. M25 and provincial office yields both moved back in 25 basis points (bps), which decreased the average prime yield for all UK sectors rose from 4.96% to 4.94%. Overall, prime yields have risen by 28 bps over the last 12 months from 4.67% in October 2015.

MSCI is the leading authority on UK property market performance. The annual, quarterly and monthly indices for the UK provide the most comprehensive assessment of the performance and characteristics of the property market. The indices are valuation- based, but do reflect a certain degree of transactional information. The general consensus is that the index reflects the UK property market with a lag of six months.

The UK MSCI Monthly Index recorded 3.2% total return for the year to September 2016 driven by income return of 5.5%. In comparison, the year to July 2016 saw total returns reach 5.5%. On a sectoral basis, the industrial sector posted 8.9% total returns, office saw 5.8% total returns and the lowest broad sector was retail at 3.2%. An analysis by property type shows the superior returns from the industrial sector, where total returns were 6.6%. The driver has been the e-tailing sector and the re- pricing of the sector to reflect the appetite to buy-in to the new forms of retailing. How long will this last? The lowest sector, in terms of returns, was Rest of UK Office Parks at -2.3% over the year. These comparatively lower returns are a reflection of the need for improved amenity provision and infrastructure improvements in regional out of town markets.

As shown in Figure 5 below, the 3-monthly total return to September 2016 has fallen to -2.3%. The equivalent yield was on a downward trajectory, but has shown signs of an upward trend to 6.3%. The most positive aspect is the three-month rental growth change that is currently showing 0.2% to September 2016. Office, industrial and retail sectors are all showing positive growth but industrial is leading the way followed closely by office. The expected total returns for 2016, from the IPF consensus, is currently -0.4%.

Figure 5 UK property performance Total Return Rental Value Growth Equivalent Yield (r-h scale) 10% 10%

5% 9%

0% 8%

-5% 7%

Equivalent yield (%) month % % monthchange/return

- -10% 6% 3

-15% 5%

Sep 11 Sep

Sep 04 Sep 05 Sep 08 Sep 09 Sep 12 Sep 13 Sep 16 Sep Sep 02 Sep 03 Sep 06 Sep 07 Sep 10 Sep 14 Sep 15 Sep

Source: MSCI

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Figure 6 below presents the year-on-year capital value growth for broad UK sectors and regions. As at the end of July, 11 sectors remain in the negative territory. The retail sector is showing the lowest level of performance overall. There is still a geographical split between the South East and the rest of the UK, in terms of performance.

Figure 6 Capital value growth: 12 months to end September 2016

Industrial - South East

Standard Retail - South East

All Industrial

Other

Office - Mid Town & West End

Office - City

Industrial - Rest of UK

All Office

Office - Rest of South East

All Property Types

All Retail

Standard Retail - Rest of UK

Office - Rest of UK

Retail Warehouse

Shopping Centres

-8% -6% -4% -2% 0% 2% 4% Annual % capital growth

Source: MSCI

Looking at rental value growth (see Figure 7 overleaf) it is very encouraging to see that all three broad commercial property sectors are showing positive growth over the past 12 months. Both the industrial and office sectors have shown signs of levelling out, with the retail sector showing signs of increasing growth. The office sector will continue to be driven by the Central London markets but there is also increasing evidence of stronger growth outside of Central London. The industrial sector has seen a much higher level of annual growth compared to the last ‘high point’ in a cycle during early 2007- the current annual growth level is at least double. This is a reflection of diminishing supply and the role of the industrial buildings, of all scales, for the retailing sector during the past few years.

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Figure 7 Rental value growth: annual % change Retail Office Industrial 15%

10%

-5% Annual % % Annualchange -10%

-15%

-20%

Mar11

Sep 11 Sep

Mar 01Mar 02Mar 03Mar 04Mar 05Mar 06Mar 07Mar 08Mar 09Mar 10Mar 12Mar 13Mar 14Mar 15Mar 16Mar

Sep 01Sep 02Sep 03Sep 04Sep 05Sep 06Sep 07Sep 08Sep 09Sep 10Sep 12Sep 13Sep 14Sep 15Sep 16Sep Sep 00Sep

Source: MSCI

Gradually, throughout 2015 and into 2016, the annual rental value growth change has moved from negative to positive territory. The economic environment in the UK remains more buoyant. However, as shown, there is a wide range of rental growth performance. At one end of the scale, office markets in London are showing growth above 6% per annum. At the other end, Standard Retail in the Rest of UK is still showing negative rental growth over the preceding 12 month period.

Figure 8 Rental value growth: 12 months to end September 2016

Office - Mid Town & West End

Office - City

Industrial - South East

All Office

Office - Rest of South East

All Industrial

Standard Retail - South East

Industrial - Rest of UK

All Property Types

Office - Rest of UK

Retail Warehouse

All Retail

Other

Shopping Centres

Standard Retail - Rest of UK -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% Annual % rental growth

Source: MSCI

Morgan Stanley November 2016 8

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The void chart presents the proportion of Estimated Rental Value (ERV) within the MSCI portfolio. A divergent trend is evident with offices showing a significantly high level of void rate whereas the retail sector is well below trend. However, the void data presented should be used with some caution. MSCI also publish alternative measures to show void rates. Their IRIS system show that the vacancy rate, based upon open-market rental value of the empty floorspace shows that Offices are 11.8% vacant, Retail 4.4% and Industrial 6.2%. Industrial vacancy now stands at its lowest level of vacancy on record.

Figure 9 Vacancy rate- financial Retail Office Industrial Retail (10-yr average) Office (10-yr average) Industrial (10-yr average) 16%

14%

12%

10%

6% Vacancy rate Vacancy

Jun 11 Jun

Jun 09 Jun 10 Jun 15 Jun 16 Jun Jun 12 Jun 13 Jun 14 Jun

Mar 11 Mar

Mar 09 Mar 10 Mar 12 Mar 13 Mar Mar 14 Mar 15 Mar 16 Mar

Dec 11 Dec Sep 11 Sep

Sep 08 Sep 10 Dec 12 Dec 13 Sep 13 Dec 14 Sep 14 Dec 15 Sep 16 Sep Sep 09 Sep 09 Dec 10 Sep 12 Sep 15 Dec Dec 08 Dec

Source: MSCI Note: Financial Vacancy, which is based on market rental value (MRV) of the vacant units divided by the total market rental value (MRV)

Investment volumes in the third quarter of 2016 reached £9 billion, 6% below the long term third quarterly average of £9.6 billion. By the end of Q3 2016, the total UK investment reached £33.2 billion, whilst by Q3 2015, investment levels reached record heights of £47.5bn. The office sector and London markets dominate the data at 42% of total investment volumes, though investors have invested higher proportions in the UK regions post EU referendum.

At 43% of deals, by value, the office sector is slightly below the 46% share seen on average during the previous five years. The leisure and other sectors have seen slightly higher shares which have been down to the appetite for investors to look beyond the main sectors to find and deliver growth. Overseas investors were the largest net buyers by end Q3, accounting for 45% by value, 4% down on 2015.

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Figure 10 UK investment by sector 70 Office Retail Industrial Leisure Other 60

£ billion£ 30

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016*

Source: Property Data Note: * as at 30/10/16

The average prime yield, as recorded by Savills for UK property, was 4.94% in September 2016, below the 4.96% recorded during May 2016. As shown in Table 1 below, most sectors have seen an outward shift in prime equivalent yields over the past 12 months.

Table 1 Savills prime equivalent yields

October 2015 March 2016 October 2016 Annual change (bps)

West End Offices 3.00% 3.25% 3.50% 50 City Offices 4.00% 4.00% 4.25% 25 Offices M25 5.00% 5.00% 5.25% 25 Provincial Offices 4.75% 5.00% 5.25% 50 High Street Retail 4.25% 4.00% 4.25% 0 Shopping Centres 4.25% 4.25% 4.50% 25 Retail Warehouse 4.50% 4.75% 5.25% 75 Retail Warehouse 5.75% 5.75% 6.00% 25 Foodstores 5.15% 5.00% 5.25% 10 Industrial Distribution 4.50% 4.75% 5.00% 50 Industrial Multi-let 4.75% 4.75% 5.00% 25 Leisure Parks 5.25% 5.00% 5.25% 0 Regional Hotels 5.50% 5.50% 5.50% 0 Source: Savills

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Commercial Property Forecasts

This section reviews the latest forecasts provided by RealFor (Q3 2016), an industry forecast provider that uses the MSCI data as the forecasting base. Over the next five years (2017-2021), the London industrial market is expected to show the highest growth over the forecast period, followed closely by the South East industrial market, driven by the e-tailing market, and a relative lack of supply.

Figure 11 Rental value growth forecasts (annual average; 2017-2021) 0.5% 0.4% 0.3% 0.2% 0.1%

0.0% Annual % Annual% growth -0.1%

-0.2%

Leisure

I London I

S InTown S

RW Other RW

Other Retail Other

I Rest ofUKRest I

Office Parks Office

R Rest ofUKRest R

O Rest ofUKRest O

Supermarkets

S Out ofTown Out S

Other Property Other

Standard ShopsStandard

RW Retail ParksRetailRW

Standard OfficesStandard

Parks Rest of UK Rest of Parks

R Rest ofLondonRest R

R Central LondonCentralR ofLondonRest O

O CentralLondon O

ShoppingCentres

RW FashionRW Parks

Retail WarehousesRetail

Standard IndustrialsStandard

Dept / Variety Stores / Variety Dept

I InnerSouth I Eastern

I Outer South Eastern Outer I

O InnerSouth Eastern O

Parks London & SouthLondon&Parks

O Outer South Outer Eastern O

R South East & Eastern South& East R DistributionWarehouses

Source: RealFor

Compared to the outlook for rental value growth, the strongest capital value growth expectations are within London. Central London retail and industrial are expected to show the strongest growth during the forecast period and the difference between the best and worst forecast performance is significant. The current expectation is for ‘Rest of UK’ markets, to see the most negative capital growth. This may be a response to yields moving too low for these sectors. However, it should be remembered that specific assets will perform differently to the broad sector/region forecasts. For example, not all rest of UK retail will see capital values fall every year during the next four years. These forecasts provide an indication and a ranking of likely performance based upon the current economic forecasts.

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Figure 12 Capital value growth forecasts (annual average; 2017-2021) 1.0% 0.8% 0.6% 0.4% 0.2% 0.0%

Annual % % Annualgrowth -0.2% -0.4%

-0.6%

Leisure

I London I

S InTown S

RW Other RW

Other Retail Other

I Rest ofUK Rest I

Office Parks Office

R Rest ofUKRest R

O Rest ofUK Rest O

Supermarkets

S Out ofOutTown S

Other Property Other

Standard ShopsStandard

RW Retail Parks Retail RW

Standard OfficesStandard

Parks Rest of UKRest of Parks

R Rest ofLondonRest R

R Central LondonCentralR O Rest ofLondonRest O

O Central LondonCentral O

ShoppingCentres

RW FashionRW Parks

Retail WarehousesRetail

Standard IndustrialsStandard

Dept / Variety Stores / Variety Dept

I InnerSouth I Eastern

I Outer South Outer Eastern I

O InnerSouth O Eastern

Parks London & SouthLondon& Parks

O Outer South Outer Eastern O

R SouthEastern & East R DistributionWarehouses

Source: RealFor

Morgan Stanley November 2016 12

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Morgan Stanley December 2016 126

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Appendix 4.0 Development Pipeline Chart

Morgan Stanley December 2016 127 City Development / Refurbishment Pipeline

Refurb pre-let Refurb speculative Development pre-let Development speculative

1400000 2017 2018 2019 2020 1300000 2.6m sq ft of 3.2m sq ft of 3.7m sq ft 1.3m sq ft speculative space speculative space of spec of spec space space 1200000

1100000

1000000

900000

800000

Sq Ft Sq 700000

600000

500000

400000

300000

200000

100000

232 WC2 232

65 Holborn 65 EC1

Park House EC2 House Park

Devon House E1 Devon

51 Moorgate 51 EC2

34 Moorgate 34 EC2

20 OldBailey 20 EC4

Herbal House House Herbal EC1

River BuildingEC4 River

Principal Place E1

21 Moorfields Moorfields 21 EC2

1 Crown Crown 1 EC2 Place

New Street 14 EC2

15 Fetter Fetter Lane 15 EC4 Fetter Lane 90 EC4

148 Old Street Street Old 148 EC1

1 MarkSquare 1 EC2

33 Gutter Gutter 33 LaneEC2

The Crosspoint The EC2

160 Aldersgate Aldersgate 160 EC1

70 St St 70 Mary Axe EC3

15 Bishopsgate Bishopsgate 15 EC2 Bishopsgate 22 EC2

Finsbury Tower FinsburyTower EC1

Bracken House, Bracken EC4

60 LondonWall 60 EC2

3 Minster Minster 3 Court EC3

2 Seething Seething 2 LaneEC3

41 41 Street Folgate E1

Riverside House Riverside SE1

Aldwych House House Aldwych WC2

33 Queen 33 Street EC4

100 Bishopsgate Bishopsgate 100 EC2 Bishopsgate 135 EC2

4 Cannon 4 EC4 Street,

Bloomberg Place Place Bloomberg EC4

Royal MintRoyal Court EC3

Governors Governors EC4 House

20 Furnival 20 Street EC4

One Braham One Street E1

20 Finsbury Circus 20 EC2

8 SalisburySquare 8 EC4

1 Finsbury 1 Avenue EC2 Finsbury 3 Avenue EC2

262 High HolbornHigh 262 WC1 Coleman 77 Street EC2

302 302 High HolbornWC1

32 Lombard 32 Street EC3

55 Gresham Gresham 55 Street EC2

10 Dominion 10 Street EC2

40 40 Blackfriars Road,SE1

The Stage, The The BardEC2

61 Southwark 61 Street SE1

20 Farringdon 20 Street EC4

100 Liverpool Liverpool 100 EC2 Street,

The Farmiloe Farmiloe The BuildingEC1

24 King 24 William EC4Street

The Stage, The The Hewett EC2

One LondonOneWall EC2 Place

Two London Two Wall Place EC2

The Bower Bower The (The Tower) EC1

131 Finsbury 131 Pavement EC2

28 Charterhouse 28 SquareEC1

One Bartholomew Bartholomew One Close EC1

Thanet House, Thanet 231

The Epworth, The City 25 Road EC1

The Scalpel, 52 The Lime Street EC3

London Fruit London&Wool Exchange E1

33 Central 33 William (King Street) EC4

1 Fen Court Fen (10 1 Fenchurch Ave) EC3

Folgate Court, Folgate 35

Arnold House,Arnold Great Eastern Street EC2

Development Development House, LeonardStreet EC2

Watchmaker 33 Court, St John's LaneEC1

WalsinghamHouse, 35 Seething LaneEC3

Wedge House, Wedge 36

LincolnHouse,296

40/Fleet 40/Fleet Buildingand Plum Tree Court,EC4

The Spice Building, Spice The Devonshire 8 Square EC2

Bridge House, Bridge 181 QueenVictoria Street EC4

The Pepper Store,The 11 Devonshire SquareEC2 Senator House, Senator Queen 85 Victoria Street EC4

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Morgan Stanley December 2016 128

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Appendix 5.0 Argus Capitalisation Printout – Existing Income Profile

Morgan Stanley December 2016 129 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

Property

Address CityPoint As Is Income Profile,Ropemaker Street,London,EC2 File/Ref No

Gross Valuation £594,124,885 Capital Costs -£3,486,555 Net Value Before Fees £590,638,330

Less Stamp Duty @5.00% of Net Value -£27,854,500 Agents Fee @0.50% of Net Value -£3,343,800 Legal Fee @0.32% of Net Value -£2,140,032

Fees include non recoverable VAT @ 20.00 % Net Valuation £557,299,998 Say £557,300,000

Equivalent Yield 5.4907% True Equivalent Yield 5.6633% Initial Yield (Deemed) 3.1691% Initial Yield (Contracted) 3.1691% Reversion Yield 6.3100%

Total Contracted Rent £20,521,981 Total Current Rent £20,521,981 Total Rental Value £37,269,010 No. Tenants 65 Capital value per ft² £785.48

Running Yields

Date Gross Rent Net Rent Annual Quarterly 10-Nov-2016 £20,521,981 £18,718,150 3.1691 % 3.2329 % 06-Dec-2016 £20,521,981 £18,716,577 3.1689 % 3.2326 % 07-Dec-2016 £20,507,981 £18,704,150 3.1668 % 3.2305 % 19-Jan-2017 £21,261,991 £19,458,160 3.2944 % 3.3634 % 01-Feb-2017 £21,254,503 £19,450,672 3.2932 % 3.3621 % 10-Feb-2017 £21,254,503 £19,044,817 3.2244 % 3.2905 % 06-Mar-2017 £21,254,503 £19,038,422 3.2234 % 3.2894 % 07-Mar-2017 £21,254,503 £19,044,817 3.2244 % 3.2905 % 09-Apr-2017 £21,369,503 £19,159,817 3.2439 % 3.3108 % 11-Apr-2017 £21,374,403 £19,164,717 3.2447 % 3.3116 % 22-Apr-2017 £21,739,203 £19,529,517 3.3065 % 3.3760 % 10-May-2017 £21,739,203 £19,738,910 3.3420 % 3.4130 % 26-May-2017 £21,736,000 £19,735,707 3.3414 % 3.4124 % 24-Jun-2017 £21,740,436 £19,740,143 3.3422 % 3.4132 % 10-Aug-2017 £21,740,436 £20,043,700 3.3936 % 3.4668 % 15-Aug-2017 £21,720,901 £20,024,165 3.3903 % 3.4633 % 12-Sep-2017 £21,711,681 £20,014,945 3.3887 % 3.4617 % 01-Nov-2017 £22,807,181 £21,110,445 3.5742 % 3.6555 % 04-Nov-2017 £23,644,381 £21,947,645 3.7159 % 3.8038 % 10-Nov-2017 £23,833,341 £22,542,460 3.8166 % 3.9094 % 07-Dec-2017 £23,845,841 £22,554,960 3.8187 % 3.9117 % 29-Jan-2018 £24,599,681 £23,308,800 3.9464 % 4.0457 % 01-Feb-2018 £24,608,321 £23,317,440 3.9478 % 4.0472 % 23-Apr-2018 £24,972,893 £23,682,012 4.0096 % 4.1121 % 01-May-2018 £24,984,277 £23,693,396 4.0115 % 4.1141 % 10-May-2018 £25,411,877 £25,411,877 4.3024 % 4.4207 % 26-May-2018 £25,414,542 £25,414,542 4.3029 % 4.4211 % 05-Jun-2018 £24,743,539 £24,743,539 4.1893 % 4.3013 % 09-Jun-2018 £24,743,539 £24,506,090 4.1491 % 4.2590 % 10-Jun-2018 £23,729,051 £23,729,051 4.0175 % 4.1205 % 17-Jun-2018 £23,729,051 £23,575,993 3.9916 % 4.0932 % 18-Jun-2018 £23,019,051 £23,019,051 3.8973 % 3.9941 % 01-Aug-2018 £23,947,741 £23,947,741 4.0546 % 4.1594 % 07-Aug-2018 £24,485,735 £24,485,735 4.1456 % 4.2553 % 10-Aug-2018 £26,079,335 £26,079,335 4.4154 % 4.5400 % 15-Aug-2018 £26,101,035 £26,101,035 4.4191 % 4.5439 % 09-Sep-2018 £26,101,035 £25,452,450 4.3093 % 4.4279 % 10-Sep-2018 £26,101,035 £26,101,035 4.4191 % 4.5439 % 12-Sep-2018 £26,108,850 £26,108,850 4.4204 % 4.5453 % 17-Sep-2018 £26,108,850 £25,859,595 4.3782 % 4.5007 % 18-Sep-2018 £26,108,850 £26,108,850 4.4204 % 4.5453 %

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

29-Sep-2018 £26,112,285 £26,112,285 4.4210 % 4.5459 % 05-Dec-2018 £26,809,988 £26,809,988 4.5392 % 4.6709 % 15-Dec-2018 £26,809,988 £26,806,608 4.5386 % 4.6703 % 16-Dec-2018 £26,784,053 £26,784,053 4.5348 % 4.6663 % 15-Mar-2019 £26,784,053 £26,772,047 4.5327 % 4.6641 % 16-Mar-2019 £26,784,053 £26,784,053 4.5348 % 4.6663 % 01-May-2019 £26,785,813 £26,785,813 4.5351 % 4.6666 % 10-May-2019 £29,216,013 £29,216,013 4.9465 % 5.1033 % 01-Aug-2019 £29,216,013 £29,203,765 4.9444 % 5.1011 % 02-Aug-2019 £29,149,513 £29,149,513 4.9353 % 5.0913 % 16-Sep-2019 £29,142,793 £29,142,793 4.9341 % 5.0901 % 01-Nov-2019 £29,142,793 £29,113,039 4.9291 % 5.0848 % 02-Nov-2019 £29,142,793 £29,142,793 4.9341 % 5.0901 % 01-Dec-2019 £29,142,793 £20,153,931 3.4122 % 3.4863 % 02-Dec-2019 £25,019,100 £17,301,978 2.9294 % 2.9838 % 16-Dec-2019 £25,045,700 £17,328,578 2.9339 % 2.9885 % 20-Jan-2020 £25,045,700 £17,169,815 2.9070 % 2.9606 % 21-Jan-2020 £24,316,328 £17,328,578 2.9339 % 2.9885 % 01-Mar-2020 £24,316,328 £15,324,098 2.5945 % 2.6371 % 02-Mar-2020 £24,316,328 £17,328,578 2.9339 % 2.9885 % 23-Mar-2020 £24,326,328 £17,338,578 2.9356 % 2.9902 % 24-Mar-2020 £24,326,328 £17,338,022 2.9355 % 2.9901 % 25-Mar-2020 £24,308,328 £17,320,578 2.9325 % 2.9871 % 05-Apr-2020 £24,308,328 £17,002,062 2.8786 % 2.9311 % 06-Apr-2020 £22,928,931 £15,941,181 2.6990 % 2.7451 % 20-Apr-2020 £22,928,931 £15,811,986 2.6771 % 2.7225 % 21-Apr-2020 £22,928,931 £15,941,181 2.6990 % 2.7451 % 10-Jun-2020 £24,182,531 £17,194,781 2.9112 % 2.9650 % 18-Jun-2020 £25,009,131 £18,021,381 3.0512 % 3.1103 % 24-Jun-2020 £25,009,131 £18,016,161 3.0503 % 3.1093 % 25-Jun-2020 £25,009,131 £18,021,381 3.0512 % 3.1103 % 05-Jul-2020 £25,009,131 £17,517,651 2.9659 % 3.0217 % 06-Jul-2020 £25,009,131 £18,021,381 3.0512 % 3.1103 % 02-Aug-2020 £25,069,931 £18,082,181 3.0615 % 3.1210 % 16-Sep-2020 £25,076,231 £18,088,481 3.0625 % 3.1221 % 27-Sep-2020 £25,076,231 £12,602,926 2.1338 % 2.1625 % 28-Sep-2020 £22,599,723 £10,911,357 1.8474 % 1.8689 % 29-Sep-2020 £22,850,822 £11,162,456 1.8899 % 1.9124 % 01-Dec-2020 £22,850,822 £18,879,578 3.1965 % 3.2614 % 02-Dec-2020 £22,857,457 £18,886,213 3.1976 % 3.2625 % 24-Dec-2020 £22,857,457 £18,878,457 3.1963 % 3.2612 % 25-Dec-2020 £22,779,957 £18,808,713 3.1845 % 3.2489 % 27-Dec-2020 £22,779,957 £17,656,867 2.9895 % 3.0462 % 28-Dec-2020 £22,779,957 £18,808,713 3.1845 % 3.2489 % 21-Jan-2021 £22,779,957 £18,079,341 3.0610 % 3.1205 % 24-Mar-2021 £22,779,957 £18,043,584 3.0549 % 3.1142 % 25-Mar-2021 £22,844,423 £18,143,807 3.0719 % 3.1318 % 10-May-2021 £22,844,423 £17,987,714 3.0455 % 3.1043 % 11-May-2021 £22,007,223 £17,864,740 3.0246 % 3.0827 % 14-Jun-2021 £22,007,223 £17,554,759 2.9722 % 3.0282 % 15-Jun-2021 £20,555,681 £16,978,578 2.8746 % 2.9270 % 10-Aug-2021 £20,555,681 £16,724,103 2.8315 % 2.8824 % 11-Aug-2021 £20,555,681 £16,978,578 2.8746 % 2.9270 % 14-Sep-2021 £20,555,681 £16,467,018 2.7880 % 2.8373 % 15-Sep-2021 £20,555,681 £16,978,578 2.8746 % 2.9270 % 27-Sep-2021 £20,555,681 £21,679,194 3.6705 % 3.7562 % 29-Sep-2021 £20,567,296 £21,690,809 3.6724 % 3.7583 % 31-Oct-2021 £20,567,296 £21,338,310 3.6128 % 3.6958 % 01-Nov-2021 £18,543,106 £20,363,137 3.4476 % 3.5232 % 25-Dec-2021 £18,584,406 £20,404,437 3.4546 % 3.5305 % 21-Jan-2022 £19,431,006 £21,251,037 3.5980 % 3.6804 % 31-Jan-2022 £19,431,006 £20,701,632 3.5050 % 3.5831 % 01-Feb-2022 £19,431,006 £21,251,037 3.5980 % 3.6804 % 06-Apr-2022 £21,051,806 £22,871,837 3.8724 % 3.9680 % 11-May-2022 £21,051,806 £22,313,704 3.7779 % 3.8688 % 02-Jun-2022 £26,636,806 £27,898,704 4.7235 % 4.8663 % 15-Jun-2022 £26,636,806 £27,333,324 4.6278 % 4.7648 % 10-Aug-2022 £26,534,386 £27,230,904 4.6104 % 4.7464 % 29-Sep-2022 £26,969,218 £27,665,736 4.6840 % 4.8244 %

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 2 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

01-Nov-2022 £26,969,218 £26,969,218 4.5661 % 4.6995 % 28-Mar-2023 £30,779,818 £30,779,818 5.2113 % 5.3855 % 10-May-2023 £30,808,638 £30,808,638 5.2162 % 5.3908 % 11-May-2023 £31,710,138 £31,710,138 5.3688 % 5.5539 % 15-Jun-2023 £33,372,638 £33,372,638 5.6503 % 5.8556 % 01-Nov-2023 £35,396,838 £35,396,838 5.9930 % 6.2244 % 19-Jan-2025 £35,507,428 £35,507,428 6.0117 % 6.2446 % 23-Mar-2025 £35,517,428 £35,517,428 6.0134 % 6.2464 % 25-Mar-2025 £37,132,204 £37,132,204 6.2868 % 6.5418 % 13-Mar-2026 £37,131,119 £37,131,119 6.2866 % 6.5416 % 25-Mar-2026 £37,143,825 £37,143,825 6.2888 % 6.5439 % 24-Jun-2026 £37,151,825 £37,151,825 6.2901 % 6.5454 % 29-Sep-2026 £37,160,325 £37,160,325 6.2916 % 6.5470 % 24-Jun-2027 £37,178,295 £37,178,295 6.2946 % 6.5502 % 10-Aug-2027 £37,280,715 £37,280,715 6.3119 % 6.5690 % 10-May-2028 £37,251,895 £37,251,895 6.3071 % 6.5637 % 27-May-2029 £37,252,725 £37,252,725 6.3072 % 6.5639 % 23-Mar-2030 £37,256,425 £37,256,425 6.3078 % 6.5646 % 29-Sep-2031 £37,269,010 £37,269,010 6.3100 % 6.5669 %

Yields based on £590,638,332

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 3 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

Tenants

Tenant name File/Ref Next Review Earliest Term Cap.Group Method Yield 1 Yield 2 Contracted Rent Current Rent ERV Gross Value Freehold U/O SquarePoint Capital LLP NA 01-Nov-2021 Private Hardcore 5.491% £0 £0 £1,095,500 £17,383,947 U/O Flextrade UK Ltd NA 01-Nov-2021 Private Hardcore 5.491% £0 £0 £928,700 £14,613,036 Kaye Scholer LLP NA 11-May-2021 Private Hardcore 5.491% £0 £0 £901,500 £14,492,007 Vacant 10-Aug-2022 09-Aug-2027 Private Hardcore 5.491% £0 £0 £847,800 £13,837,010 Seyfarth Shaw UK NA 21-Jan-2020 Private Hardcore 5.491% £0 £0 £846,600 £13,694,042 Vacant 23-Jun-2022 09-May-2027 Private Hardcore 5.491% £0 £0 £427,600 £7,087,040 Winston and Strawn Property NA 10-Jun-2018 Private Hardcore 5.491% £328,050 £328,050 £392,400 £6,384,300 Winston and Strawn Property NA 10-Jun-2018 Private Hardcore 5.491% £686,438 £686,438 £861,200 £13,962,861 United Trust Bank 19-Jan-2020 18-Jan-2025 Private Hardcore 5.491% £0 £0 £864,600 £14,745,971 Wilkie Farr and Gallagher 05-Dec-2018 15-Jun-2021 Private Hardcore 5.491% £671,003 £671,003 £845,700 £13,244,716 Janus Capital International Lt NA 18-Jun-2018 Private Hardcore 5.491% £710,000 £710,000 £826,600 £13,476,967 Wilkie Farr and Gallagher (U NA 15-Jun-2021 Private Hardcore 5.491% £0 £0 £816,800 £12,998,689 Cravath Swaine & Moore LL NA 06-Apr-2020 Private Hardcore 5.491% £611,127 £611,127 £812,400 £12,934,595 Cravath Swaine & Moore LL NA 06-Apr-2020 Private Hardcore 5.491% £768,270 £768,270 £808,400 £13,356,712 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.491% £632,580 £632,580 £827,400 £14,186,345 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.491% £631,621 £631,621 £826,400 £14,168,535 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.491% £630,517 £630,517 £824,500 £14,137,149 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.491% £667,150 £667,150 £769,500 £13,462,879 Vacant NA 09-May-2028 Private Hardcore 5.491% £0 £0 £767,200 £11,668,705 Vacant 10-May-2023 09-May-2028 Private Hardcore 5.491% £0 £0 £743,000 £11,300,686 Vacant NA 09-Aug-2027 Private Hardcore 5.491% £0 £0 £745,800 £11,768,968 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.491% £442,065 £442,065 £792,700 £11,067,652 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.491% £590,435 £590,435 £971,000 £13,650,175 Vacant 10-May-2023 09-May-2028 Private Hardcore 5.491% £0 £0 £920,000 £13,942,672 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.491% £716,758 £716,758 £1,015,900 £14,615,219 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.491% £727,250 £727,250 £1,031,000 £14,831,713 Ebiquity Associates Limited NA 01-Dec-2019 Private Hardcore 5.491% £729,637 £729,637 £1,264,400 £17,711,961 Morrison and Foerster UK LL NA 01-Dec-2019 Private Hardcore 5.491% £1,528,613 £1,528,613 £2,134,300 £30,714,192 Mimecast Service Ltd 07-Aug-2018 01-Dec-2019 Private Hardcore 5.491% £1,320,361 £1,320,361 £2,186,300 £31,403,746 Simmons & Simmons 25-Mar-2020 24-Mar-2025 Private Hardcore 5.491% £6,780,224 £6,780,224 £8,395,000 £142,051,855 City Point (Jersey) Unit Trust NA 10-Apr-2017 Private Hardcore 5.491% £23,000 £23,000 £27,900 £506,149 MSCP Wellbeing Ltd NA 24-Mar-2026 Private Hardcore 5.491% £419,928 £419,928 £487,100 £8,573,259 Wagamama Limited 25-Mar-2022 28-Sep-2026 Private Hardcore 5.491% £0 £0 £123,500 £2,137,459 Noble Bar and Diners NA 01-Aug-2019 Private Hardcore 5.491% £66,500 £66,500 £60,800 £1,071,424 Corney & Barrow Wine Bars 29-Sep-2021 28-Sep-2031 Private Hardcore 5.491% £143,600 £143,600 £167,800 £2,881,665 Gatti's Restaurant NA 22-Mar-2030 Private Hardcore 5.491% £100,000 £100,000 £123,700 £2,122,771 Pret A Manager (Europe) Lim 24-Jun-2021 23-Jun-2026 Private Hardcore 5.491% £122,500 £122,500 £130,500 £2,312,178 Lawrence Edward Weimer 29-Sep-2018 16-Dec-2018 Private Hardcore 5.491% £22,500 £22,500 £26,600 £454,741 MSCP Wellbeing Ltd 27-Mar-2021 24-Mar-2026 Private Hardcore 5.491% £0 £0 £0 £0 Costa Limited 01-Nov-2020 24-Dec-2020 Private Hardcore 5.491% £77,500 £77,500 £41,300 £847,146 A3D2 Limited t/a Amber 24-Jun-2017 23-Jun-2027 Private Hardcore 5.491% £217,194 £217,194 £239,600 £4,219,285 Notes Music & Coffee 27-May-2019 26-May-2029 Private Hardcore 5.491% £53,570 £53,570 £54,400 £979,883 Firoz Mitha and Salim Mitha NA 06-Dec-2016 Private Hardcore 5.491% £14,000 £14,000 £12,500 £216,017 Costa Limited 06-Feb-2017 24-Mar-2020 Private Hardcore 5.491% £18,000 £18,000 £10,000 £176,046 Ultimate Security Services NA 11-Sep-2017 Private Hardcore 5.491% £9,220 £9,220 £7,815 £136,369 Cofely Ltd NA 25-May-2017 Private Hardcore 5.491% £3,203 £3,203 £2,665 £46,363 Finsbury Enterprises 16-Sep-2018 15-Sep-2019 Private Hardcore 5.491% £6,720 £6,720 £6,300 £110,330

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 4 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

Ebiquity Associated Ltd NA 30-Apr-2018 Private Hardcore 5.491% £1,936 £1,936 £1,760 £30,755 Landlord Storage Area NA 30-Apr-2018 Private Hardcore 5.491% £0 £0 £13,320 £224,208 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £1,355 £23,393 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £1,275 £22,012 Fabric Solutions London Ltd NA 31-Jan-2017 Private Hardcore 5.491% £7,488 £7,488 £8,640 £149,011 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £27,495 £474,688 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £6,055 £104,537 Mimecast Services Ltd 06-Dec-2018 01-Dec-2019 Private Hardcore 5.491% £7,088 £7,088 £6,635 £116,364 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £22,945 £396,134 The British Red Cross Societ NA 14-Aug-2017 Private Hardcore 5.491% £19,535 £19,535 £21,700 £373,885 BMA NA 14-Aug-2017 Private Hardcore 5.491% £0 £0 £0 £0 Chop'd Ltd 05-Feb-2021 12-Mar-2026 Private Hardcore 5.491% £7,400 £7,400 £6,315 £119,017 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £16,955 £292,720 TO LET NA 09-Nov-2022 Private Hardcore 5.491% £0 £0 £21,880 £377,747 TO LET 10-Nov-2022 09-Nov-2027 Private Hardcore 5.491% £0 £0 £91,000 £1,571,070 Disabled Parking Spaces 01-Jan-2020 31-Dec-2024 Private Hardcore 5.491% £0 £0 £0 £0 Winston and Strawn Property NA 31-Oct-2017 Private Hardcore 5.491% £7,000 £7,000 £7,000 £127,487 AboveNet Comms UK NA 29-May-2021 Private Hardcore 5.491% £2,000 £2,000 £2,000 £36,425 Total £20,521,981 £20,521,981 £37,269,010 £594,124,885

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 5

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Morgan Stanley December 2016 130

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Appendix 6.0 Argus Capitalisation Printout – Topped-Up Income Profile

Morgan Stanley December 2016 131 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

Property

Address CityPoint Topped Up,Ropemaker Street,London,EC2 File/Ref No

Gross Valuation £599,424,085 Capital Costs -£3,486,555 Net Value Before Fees £595,937,530

Less Stamp Duty @5.00% of Net Value -£28,104,500 Agents Fee @0.50% of Net Value -£3,373,800 Legal Fee @0.32% of Net Value -£2,159,232

Fees include non recoverable VAT @ 20.00 % Net Valuation £562,299,998 Say £562,300,000

Equivalent Yield 5.4841% True Equivalent Yield 5.6576% Initial Yield (Deemed) 3.9538% Initial Yield (Contracted) 3.9538% Reversion Yield 6.2538%

Total Contracted Rent £25,366,021 Total Current Rent £25,366,021 Total Rental Value £37,269,010 No. Tenants 65 Capital value per ft² £792.53

Running Yields

Date Gross Rent Net Rent Annual Quarterly 10-Nov-2016 £25,366,021 £23,562,190 3.9538 % 4.0535 % 06-Dec-2016 £25,366,021 £23,560,617 3.9535 % 4.0532 % 07-Dec-2016 £25,352,021 £23,548,190 3.9515 % 4.0510 % 01-Feb-2017 £25,344,533 £23,540,702 3.9502 % 4.0497 % 10-Feb-2017 £25,344,533 £23,134,847 3.8821 % 3.9781 % 06-Mar-2017 £25,344,533 £23,128,452 3.8810 % 3.9770 % 07-Mar-2017 £25,344,533 £23,134,847 3.8821 % 3.9781 % 25-Mar-2017 £25,349,533 £23,139,847 3.8829 % 3.9790 % 11-Apr-2017 £25,354,433 £23,144,747 3.8838 % 3.9799 % 10-May-2017 £25,354,433 £23,354,140 3.9189 % 4.0168 % 26-May-2017 £25,351,230 £23,350,937 3.9184 % 4.0162 % 24-Jun-2017 £25,355,666 £23,355,373 3.9191 % 4.0170 % 10-Aug-2017 £25,355,666 £23,658,930 3.9700 % 4.0705 % 15-Aug-2017 £25,336,131 £23,639,395 3.9668 % 4.0671 % 12-Sep-2017 £25,326,911 £23,630,175 3.9652 % 4.0655 % 10-Nov-2017 £25,515,871 £24,224,990 4.0650 % 4.1704 % 07-Dec-2017 £25,528,371 £24,237,490 4.0671 % 4.1726 % 01-Feb-2018 £25,537,011 £24,246,130 4.0686 % 4.1742 % 23-Apr-2018 £25,901,583 £24,610,702 4.1297 % 4.2386 % 01-May-2018 £25,912,967 £24,622,086 4.1317 % 4.2406 % 10-May-2018 £26,340,567 £26,340,567 4.4200 % 4.5449 % 26-May-2018 £26,343,232 £26,343,232 4.4205 % 4.5453 % 05-Jun-2018 £25,672,229 £25,672,229 4.3079 % 4.4264 % 09-Jun-2018 £25,672,229 £25,434,780 4.2680 % 4.3844 % 10-Jun-2018 £24,657,741 £24,657,741 4.1376 % 4.2469 % 17-Jun-2018 £24,657,741 £24,504,683 4.1120 % 4.2198 % 18-Jun-2018 £23,947,741 £23,947,741 4.0185 % 4.1215 % 07-Aug-2018 £24,485,735 £24,485,735 4.1088 % 4.2165 % 10-Aug-2018 £26,079,335 £26,079,335 4.3762 % 4.4985 % 15-Aug-2018 £26,101,035 £26,101,035 4.3798 % 4.5024 % 09-Sep-2018 £26,101,035 £25,452,450 4.2710 % 4.3875 % 10-Sep-2018 £26,101,035 £26,101,035 4.3798 % 4.5024 % 12-Sep-2018 £26,108,850 £26,108,850 4.3811 % 4.5038 % 17-Sep-2018 £26,108,850 £25,859,595 4.3393 % 4.4596 % 18-Sep-2018 £26,108,850 £26,108,850 4.3811 % 4.5038 % 29-Sep-2018 £26,112,285 £26,112,285 4.3817 % 4.5044 % 05-Dec-2018 £26,809,988 £26,809,988 4.4988 % 4.6282 % 15-Dec-2018 £26,809,988 £26,806,608 4.4982 % 4.6276 % 16-Dec-2018 £26,784,053 £26,784,053 4.4944 % 4.6236 % 15-Mar-2019 £26,784,053 £26,772,047 4.4924 % 4.6215 % 16-Mar-2019 £26,784,053 £26,784,053 4.4944 % 4.6236 %

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

01-May-2019 £26,785,813 £26,785,813 4.4947 % 4.6239 % 10-May-2019 £29,216,013 £29,216,013 4.9025 % 5.0565 % 01-Aug-2019 £29,216,013 £29,203,765 4.9005 % 5.0543 % 02-Aug-2019 £29,149,513 £29,149,513 4.8914 % 5.0446 % 16-Sep-2019 £29,142,793 £29,142,793 4.8902 % 5.0434 % 01-Nov-2019 £29,142,793 £29,113,039 4.8853 % 5.0381 % 02-Nov-2019 £29,142,793 £29,142,793 4.8902 % 5.0434 % 01-Dec-2019 £29,142,793 £20,153,931 3.3819 % 3.4546 % 02-Dec-2019 £25,019,100 £17,301,978 2.9033 % 2.9568 % 16-Dec-2019 £25,045,700 £17,328,578 2.9078 % 2.9614 % 20-Jan-2020 £25,045,700 £17,169,815 2.8811 % 2.9338 % 21-Jan-2020 £24,316,328 £17,328,578 2.9078 % 2.9614 % 01-Mar-2020 £24,316,328 £15,324,098 2.5714 % 2.6133 % 02-Mar-2020 £24,316,328 £17,328,578 2.9078 % 2.9614 % 23-Mar-2020 £24,326,328 £17,338,578 2.9095 % 2.9631 % 24-Mar-2020 £24,326,328 £17,338,022 2.9094 % 2.9631 % 25-Mar-2020 £24,308,328 £17,320,578 2.9064 % 2.9600 % 05-Apr-2020 £24,308,328 £17,002,062 2.8530 % 2.9046 % 06-Apr-2020 £22,928,931 £15,941,181 2.6750 % 2.7203 % 20-Apr-2020 £22,928,931 £15,811,986 2.6533 % 2.6979 % 21-Apr-2020 £22,928,931 £15,941,181 2.6750 % 2.7203 % 10-Jun-2020 £24,182,531 £17,194,781 2.8853 % 2.9381 % 18-Jun-2020 £25,009,131 £18,021,381 3.0240 % 3.0821 % 24-Jun-2020 £25,009,131 £18,016,161 3.0232 % 3.0812 % 25-Jun-2020 £25,009,131 £18,021,381 3.0240 % 3.0821 % 05-Jul-2020 £25,009,131 £17,517,651 2.9395 % 2.9943 % 06-Jul-2020 £25,009,131 £18,021,381 3.0240 % 3.0821 % 02-Aug-2020 £25,069,931 £18,082,181 3.0342 % 3.0927 % 16-Sep-2020 £25,076,231 £18,088,481 3.0353 % 3.0938 % 27-Sep-2020 £25,076,231 £12,602,926 2.1148 % 2.1431 % 28-Sep-2020 £22,599,723 £10,911,357 1.8310 % 1.8521 % 29-Sep-2020 £22,850,822 £11,162,456 1.8731 % 1.8952 % 01-Dec-2020 £22,850,822 £18,879,578 3.1680 % 3.2318 % 02-Dec-2020 £22,857,457 £18,886,213 3.1692 % 3.2329 % 24-Dec-2020 £22,857,457 £18,878,457 3.1679 % 3.2316 % 25-Dec-2020 £22,779,957 £18,808,713 3.1562 % 3.2194 % 27-Dec-2020 £22,779,957 £17,656,867 2.9629 % 3.0186 % 28-Dec-2020 £22,779,957 £18,808,713 3.1562 % 3.2194 % 21-Jan-2021 £22,779,957 £18,079,341 3.0338 % 3.0922 % 24-Mar-2021 £22,779,957 £18,043,584 3.0278 % 3.0859 % 25-Mar-2021 £22,844,423 £18,143,807 3.0446 % 3.1034 % 10-May-2021 £22,844,423 £17,987,714 3.0184 % 3.0762 % 11-May-2021 £22,007,223 £17,864,740 2.9978 % 3.0548 % 14-Jun-2021 £22,007,223 £17,554,759 2.9457 % 3.0008 % 15-Jun-2021 £20,555,681 £16,978,578 2.8491 % 2.9005 % 10-Aug-2021 £20,555,681 £16,724,103 2.8064 % 2.8563 % 11-Aug-2021 £20,555,681 £16,978,578 2.8491 % 2.9005 % 14-Sep-2021 £20,555,681 £16,467,018 2.7632 % 2.8116 % 15-Sep-2021 £20,555,681 £16,978,578 2.8491 % 2.9005 % 27-Sep-2021 £20,555,681 £21,679,194 3.6378 % 3.7221 % 29-Sep-2021 £20,567,296 £21,690,809 3.6398 % 3.7241 % 31-Oct-2021 £20,567,296 £21,338,310 3.5806 % 3.6622 % 01-Nov-2021 £18,543,106 £20,363,137 3.4170 % 3.4912 % 25-Dec-2021 £18,584,406 £20,404,437 3.4239 % 3.4985 % 21-Jan-2022 £19,431,006 £21,251,037 3.5660 % 3.6469 % 31-Jan-2022 £19,431,006 £20,701,632 3.4738 % 3.5505 % 01-Feb-2022 £19,431,006 £21,251,037 3.5660 % 3.6469 % 06-Apr-2022 £21,051,806 £22,871,837 3.8380 % 3.9318 % 11-May-2022 £21,051,806 £22,313,704 3.7443 % 3.8336 % 02-Jun-2022 £26,636,806 £27,898,704 4.6815 % 4.8217 % 15-Jun-2022 £26,636,806 £27,333,324 4.5866 % 4.7212 % 10-Aug-2022 £26,534,386 £27,230,904 4.5694 % 4.7030 % 29-Sep-2022 £26,969,218 £27,665,736 4.6424 % 4.7803 % 01-Nov-2022 £26,969,218 £26,969,218 4.5255 % 4.6565 % 28-Mar-2023 £30,779,818 £30,779,818 5.1649 % 5.3361 % 10-May-2023 £30,808,638 £30,808,638 5.1698 % 5.3412 % 11-May-2023 £31,710,138 £31,710,138 5.3211 % 5.5028 % 15-Jun-2023 £33,372,638 £33,372,638 5.6000 % 5.8017 % 01-Nov-2023 £35,396,838 £35,396,838 5.9397 % 6.1669 %

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 2 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

19-Jan-2025 £35,507,428 £35,507,428 5.9582 % 6.1869 % 23-Mar-2025 £35,517,428 £35,517,428 5.9599 % 6.1887 % 25-Mar-2025 £37,132,204 £37,132,204 6.2309 % 6.4813 % 13-Mar-2026 £37,131,119 £37,131,119 6.2307 % 6.4811 % 25-Mar-2026 £37,143,825 £37,143,825 6.2328 % 6.4834 % 24-Jun-2026 £37,151,825 £37,151,825 6.2342 % 6.4849 % 29-Sep-2026 £37,160,325 £37,160,325 6.2356 % 6.4864 % 24-Jun-2027 £37,178,295 £37,178,295 6.2386 % 6.4897 % 10-Aug-2027 £37,280,715 £37,280,715 6.2558 % 6.5083 % 10-May-2028 £37,251,895 £37,251,895 6.2510 % 6.5030 % 27-May-2029 £37,252,725 £37,252,725 6.2511 % 6.5032 % 23-Mar-2030 £37,256,425 £37,256,425 6.2517 % 6.5039 % 29-Sep-2031 £37,269,010 £37,269,010 6.2538 % 6.5061 %

Yields based on £595,937,532

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 3 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

Tenants

Tenant name File/Ref Next Review Earliest Term Cap.Group Method Yield 1 Yield 2 Contracted Rent Current Rent ERV Gross Value Freehold U/O SquarePoint Capital LLP NA 01-Nov-2021 Private Hardcore 5.484% £1,095,500 £1,095,500 £1,095,500 £18,422,639 U/O Flextrade UK Ltd NA 01-Nov-2021 Private Hardcore 5.484% £928,690 £928,690 £928,700 £16,124,597 Kaye Scholer LLP NA 11-May-2021 Private Hardcore 5.484% £837,200 £837,200 £901,500 £15,293,660 Vacant 10-Aug-2022 09-Aug-2027 Private Hardcore 5.484% £0 £0 £847,800 £13,855,583 Seyfarth Shaw UK NA 21-Jan-2020 Private Hardcore 5.484% £364,800 £364,800 £846,600 £13,870,152 Vacant 23-Jun-2022 09-May-2027 Private Hardcore 5.484% £0 £0 £427,600 £7,096,423 Winston and Strawn Property NA 10-Jun-2018 Private Hardcore 5.484% £328,050 £328,050 £392,400 £6,392,822 Winston and Strawn Property NA 10-Jun-2018 Private Hardcore 5.484% £686,438 £686,438 £861,200 £13,981,558 United Trust Bank 19-Jan-2020 18-Jan-2025 Private Hardcore 5.484% £754,010 £754,010 £864,600 £14,904,521 Wilkie Farr and Gallagher 05-Dec-2018 15-Jun-2021 Private Hardcore 5.484% £671,003 £671,003 £845,700 £13,262,759 Janus Capital International Lt NA 18-Jun-2018 Private Hardcore 5.484% £710,000 £710,000 £826,600 £13,494,918 Wilkie Farr and Gallagher (U NA 15-Jun-2021 Private Hardcore 5.484% £753,840 £753,840 £816,800 £13,882,239 Cravath Swaine & Moore LL NA 06-Apr-2020 Private Hardcore 5.484% £611,127 £611,127 £812,400 £12,952,051 Cravath Swaine & Moore LL NA 06-Apr-2020 Private Hardcore 5.484% £768,270 £768,270 £808,400 £13,374,149 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.484% £632,580 £632,580 £827,400 £14,204,427 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.484% £631,621 £631,621 £826,400 £14,186,596 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.484% £630,517 £630,517 £824,500 £14,155,168 Simpson Thacher & Bartlett L 29-Sep-2020 28-Sep-2022 Private Hardcore 5.484% £667,150 £667,150 £769,500 £13,479,736 Vacant NA 09-May-2028 Private Hardcore 5.484% £0 £0 £767,200 £11,685,399 Vacant 10-May-2023 09-May-2028 Private Hardcore 5.484% £0 £0 £743,000 £11,316,853 Vacant NA 09-Aug-2027 Private Hardcore 5.484% £0 £0 £745,800 £11,785,126 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.484% £442,065 £442,065 £792,700 £11,084,227 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.484% £590,435 £590,435 £971,000 £13,670,481 Vacant 10-May-2023 09-May-2028 Private Hardcore 5.484% £0 £0 £920,000 £13,962,687 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.484% £716,758 £716,758 £1,015,900 £14,636,513 Regus (UK) Ltd NA 27-Sep-2020 Private Hardcore 5.484% £727,250 £727,250 £1,031,000 £14,853,324 Ebiquity Associates Limited NA 01-Dec-2019 Private Hardcore 5.484% £729,637 £729,637 £1,264,400 £17,738,579 Morrison and Foerster UK LL NA 01-Dec-2019 Private Hardcore 5.484% £1,528,613 £1,528,613 £2,134,300 £30,759,225 Mimecast Service Ltd 07-Aug-2018 01-Dec-2019 Private Hardcore 5.484% £1,320,361 £1,320,361 £2,186,300 £31,449,906 Simmons & Simmons 25-Mar-2020 24-Mar-2025 Private Hardcore 5.484% £6,780,224 £6,780,224 £8,395,000 £142,234,063 City Point (Jersey) Unit Trust NA 10-Apr-2017 Private Hardcore 5.484% £23,000 £23,000 £27,900 £506,765 MSCP Wellbeing Ltd NA 24-Mar-2026 Private Hardcore 5.484% £419,928 £419,928 £487,100 £8,583,945 Wagamama Limited 25-Mar-2022 28-Sep-2026 Private Hardcore 5.484% £110,000 £110,000 £123,500 £2,184,364 Noble Bar and Diners NA 01-Aug-2019 Private Hardcore 5.484% £66,500 £66,500 £60,800 £1,072,755 Corney & Barrow Wine Bars 29-Sep-2021 28-Sep-2031 Private Hardcore 5.484% £143,600 £143,600 £167,800 £2,885,303 Gatti's Restaurant NA 22-Mar-2030 Private Hardcore 5.484% £100,000 £100,000 £123,700 £2,125,464 Pret A Manager (Europe) Lim 24-Jun-2021 23-Jun-2026 Private Hardcore 5.484% £122,500 £122,500 £130,500 £2,315,037 Lawrence Edward Weimer 29-Sep-2018 16-Dec-2018 Private Hardcore 5.484% £22,500 £22,500 £26,600 £455,323 MSCP Wellbeing Ltd 27-Mar-2021 24-Mar-2026 Private Hardcore 5.484% £0 £0 £0 £0 Costa Limited 01-Nov-2020 24-Dec-2020 Private Hardcore 5.484% £77,500 £77,500 £41,300 £848,066 A3D2 Limited t/a Amber 24-Jun-2017 23-Jun-2027 Private Hardcore 5.484% £217,194 £217,194 £239,600 £4,224,524 Notes Music & Coffee 27-May-2019 26-May-2029 Private Hardcore 5.484% £53,570 £53,570 £54,400 £981,079 Firoz Mitha and Salim Mitha NA 06-Dec-2016 Private Hardcore 5.484% £14,000 £14,000 £12,500 £216,292 Costa Limited 06-Feb-2017 24-Mar-2020 Private Hardcore 5.484% £18,000 £18,000 £10,000 £176,265 Ultimate Security Services NA 11-Sep-2017 Private Hardcore 5.484% £9,220 £9,220 £7,815 £136,541 Cofely Ltd NA 25-May-2017 Private Hardcore 5.484% £3,203 £3,203 £2,665 £46,422 Finsbury Enterprises 16-Sep-2018 15-Sep-2019 Private Hardcore 5.484% £6,720 £6,720 £6,300 £110,468

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 4 REPORT Summary Valuation Savills

Report Date 12 December 2016 Valuation Date 10 November 2016

Ebiquity Associated Ltd NA 30-Apr-2018 Private Hardcore 5.484% £1,936 £1,936 £1,760 £30,793 Landlord Storage Area NA 30-Apr-2018 Private Hardcore 5.484% £0 £0 £13,320 £224,500 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £1,355 £23,423 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £1,275 £22,040 Fabric Solutions London Ltd NA 31-Jan-2017 Private Hardcore 5.484% £7,488 £7,488 £8,640 £149,201 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £27,495 £475,293 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £6,055 £104,670 Mimecast Services Ltd 06-Dec-2018 01-Dec-2019 Private Hardcore 5.484% £7,088 £7,088 £6,635 £116,509 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £22,945 £396,639 The British Red Cross Societ NA 14-Aug-2017 Private Hardcore 5.484% £19,535 £19,535 £21,700 £374,362 BMA NA 14-Aug-2017 Private Hardcore 5.484% £0 £0 £0 £0 Chop'd Ltd 05-Feb-2021 12-Mar-2026 Private Hardcore 5.484% £7,400 £7,400 £6,315 £119,157 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £16,955 £293,093 TO LET NA 09-Nov-2022 Private Hardcore 5.484% £0 £0 £21,880 £378,229 TO LET 10-Nov-2022 09-Nov-2027 Private Hardcore 5.484% £0 £0 £91,000 £1,573,073 Disabled Parking Spaces 01-Jan-2020 31-Dec-2024 Private Hardcore 5.484% £0 £0 £0 £0 Winston and Strawn Property NA 31-Oct-2017 Private Hardcore 5.484% £7,000 £7,000 £7,000 £127,642 AboveNet Comms UK NA 29-May-2021 Private Hardcore 5.484% £2,000 £2,000 £2,000 £36,469 Total £25,366,021 £25,366,021 £37,269,010 £599,424,085

Portfolio: CEHA - CityPoint ARGUS Valuation - Capitalisation 2.50.079 Page 5

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Morgan Stanley December 2016 132

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Morgan Stanley December 2016 133

Report & Valuation

CityPoint, One Ropemaker Street, London EC2Y 9AW

Edward Shakespeare Charlotte Aschan Director Director

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