KENSINGTON HIGH STREET INVESTMENT SUMMARY

A Prime Central London Redevelopment Opportunity Comprising Embassy, Office and Residential uses with Car Parking.

> Freehold 1970’s-built, mixed-use corner property with > The property offers exceptional road transport links as commanding views over South West London. well as being in close proximity to five central London underground and mainline stations all within walking > Situated on a hugely prominent junction of the world- distance of the property. famous Kensington High Street and the extremely affluent residential Addison Road. > It is well-positioned to benefit from a number of significant development and regeneration projects > The property is arranged over basement, ground and with increased footfall, connectivity, retail and public eight upper floors offering highly desirable 2,000 sq ft realm including Earls Court and Olympia Exhibition GIA rectangular, column-free floorplates which benefit Centres close by. from light on three sides. > The property will appeal to owner occupiers, investors > The building has a site footprint of approximately 3,500 and developers, both commercial and residential. The sq ft (325 sq m) and totals 16,536 sq ft GIA building is neither listed nor within (1538.8 sq m) / 11,678 sq ft NIA (1,084.9 sq m) excluding a conservation area. the 7th/8th floor duplex penthouse which has been sold off on a long lease. > There is private surface parking for three to five cars. The internal garage leased to the duplex flat could be > Currently configured as an office and embassy building incorporated into a larger, enhanced scheme subject which additionally benefits from residential use across to separate negotiation. the entire vacant 6th floor. > Subject to planning, there is further development > The remaining B1/embassy tenancies expire within potential over the car park. 12-18 months and generate a total passing rent of £275,000 per annum. The accommodation has been > The vendor is seeking offers in excess of £9,750,000 historically let off very low rents and is highly (Nine Million Seven Hundred and Fifty Thousand reversionary. Pounds) excluding VAT and subject to contract, equating to £588 per sq ft GIA (excluding surface car > The recently gained planning consent allows for the park), for the freehold interest. conversion of the majority to residential over 3rd to 6th floors, two floors of offices at 1st and 2nd and a brand- > By separate negotiation, there may be the opportunity new retail unit with highly visible corner frontage. to acquire the UK SPV holding structure which provides the opportunity to save SDLT. 2 KENSINGTON HIGH STREET

3 LOCATION The property is situated on the north side of Kensington High Street, close to Olympia on the junction with Addison Road.

The Royal Borough of Kensington and Chelsea is arguably London’s most affluent borough. The commercial centre lies along Kensington High Street which offers an abundance of large format retailing, department stores, smaller luxury boutiques, restaurants, cafés and hotels.

Kensington has long been the epicentre of London’s cultural district and is naturally an extremely popular tourist destination benefiting from significant footfall year round. Home to the Design Museum, which neighbours the property, the Science Museum, Royal College of Art, Natural History Museum, the Serpentine Gallery, the Royal Albert Hall and the Victoria & Albert Museum. As well as these globally recognised landmarks, the parks and gardens of Holland Park and Hyde Park are nearby and make this location an extremely attractive place to live and work.

As a result, numerous substantial occupiers, particularly from the music and TMT sectors, have chosen to headquarter here including Universal, Warner, Netjets and Daily Mail. 4 SHEPHERD’S Shepherd’s Bush Market BUSH KESIGTO GARDES Shepherd’s Kensington Bush Palace

W12 HOLLAD Shopping Centre PARK ET RE ST Goldhawk H Road IG H KENSINGTON H O D O GT High Street A L L SI Kensington Royal Albert O A A E Hall R D K D D Design H I R S S O Museum OAD U Science KNIGHTSBRIDGE B R O Museum S ’ Kensington A D D R Olympia E KENSINGTON H P HIGH E STREET Natural H S Olympia History W Museum London A R Kings Mall W Shopping IC K A4 Centre R OAD D O CROWELL R OA A H R D RSIT Gloucester HAE Road

ET KIG ST RE Hammersmith D R L L E D W Earl’s OA A4 RO BROPTO R Broadway T ST C Court LD ALGA WE O Shopping RT H ROAD A4 Centre West Barons Kensington Court F Earl’s Court U O R L T H Regeneration H A

E P D D A A L O CHELSEA The Queen’s R R A O IE C Club L A IL E L D West Brompton R

O

A

D FULHAM

SITUATION The property is within easy walking distance of Piccadilly, Circle, District lines, plus Stamford overground / rail, taxi and airport links therefore allowingBridge quick access to and from central London.

KENSINGTON PARK 10 MIN WALK BARONS COURT EARL’S COURT HEATHROW HAMMERSMITH 15 MIN WALK 12 MIN WALK

Circle KEW GARDENS WEST RICHMOND KENSINGTON WEST SOUTH LIVERPOOL Piccadilly 15 MIN WALK PADDINGTONBROMPTON KING’S CROSS KENSINGTON STREET VICTORIA District SHEPHERD’S ST PANCRAS District weekends BUSH LEICESTER Overground CLAPHAM SQUAREWIMBLEDON KENSINGTON JUNCTION OLYMPIA MONUMENT 5 MIN WALK HIGH STREET GREEN KENSINGTON PARK 10 MIN WALK BARONS COURT EARL’S COURT HEATHROW HAMMERSMITH 15 MIN WALK 12 MIN WALK

KEW GARDENS WEST RICHMOND KENSINGTON WEST SOUTH 15 MIN WALK BROMPTON KENSINGTON VICTORIA

KENSINGTON HIGH STREET CLAPHAM WIMBLEDON JUNCTION

5 DESCRIPTION The property, which was built in the late 1970’s, is arranged over basement, ground and eight upper floors and forms the end of a terrace of dissimilar buildings; it was originally conceived as a secure banking facility and showroom.

The main entrance to the building is from Kensington High Street and shared by the office and residential occupiers. Additionally, side access is provided from the private gated car park large enough for three to five cars.

The office / embassy floors over ground to fifth floors provide open plan, column-free consular and private office accommodation whilst the entire sixth floor is a large apartment requiring modernisation and has the benefit of vacant possession and local authority parking permits. The basement is given over to plant rooms and stores and has excellent ceiling height. The 8-person lift opens directly into each floor via locked-off doors.

The 7th & 8th floors comprise a stunning duplex penthouse set back behind a panoramic balcony on three sides which was historically sold off on a long lease. The roof level of flat-top mansard design contains further plant and telecommunication masts providing the additional income and the opportunity for increased massing, subject to planning.

Principally the building is constructed of cavity brick / block elevations with regularly spaced, double-glazed casement windows and full-height display windows at ground floor. The structure incorporates a concrete service core and concrete floor slabs. Two separate staircases are incorporated within a single stairwell providing each floor with separate access escape routes.

The accommodation which needs updating currently provides the following typical specification;

> Suspended mineral tile ceilings with inset fluorescent lights and spot lights.

> Approx. 2.7m floor to ceiling height.

> Ducted fresh-air circulation system via ceiling grilles.

> Perimeter air-conditioning /central heating units (not ground floor) with gas boiler in the basement.

> Double glazed casement windows

> 8-person, 600 kg passenger lift to all floors except the basement.

6 TENANCY SCHEDULE

Area Lease Start Lease Passing Rent Floor Tenant Breaks Comments NIA/NSA (Review) Expiry (£ PSF)

Grd The Embassy of G: 1,063 sq ft 08/9/2015 07/9/2020 Rolling £100,000 Outside L&T Act / 1 s t Romania in the 1st: 1,643 sq ft mutual (£36.95 psf) Rent deposit: £50,000 United Kingdom break Rent payable annually in clause on advance 6 months’ notice.

2nd Brompton Cross 1,644 sq ft - - - £48,000 Lease expired . Construction Limited (£27.37 psf) Occupied on Tenancy at Mohammed Chbib Will and Urbanauts Consultancy Limited

3rd Pentafour Software 1,652 sq ft 02/11/2016 31/12/2020 Tenant £60,000 L&T Act may apply (UK) Ltd assigned break (£36.32 psf) Rent Deposit: £24,875 Rent to The Republic of option on payment quarterly in Paraguay 2/11/19 on advance. 6 months’ notice

4th Vacant Possession 1,652 sq ft - - - - Vacant Possession

5th The Embassy of 1,663 sq ft 8/9/2015 07/9/2020 Rolling £45,000 Outside L&T Act Romania in the mutual (£27. 06 psf) Rent deposit: £25,000 United Kingdom break Rent payable annually clause on in advance 6 months’ notice.

6th Vacant Possession 1,721 sq ft - - - - Benefits from C3 consent

7th / 8th Minoo Mehrjerdi & 2,725 sq ft 20/11/2015 24/3/2191 - Peppercorn Includes internal ground Plus Mehrdad Mehrjerdi NSA floor garage. Service charge Garage 7.5% of total costs.

Roof Telefonica O2 UK 24/5/2010 23/5/2020 £20,000 Schedule 1 of the Digital Limited Economy Act 2017 applies.

Car Brompton Cross 1 space - - - £2,000 Periodic tenancy let Parking Construction with 2nd floor

Basement Vacant Possession 640 sq ft - - - - - Store

Totals 11,678sq ft £275,000 14,403 sq ft inc. duplex

7 PLANNING Following positive pre-application planning advice from by the Royal Borough of CONSENT Kensington & Chelsea, full planning permission was granted by the local authority on 6th July 2018 for the following scheme (PP/18/02330 /Q18), which allows for;

Use of ground floor as either retail (Class A1) and / or financial and professional services (Class A2); first floor as offices (Class B1) and third, fourth and fifth floors as residential flats (Class C3).

The building is not listed nor within a conservation area. The table below highlights the existing and consented uses available.

STACKING FLOOR EXISTING BUILDING PLANNING CONSENT PLAN Roof Plant & airspace Plant & airspace

7th/8th Duplex apartment sold off Duplex apartment sold off

6th C3 Residential C3 Residential

5th Embassy / sui generis C3 Residential

4th B1 Office C3 Residential

3rd Embassy / sui generis C3 Residential

2nd B1 Office B1 Office

1st Embassy / sui generis B1 Office

Ground Embassy / sui generis A1/A2 Retail

Basement Ancillary, storage & plant Ancillary, storage & plant

Car Park 3-5 Spaces 3-5 Spaces

Garage Sold off Sold off

8 THE OPPORTUNITY

The valuable entire 6th floor residential floor is unmodernised and vacant. The remaining occupational tenancies (B1/embassy use) expire within 12 to 18 months and therefore provide full vacant possession in the short term and the car park could be converted to a mews scheme, subject to an enhanced planning consent.

Given its multi-let, mixed use profile in a prime central London location which is undergoing widespread regeneration, positioned on the corner of High Street Kensington (famously providing prime retail, restaurants, residential and hotel uses) and Addison Road (a super prime residential street) together with the benefit of rare, private gated parking – the property will therefore appeal to a range of purchasers:

> FAMILY OFFICE or long-term hold investors looking for a core London holding which provides a steady yield derived from sovereign income and the opportunity to drive rents through light refurbishment or re-gearing the existing leases.

> OWNER-OCCUPIERS seeking a well-connected, central London headquarters which provides 16,563 sq ft GIA of sui generis / B1 office space, including a 1,721 sq ft “director’s flat” and private gated parking and basement storage.

> RESIDENTIAL DEVELOPERS or property companies looking to update the branding, specification and use of the building; build out the consent and potentially increase the massing in the car park and roof areas and ultimately drive both rental and capital value.

> RETAILERS looking to owner-occupy a highly visible showroom, offering customer parking; together with an income-producing investment upstairs or apartment sales.

> SERVICED OFFICE providers looking to capitalise on a highly visible, prominent corner office with the benefit of parking in the Royal Borough of Kensington & Chelsea which lacks quality, easily accessible offices but is home to a large and highly affluent residential population.

> A VARIETY OF DIPLOMATIC USES including embassy, consulate, cultural, or visa / tourist centre.

9 DEVELOPMENT POTENTIAL

Between the existing and consented scheme, the property provides for a variety of uses: office, embassy, residential, retail, parking, storage and telecommunications.

COMMERCIAL-LED REFURBISHMENT There is an opportunity to take back all floors in the short term, negotiate dilapidations and undertake a light-touch refurbishment to the office/embassy areas which, in our opinion, would drive the rental income to approximately £600,000 per annum based off rents of £50 per sq ft. A refurbishment of the large residential 6th floor flat, possibly splitting into two units, would create a valuable rental investment or the floor could simply be sold off on a long lease, capitalising on penthouse sales values which can exceed £2,000 per sq ft or conversion to B1 office use, subject to planning.

RESIDENTIAL-LED REFURBISHMENT

In addition to the existing apartment over the entire 6th floor, the recently secured valuable planning permission allows for a further seven residential units (five x 2-bed and two x 1-bed flats) over third, fourth and fifth floors delivering a total of 8 – 9 flats depending whether or not the 6th floor is split. Two levels of offices are consented over 1st and 2nd floors and a brand-new A1/A2 retail unit at ground floor.

TYPICAL UPPER FLOOR CONSENTED BEDROOM 13.5 sqm FLAT LAYOUT BEDROOM 10.5 sqm

BEDROOM 9.0 sqm UNIT 1 (mist system required) 1bed (1p)/ 39 sqm

storage storage bathroom

UNIT 2 (mist system required) UNIT 3 OPEN 1bed (1p)/ 39 sqm 2bed (3p)/ 61.5 sqm PLAN LIVING BEDROOM 21 sqm OPEN 11.5 sqm PLAN LIVING OPEN PLAN LIVING 21.5 sqm 24 sqm 10 INDICATIVE GROUND FLOOR PLAN ON CAR PARK

Patio 10 sm

Open plan living 31.5 sm

UPPER FLOORS NOT SHOWN

ENHANCED Although the 7th/8th floor residential duplex apartment with a small PLANNING & basement store was sold off on a long lease (expiring March 2191) soon POTENTIAL after construction in the late 1970s, together with an internal garage which is accessed from the car park, the freeholder benefits from the SITE ASSEMBLY roof and air space and income from telecommunications masts. Subject to planning, a further floor could be added and a 2-storey mews built on the the car park.

Through separate negotiation, if the unused garage is bought back in from the duplex owner, the ground floor retail area could be extended and a larger mews scheme covering the entire car park could be constructed.

11 MARKET COMMENTARY

The average yield paid for the most recent basket of 13 deals on Kensington High Street since January 2014 has been 4.3% NIY (or 3.9% across 8 deals since 2015).

COMMERCIAL RBKC is starved of quality office accommodation across the borough where prime office rents reach £70 per sq ft. In our opinion, following a basic strip-out and light refurbishment of the property, the office ERVs can be driven to £50 per sq ft and a conversion, subject to planning, of the 6th floor flat to B1 office use, totalling approximately £600,000 per annum with minimal marketing void and rent free given away. A wholesale Grade-A office redevelopment and rebranding of the building might generate £60+ per sq ft and considerably more for a fully-managed serviced office operation with inclusive rents and services.

RESIDENTIAL Kensington is a globally-renowned prime central residential London location. We expect that peak capital values of £1,650 per sq ft can be achieved in the building following a comprehensive redevelopment. New-build flats in developments nearby and the tone of prime residential within the Borough often command sales capital values of £2,000 - £3,000 per sq ft.

12 EXISTING FLOOR PLANS

GROUND FLOOR

BASEMENT 1ST FLOOR

4TH FLOOR (TYPICAL UPPER) FLOOR NET INTERNAL GROSS INTERNAL

7th/8th 2,725 sq ft (253.2 sq m) (Sold Off)

6th 1,721 sq ft (159.9 sq m) 2,051 sq ft (190.5 sq m)

5th 1,663 sq ft (154.6 sq m) 2,088 sq ft (194.0 sq m)

4th 1,652 sq ft (153.5 sq m) 2,090 sq ft (194.2 sq m)

3rd 1,652 sq ft (153.5 sq m) 2,085 sq ft (193.7 sq m)

2nd 1,644 sq ft (152.8 sq m) 2,077 sq ft (193.0 sq m)

6TH FLOOR (RESIDENTIAL) 1st 1,643 sq ft (152.7 sq m) 2,084 sq ft (193.6 sq m)

Ground 1,063 sq ft (98.8 sq m) 2,028 sq ft (188.4 sq m)

Basement 640 sq ft (59.5 sq m) 2,060 sq ft (191.4 sq m)

Potential Mews Car Park 3-5 Spaces Development

TOTAL 11,678 sq ft (1,084.9 sq m) 16,563 sq ft (1,538.8 sq m)

13 LOCAL DEVELOPMENT ACTIVITY

THE KENSINGTON OLYMPIA LONDON COLLECTION

The 130-year-old exhibitions and events venue St Edwards are developing a three-phase masterplan located a few minutes’ walk from the property which will deliver 1,000 new homes, a primary school currently hosts 200 events with 1.2m visitors annually. and over a hectare of landscaped open space The owners have recently announced plans for a including a new retail and leisure pitch. £700m investment in the site where the capital The first phases 375 Kensington High Street and injection will look to enhance the available exhibition Kensington Row were completed in 2014 with Royal space at the venue by investing in facilities as well Warwick Square due to follow in 2022. as creating 70,000 sq ft of brand new co-working spaces and 600,000 sq ft of creative offices and studios. The owners aim to make the space “a year-round destination in its own right” with restaurants, hotels and cinemas all added to the site creating a culture, media and technology hub a stone’s throw from the property.

14 EARLS COURT THE KENSINGTON

The Earls Court Masterplan is based on the creation The Kensington scheme was recently purchased by of ‘Four Urban Villages and a High Street’ over 77 Lodha from Delancey who will significantly redevelop acres, a concept devised by renowned architect Sir a former Odeon cinema, Post Office sorting house Terry Farrell. The Earls Court Partnership being and office building on Kensington High Street. driven by CapCo together with TfL, London Borough The redevelopment was granted planning permission of Hammersmith & Fulham and RBKC, will be in February 2016. The scheme will bring significant delivering a new world-class residential district in benefits for the community to enjoy, including two prime central London together with 7.5 acres of new state-of-the- art cinemas, a bar, new retail green space including the Lost River Park lined with space and modern offices. The consent will also restaurants and cafés and a new High Street that will deliver 35 luxury private apartments and 20 connect North End Road in the west to Warwick Road high-quality on-site affordable homes. in the east. The first phase of the Masterplan started in early 2015 and will offer the best of London - luxury retail, dining in the park, culture, leisure and services. The regeneration will provide 7,500 new homes including 1,500 affordable units, 10,000 jobs and £8 million worth of employment and skills training.

15 INVESTMENT & T HE DEVELOPMENT RATIONALE P R OP OS AL

The building will appeal to owner occupiers, investors The vendor is seeking offers in excess of £9,750,000 and developers, both commercial and residential. (Nine Million Seven Hundred & Fifty Thousand Pounds) excluding VAT and subject to contract, equating to Asset management initiatives include; £588 per sq ft GIA (excluding surface car park), for the Freehold interest. > A refurbishment of the B1 office space, increasing the rents to circa £50+ per sq ft, driving the total By separate negotiation it may be possible to acquire ERV beyond c. £600,000 per annum. the UK SPV holding structure which provides the opportunity to save SDLT. > Executing the consent and converting the majority to residential targeting capital values of £1,650 per A commercial-led refurbishment would reflect a sq ft. reversionary yield of 5.77% or an improved GDV can be achieved by carrying out the residential-led planning > There is an opportunity to seek approval for an consent. Subject to planning, there is further enhanced development, increasing the massing by development potential over the car park. constructing a separate two-storey mews on the surface car park to the rear, subject to planning Access to the data room is available upon request. consent. V AT & S T RU CTUR E

> Acquire long leasehold interest of the 7th & 8th floor The property has been elected for VAT and the sale is residential flat along with ground floor garage expected to be effected by way of a transfer of 100% increasing the ground floor retail and allowing for a of the shares of the clean, single-asset UK SPV. larger mews scheme. V I E WING S

Strictly by appointment through X Real Estate.

CONTACT

For more information please contact either:

Will Collis E: [email protected] T: +44 (0) 20 3934 9755 M: +44 (0) 7912 603 525

Nigel Thompson E: [email protected] T: +44 (0) 20 3934 9754 M: +44 (0) 7971 006 880

X Real Estate 25 Hill Street, KENSINGTON HIGH London, W1J 5LW T: +44 (0) 20 3934 9740 STREET XREALESTATE.CO.UK

SUBJECT TO CONTRACT; MISREPRESENTATION ACT 1967: DISCLAIMER – X Real Estate Limited (10971969) trading as X Real Estate (“XRE”) give notice that:- (i) the particulars are set out as a general outline only for the guidance of intending purchasers and do not constitute, nor constitute part of, an offer or contract; (ii) all descriptions, dimensions, references to conditions and necessary permissions for use and occupation, and other details are given in good faith and are believed to be correct but any intending purchaser should not rely upon them a statement or representations of fact but should satisfy themselves by inspection or otherwise as to the correctness of each of them; (iii) no person in the employment of XRE has any authority to make or give any representation or warranty whatever in relation to this property. (iv) unless otherwise stated all rents or prices quoted are exclusive of VAT which may be payable in addition. (v) XRE has not made any investigations or otherwise of any issues concerning pollution and potential land, building, air or water contamination. Prospective purchasers must undertake their own enquiries and satisfy themselves in this regard. Date: June 2019.