Cambridge | Exciting Shopping Centre Investment Opportunity

CAMBRIDGE | EXCITING SHOPPING CENTRE INVESTMENT OPPORTUNITY

INVESTMENT CONSIDERATIONS

• Cambridge is considered one of the most desirable cities in the UK within which to own commercial property investments.

• The city’s core strengths: its large, affluent and rapidly expanding catchment, its world renowned university and its huge tourist industry make Cambridge one of the strongest regional economies in the UK.

• The city is considered Britain’s pre-eminent research and development centre and has an established reputation as one of the world’s leading high technology business clusters.

• Over 17 million tourists visit the city every year, boosting the already affluent and rapidly growing catchment population.

• Each of these strengths combine to give Cambridge one of the highest employment rates in the UK and the city continues to deliver exceptional growth across all of the property sectors.

• The Grafton Centre is a key retailing location in its own right, conveniently situated on the east side of the city centre.

• The Centre is located in an area known as The Kite, a key area designated for further retail development within the local plan.

• The Centre comprises nearly 500,000 sq ft of retailing accommodation in 84 units with 1,150 car parking spaces.

• Anchored by Debenhams, the centre houses key retailers such as Next, H&M, TopShop and New Look in addition to an 8 screen Vue cinema.

• The centre benefits from an existing planning consent for a substantial refurbishment and re-modelling project. A purchaser will have the opportunity to initiate exciting plans to re-invigorate Grafton to once again become the favoured shopping destination for the wealthy local population.

• The property currently produces a total gross passing rent of £7,002,463 per annum with a net passing rent of £6,137,760 per annum. 92% of income is secured against national multiple retailers with 76% of the income expiring in excess of 5 years. The Weighted Average Unexpired Lease Term until lease expiry is just over nine years (or to six years excluding the anchor tenants).

• We are instructed to seek offers in the region of £92,500,000, which adopting our opinion of ERV and taking purchaser’s costs at 5.80% reflects the following approximate yield profile:

Net initial yield: 6.25 % Nominal equivalent yield: 7.30% True equivalent yield: 7.64%

CAMBRIDGE | EXCITING SHOPPING CENTRE INVESTMENT OPPORTUNITY LOCATION

The world famous city of Cambridge is rich in history and EDINBURGH boasts one of the most vibrant economies in the UK. The city is renowned for having one of the world’s leading institutions NEWCASTLE UPON TYNE for education. The city is also Britain’s pre-eminent research and development centre and is widely recognised as one of the world’s leading high technology business clusters.

The dynamic and charismatic city of Cambridge is the administrative centre for the county and is located approximately MANCHESTER 65 miles north of London, 58 miles south west of Norwich and 43 miles south east of Peterborough. PETERBOROUGH NORWICH BIRMINGHAM CAMBRIDGE

CARDIFF LONDON

CATCHMENT AND DEMOGRAPHICS

Cambridge has a large, loyal and affluent primary catchment population of 557,000 people, ranking it 28th of the 200 Promis retail centres in the UK. Between 2001 and 2011 Cambridge was ranked the 4th fastest growing city in the UK and it is expected to see population growth significantly above the national average over the next few years.

This population growth will be supported by the East of England’s plan, which requires a further 14,700 new houses to be built in Cambridge by 2021. There is currently exceptionally strong demand for housing in the city. The 2015 Centre for Cities report states that Cambridge is one of only 3 UK Cities where house price growth between 2013 and 2014 increased by in excess of 10%.

Cambridge Acorn Profile

25% Wealthy Achievers Urban Prosperity Comfortably Off Moderate Means Hard-Pressed

20%

15%

10%

5% The Cambridge catchment population is one of the most affluent in the country, ranked 16th of the 200 Promis centres on this measure. CACI data shows that the Cambridge shoppers 0% are overrepresented in the following social categories: wealthy executives, flourishing families, prosperous professionals and secure families. In 2014 Cambridge had the 10th

Starting Out highest earnings of all UK cities (Centre for Cities, Cities Outlook, 2015). Affluent Greys Aspiring Singles Secure Families Settled Suburbia Blue Collar Roots Burdened Singles Wealthy Executives Flourishing Families Educated Urbanites Prudent PensionersAsian Communities Struggling Families High Rise HardshipInner City Adversity Post Industrial Families Prosperous Professionals

Cambridge East of England UK

Cambridge contains a particularly high proportion of young adults aged 15-24. The high proportion of young adults reflects the large student population with around 15,500 full time students at the University of Cambridge. Incorporating students from the Anglia Ruskin University and many independent learning institutions, the student population would account for 27% of the total population of Cambridge. Students are of a significant benefit to Cambridge’s economy as they have significant spending power and they benefit Cambridge has a large, loyal and from more leisure time and money than any other sector in the youth market. affluent primary catchment population... LOCAL ECONOMY

Over the last 30 years the Cambridge economy has experienced dramatic growth. It is at the heart of one of the most dynamic sub regions within the UK and is widely recognised as a leading location in the world for research and development (R&D). The 2014 Centre for Cities Report states that Cambridge saw the largest increase in jobs between 2004 and 2013. This is often attributed to the presence of the University of Cambridge, which ranked 2nd internationally in the 2012 QS World University Rankings behind only Massachusetts Institute of Technology and ahead of Harvard University and University College London.

Cambridge is situated within a government identified area for sustainable economic growth and is the fastest growing region in the UK outside of London as a result of the world-leading high technology business cluster and business opportunities from the University’s transfer of technology. Major employers in the R&D sector include ARM Holdings, which employ over 1,700 people, and Cambridge Antibody Technology, which employs around 570 people. The main activity focuses on the Cambridge Science Park, located two miles north of the city centre, where there are around 90 companies employing over 5,000 people. Astra Zeneca have announced that it will be moving its global headquarters to Cambridge in a new £330 million facility creating 2,000 new jobs.

Cambridge is also home to a number of high profile medical research institutes, including Cancer Research UK, The Wellcome Trust Sanger Institute with over 800 staff and the Babraham Institute which employs over 300 staff, all taking advantage of the research expertise available in the city.

In addition to R&D there is a high proportion of people employed within the finance and business services sector, which is partly due to a large number of firms providing professional expertise or technical support to the many start-up companies that characterise Cambridge’s economy. Major employers include Deloitte, PwC, Grant Thornton, Brossard De Bayle and Throgmorton Private Capital.

The University of Cambridge has been established for over 800 years and is the city’s single largest employer. There are 32 Colleges and over 150 departments incorporated within the University campus. The University, Colleges, Cambridge University Press and Cambridge Assessment collectively employ over 11,700 people directly and indirectly support more than 77,000 jobs in the region. Cambridge University is very well funded and the generosity of benefactors has enabled the University to create a new science and technology campus to the west of the city centre. The University is now looking to expand to the north west of Cambridge. The city has a number of other higher education establishments and several hospitals, including Cambridge University Hospitals, which employs over 7,000 people.

...at the heart of one of the most dynamic sub regions within the UK

Cambridge’s economy benefits from having an innovative workforce. In the UK, the city has more patents per 100,000 residents approved (94.5%) than the next ten most innovative cities combined, including Edinburgh, Oxford, Aberdeen and Milton Keynes (Centre for Cities, Cities Outlook, 2015).

The Cambridge economy is boosted further by a huge tourist industry. It is estimated that approximately 17.2 million people visit the city each year generating £1.594 billion for the local economy. The tourist sector is also a major employer with over 6,500 jobs sustained by tourism in Cambridge and the surrounding area.

With a strong local economy and employment base, the recession has had less of an impact on employment levels within Cambridge than across the UK generally and consequently unemployment in Cambridge is significantly below average. Cambridge experienced the second highest employment rate in the whole of the UK between July 2013 and June 2014 and had the lowest JSA claimant count at 0.7% compared to the UK average of 3.8% (Centre for Cities Report 2015).

The buoyant economy will continue to grow, enhanced by three key developments within Cambridge. To the south of Cambridge, close to Addenbrookes Hospital, an additional 4,000 new homes have planning permission. To the north west of Cambridge, towards Madingley, around 83 hectares of land owned by the University of Cambridge is being developed to provide 3,000 new homes and other key services such as a library and a medical centre. To the north east of Cambridge, in Chesterton, there is to be significant development of office space, light industrial units and a new £26m railway station. This station will be on the main line between Cambridge and Ely and will benefit from direct trains running to London Kings Cross and London Liverpool Street, Norwich and King’s Lynn. It is anticipated that the station could be delivered by 2015 and that after three years of being operational it will be used by circa 800,000 people.

...circa 17.2m people visit the city each year generating £1.594 billion for the local economy A9

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A9 A835 Fraserburgh

(A92) Elgin A98 A90

BENBECULA A87 A9 (A856) A96 A941 INVERNESS

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A9 A82 A95 A96

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A9 Aberdeen BARRA A87 A93 A93

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A90 Arbroath A92

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A338 Gosport A30 Seaford Eastbourne A348 Lymington PortsmouthStation is currentlyBognor in the process of being redeveloped to enable it to cope with its 10 million visitors A31 Regis Exeter A35 Bridport A35 New Milton Cowes Ryde Dorchester Poole Christchurch Bournemouth Newport per year. The new mixed use development will provide an improved transport interchange for the city. A395 A30 Sidmouth A376 Sandown

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RETAILING IN CAMBRIDGE

Cambridge is one of the leading retail destinations in the UK with the city’s vibrant economy supporting a diverse, thriving retail offer. The city provides approximately 1.49 million sq ft of retail floor space, of which 39% of this is managed floor space. Cambridge’s total in-store comparison retail expenditure stood at £1.45bn in 2014 ranking it 24th in the UK. A high proportion of spend is retained in Cambridge since it is some distance from major competition and these centres provide a weaker retailing provision.

The historic retail core of Cambridge is centred on Petty Cury, Market Hill and Market Street, with Trinity Street to the west and St Andrews Street and Sidney Street to the east. These streets form the natural prime shopper circuit and have an exceptionally high level of footfall.

Rents in Cambridge have grown, on average, by 5% year on year since 1987 (Source PMA). Cambridge’s historic core has a strong fashion offer with a particularly high number of the upper end fashion retailers including Reiss, Jigsaw, Jaeger, Joules, French Connection and Jack Wills. However, the colleges, churches and other historic buildings dominate the city centre and large, modern shop units are not easily accommodated within this environment. MIDSUMMER COMMON SIDNEY STREET E AN L O A D R K E T R JES E W M A JESUS US L N ANE T AY E S E W E M A I D S C A U R

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CAMBRIDGE UNIVERSITY

There are three shopping centres in Cambridge: The Grafton, positioned at the start of the short walk across Christ’s Pieces Grand Arcade and Lion Yard. The Grand Arcade opened in 2008 to The Grafton. Fitzroy Street leads directly from Christ’s Pieces and links into the Lion Yard, Petty Cury and Sidney Street. The to the main entrance to The Grafton on the corner of Burleigh Grand Arcade provides a high end, premium retail offer and is Street and Fitzroy Street. This whole area benefited from the anchored by a John Lewis department store. Other key retailers opening of Primark on Burleigh Street in 2009, which dramatically include Russell and Bromley, Gant, Links of London, Ted Baker increased the foot flow. Fitzroy Street has further benefited from and Hollister. Target tenants for the scheme are high end the opening of a new format Waitrose convenience store. retailers, predominantly international retailers who are looking to diversify outside of London. Lion Yard is connected to The The Grafton is anchored by Debenhams and BHS and is Grand Arcade, essentially forming a single shopping centre. It is primarily focused on main stream high street retailers and young anchored by New Look on the first floor of the scheme and other fashion. The centre also benefits from an 8 screen multiplex retailers include Superdry and Sportsdirect. Vue cinema and a food court, as well as offering significant parking. Being located on the edge of the traditional city centre, Christ’s Lane, which was developed in 2007, further enhances this area benefits from fewer historic buildings restrictions and the retail offer in Cambridge with tenants including Zara, H&M importantly is much less congested. and the recently opened Metro Bank. This development is RETAIL PARKS RETAILING COMPETITION

There are two significant retail parks in Cambridge. Cambridge Retail Park, to the east of the city There is very little leakage of spending from the Cambridge catchment due to the distance to centre provides the main out of town provision with retailers including Boots, Burton/Dorothy Perkins competing towns, their generally weaker retailing provision and the loyal and affluent catchment. and Argos. Adjacent to Cambridge Retail Park there is a small cluster of retail warehouses with The main competitor is Peterborough, which is around a 50 minute drive to the north west and has tenants including B&Q, Staples and DFS. a significantly lower representation of multiples and lacks the range of up-market and speciality retailers that are present in Cambridge. To the south, Luton is 38 miles away and to the west, Further along Newmarket Road is the Beehive Centre, which was built in the 1980s. The park is Northampton is 60 miles and to the east, Ipswich is 54 miles. All of these locations offer an inferior anchored by Asda, alongside Hobbycraft, Maplin, TK Maxx, HomeSense and Next Home. retail provision to Cambridge.

Cambridge Leisure Park is the only leisure park in Cambridge and is located on the south eastern edge of the city centre. The park is anchored by Cineworld, LA Fitness and Tenpin alongside a number of A3 operators including Nando’s and Frankie & Benny’s. There is also a Travelodge and Tesco Express.

Cambridge sees very little leakage of spending from its catchment

THE GRAFTON

The property is located to the south east of the historic core, on the corner of Burleigh Street and Fitzroy Street in the heart of an area known locally as The Kite. The Kite area was originally identified in 1959 by The University of Cambridge as being the ideal location for a regional shopping centre as it was easily accessible from the Cambridge ring road and its location outside the city centre would ease the pressure on Cambridge’s historic core.

The property provides just under 500,000 sq ft of retail and leisure space. The centre, together with Fitzroy and Burleigh Street, create their own retail pitch, which is conveniently accessed via car or public transport and benefits from the presence of Primark. The Centre further benefits from its proximity to Anglia Ruskin University, which has recently benefited from a £35 million refurbishment which has now been completed and has re-opened in September 2011.

The Grafton Centre, together with Fitzroy and Burleigh Street consists of just under 500,000 sq ft of retail and leisure space across 84 units The centre was originally built in 1983 but was refurbished and extended in both 1995 and 2004. The covered centre is principally arranged over one floor with a food court positioned at first floor. There is one main mall running in a west to east direction. There is also a small horse-shoe shaped mall at the west end of the scheme, known as Eden Hall, which houses a number of specialist retailers.

The centre is anchored by Debenhams located near the centre of the scheme and BHS located at the eastern end. Other major retailers include Next, H&M, New Look, Boots and Topshop. There is also an 8 screen multiplex Vue cinema, which was developed as part of the extension in 1995, and a food court on the first floor, with retailers including Bella Italia, Café Lavazza and Burger King.

The main entrance to the scheme is from Fitzroy Street, which is a busy pedestrianised street that provides the main thoroughfare between the city centre retail area and The Grafton. There are also additional entrances from Burleigh Street (opposite Primark), Napier Street, Wellington Street and East Road.

...anchored by Debenhams and BHS, with other key retailers including Next, H&M, New Look and Topshop

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The retail units on the north side of Fitzroy Street are included in the vendor’s ownership. This well-used thoroughfare benefits from strong pedestrian footfall and key tenants in the street include a Little Waitrose, Patisserie Valerie, HMV and Caffé Nero. RESIDENTIAL

The Grafton was built nestled into a residential area of Cambridge. It is therefore not surprising that some of the space within the scheme and above the retail units is used for residential accommodation. There are thirteen flats located above the retail units on Fitzroy Street. In addition there are four flats that sit above the Eden Hall and are accessed from Burleigh Street. These residential units are let on long leases and are effectively privately owned. Finally, above the retail units to the north of The Grafton there are twenty two flats, accessed from Christchurch Street, which are leased and run by King Street Housing Society Limited.

CAR PARK

The centre benefits from two large car parks that are managed and operated by Cambridge City Council and provide approximately 1,150 car parking spaces. Grafton East multi-storey car park provides 870 spaces and is accessed off East Road whilst Grafton West, which is situated off Fitzroy Street, has two levels of parking providing 280 spaces.

The two car parks (Grafton East and Grafton West) are let on a long leasehold to Cambridge City Council expiring in 2107 on a peppercorn rent. The City Council manage and run the car parks.

Current car parking charges in both car parks are as follows:

Length of Stay Monday to Friday Saturday 8am to 5pm 9am to 5pm Up to 1 hour £2.00 £2.20 Up to 2 hours £3.60 £4.30 Up to 3 hours £5.50 £6.10 Up to 4 hours £9.10 £10.40 Up to 5 hours £16.50 £17.50 Over 5 hours £24.00 £24.00 Evenings and overnight £0.80 per hour £0.80 per hour Season tickets Emissions based

The centre is also easily accessible by public transport. The bus interchange, which is located immediately outside the East Road entrance to the scheme, was extensively upgraded in 2000 and is serviced by four of Cambridge’s five park and ride services with buses every 10 minutes. This bus interchange helps to contribute to The Grafton’s meaningful footfall. FOOTFALL

The annual footfall for the centre in 2014 was 9,381,274, equating to an average weekly count of 180,409. 40% of the footfall enters the scheme from Fitzroy Street, 16% from Burleigh Street and 15% from the car park escalators. C E K 1 g N 2a ta 1 O GA ot 5 1 I C U N

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This plan is published for convenience of identification. 31-39 Fitzroy Street Any site boundaries shown are indicative only and should be checked against Title Deeds.

ES753998 Is held on a 99 year leasehold interest from Jesus College expiring on 28/09/2058 at a peppercorn rent. TENANCIES Income by Covenant Type Income Expiry Profile

The centre is let to 58 retailers and there are an additional thirteen 6% 2% retailers on Fitzroy Street. The income from these retailers together 16% 23% with the commercialisation revenue produces a current gross income 0-5 years of £7,002,463 per annum. After the deduction of the PAL payment, National landlord’s shortfalls and landlord’s contribution to marketing the current 5-10 years net income is £6,137,760 per annum. Regional

New lettings have recently taken place to H&M, Topshop, Deichmann and Local 10-15 years Patisserie Valerie. 92% 60% The WAULT to lease expiry is just over 9 years (or to 6 years excluding the long leases to the anchor tenants). Income Expiry Profile (to breaks) Currently 92% of the retail income is secured against national multiples, with a further 8% secured against regional and local retailers. 76% of the income is secured for in excess of 5 years. The graphs opposite show 16% the income profile and the income profile to lease expiry. 0-5 years

55% 5-10 years 29% 10-15 years

New lettings to H&M, Topshop, Deichmann and Patisserie Valerie have notably improved the centre SERVICE CHARGE

The service charge year runs from 1 January to 31 December and the budget for 2015 is £2,666,757. The service charge is calculated on a weighted floor area basis. On an unweighted basis this equates to approximately £6.54 psf. CENTRE MANAGEMENT

The centre management offices are located on the 2nd floor above New Look. ASSET MANAGEMENT

The present owners have considered a number of options to both reconfigure parts of the Centre and to refurbish the Mall. Planning consent for a refurbishment scheme was granted in 2009, though not implemented at the time due to the financial downturn. That consent was renewed in 2012.

Whilst the principle of refurbishment has not proven contentious with the local planning authority, the owners intend to undertake some of the consented works in order that the granted consent should be deemed implemented in planning terms. No planning obligations will pass to any purchaser to complete the originally consented scheme, thus allowing a purchaser freedom to identify their own preferred improvement works, and to seek any necessary new statutory consents for such, with the benefit of the previous consent in place and deemed to have been implemented. Proposed Proposed Create new centre entrance and reconfigure Eden Hall Mall refurbishment opportunity We believe there is enormous potential to improve the whole Centre by replacing and re-modelling the main Grafton entrance from Fitzroy Street. Our client’s previously consented scheme envisaged Our client’s planning consent identified potential for a number of other works which could be carried the installation of a new modern glazed entrance to improve the appeal of the centre, the lighting out to update The Grafton. Raised ceilings could improve the current retailers’ fascias, enabling them within the scheme and to provide a more contemporary and elegant environment. to have full height glazing and consequently improving the sight lines within the scheme. Our clients have considered a number of options ranging from relatively low cost ‘cosmetic’ works in various There is also potential to provide a much higher roof to the mall area, which could dramatically targeted areas of the malls, through to more ambitious comprehensive schemes which, given the enhance the entrance area and the Eden Hall space, which could at the same time be reconfigured to scale of the Centre and Cambridge’s growth potential, we feel could be warranted. provide better configured larger units.

The higher ceilings would also provide the opportunity to create a food court to create a casual Possible Centre extension dining area out of the current Eden Hall. It should be highlighted that Cambridge City Council appear to have an emerging planning policy which favours significant retail expansion in the ‘Kite’ area of Cambridge, in which the Grafton sits. This might offer scope to expand the Centre towards or even onto Burleigh Street and/or the current bus drop off points and site of Abbey Gate House. The West car park could also offer potential in agreement with the Council. Further residential development on the site could also be considered, subject to planning.

Food Court

The planning permission grants approval for improvements to the entrance from the bus station at the rear of Grafton, including the installation of a new lift up to the cinema and food court at first floor level. Re-configuring the food court and further enhancing the leisure provision in The Grafton by attracting the likes of Wagamama and Nando’s would materially improve the destination as a whole.

Existing Proposed Improving sight lines within the scheme Let the vacant space

It may be feasible to enter into negotiations with Debenhams to take back some of the space at Building on the success of the re-anchoring of the scheme with the letting to H&M and Topshop at the front of their unit, in exchange for giving them unit 35 to trade from which would significantly the rear, there is a renewed focus on letting the rest of the vacant space. There are currently 6 vacant improve the sightlines within the schemes. This would also improve the foot flow throughout units. Target tenants for these units include: Ann Summers, Boux Avenue, Warren James, Body the mall. Shop, Footlocker, Tiger, Toni & Guy, Clas Ohlson, Uniqlo, Decathlon and Peacocks.

Extension to 31/33 Fitzroy Street Potential to enhance commercialisation and ancillary income

The Entertainer is interested in taking occupation of 31-33 Fitzroy Street. The specification of this unit The opportunity exists to intensify and increase the comparatively modest levels of could involve extending this unit to the rear. The plans are currently with the tenant to review ahead commercialisation within the scheme. This will be particularly relevant in Central Hall and Great Hall. of a planning application being submitted.

Footlights Restaurant

There is currently a vacant restaurant at the entrance to the scheme which is just under 4,000 sq ft of retail or leisure space. The opportunity exists to attract a new operator to this key area, enhancing the scheme’s overall leisure offer. This unit will benefit from the landlord’s works to implement the planning permission.

...opportunities to add value and drive growth in The Grafton through executing the exciting asset management initiatives ENERGY PERFORMANCE CERTIFICATES PROPOSAL

EPCs are available on request. We are instructed to seek offers in excess of £92,500,000, subject to contract for our clients freehold and long leasehold interests.

Adopting our opinion of rental value and taking purchaser’s costs at 5.80%, this reflects the following WEBSITE approximate yield profile: Net initial yield: 6.25% Further information can be found on our website at www.graftoncentre-investment.co.uk Nominal equivalent yield: 7.30% True equivalent yield: 7.64%

FURTHER INFORMATION

For further information please contact:

Charlie Barke T: +44 (0) 20 7152 5027 E: [email protected]

Imogen Bryan T: +44 (0) 20 7152 5864 E: [email protected]

Dominic Hoole T: + 44 (0) 20 7152 5707 E: [email protected]

Misrepresentations Act 1967 and Property Misdescriptions Act 1991 Cushman & Wakefield, their clients and any joint agents give notice that: (i) These particulars do not form part of any offer or contract and must not be relied upon as statements or representations of fact. (ii) No person in the employment of the agents(s) has any authority to make or give representation or warranty whatever in relation to this property. (iii) Floor areas, measurements or distances given are approximate. Unless otherwise stated, any rents, or outgoings quoted are exclusive of VAT. (iv) Any descriptions given of the property cannot be taken to imply, it is in good repair, has all necessary consents, is free of contamination, or that services and facilities are in working order. Interested parties are advised to carry out their own investigations as required. March 2015. Designed by Creativeworld: 01282 858200.