Prime Retail Investment Opportunity THE FIRST PURPOSE BUILT NEXT FASHION, HOME & GARDEN STORE NEXT GROUP PLC CHARLES WATTS WAY SO30 4RT

enter uuu Prime Retail Investment Opportunity NEXT GROUP PLC t previous next u

Investment Summary

• A “Trophy” Retail Superstore opportunity located in Hedge End, Southampton.

• An affluent catchment with 745,237 persons living within a 20 minute drive time.

• Prominent position at the entrance/exit to Junction 7, M27, immediately adjacent to Hedge End Retail Park and opposite to the large M&S and Sainsbury’s superstores.

• Benefits from excellent critical mass being located at the heart of one of the South’s largest Retail Warehouse Shopping destinations (735,000 sq ft). u investment summary • Freehold. u location • A new 86,523 sq ft (GIA) quality retail development built and warranted by Next to an extremely high specification. u demographics • Open A1 non-food planning consent. u situation & • The UK’s first purpose built Next “Fashion, Home and retail warehousing Garden” format store. M27 • A New 21 year 3 month lease, (20 years unexpired) to the u description A334 Charles Watts Way undoubted covenant of Next Group Plc. u accommodation, • A commencing rent of £1,454,313 pax with a fixed uplift tenure & planning at Year 5, measured by CPI with 1.5% and 3% collar Junction 7 and cap. u tenancy • Offers are invited in excess of £28,940,000 (Twenty-Eight Million, Nine Hundred and Forty Thousand Pounds), u income & x which reflects a Net Initial Yield of 4.75%, assuming purchasers costs of 5.8%. Assuming an average CPI rate of 2.5%, there is a guaranteed Reversionary Yield (2019) u tenant covenant of 5.37% and an Equivalent (Nominal) Yield of 5.23%. u development, epc & vat u investment rationale proposal & contacts t previous next u CHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT

12 10 A5 M5 A44 8 Stow-on- the-Wold M1 M40 A1(M) Location Luton Stevenage STANSTED 7 Cheltenham 11 A602 8 A41 9 A120 10 A10 A34 LUTON A130 A131 Hedge End, 4.8 miles to the east of , is a A436 6 9 A12 A40 A417 5 M11 major regional trading location on the South Coast and one of the most A429 4 A40 A41 Harlow Oxford 8 established retail warehousing locations in the South of . A413 M10 3 A40 7 7 1 2 8 A418 A414

A419 7 A4010 22 Amersham 20 24 M25 25 26 A12 A130 19 5 It is immediately located on the at Junction 7, linking A420 High Watford 6 18 5 the area to Southampton, and the M3 motorway (5.5 miles 5 Wycombe 4 17 A10 A419 M40 M11 28 4 A12 Brentwood 3 M1 2 A406 4 A127 north west). Hedge End services both the Southampton and Portsmouth 2 29 A127 Basildon 1 A41 1 A40 catchments, as well as extending into . Swindon M25 A13 A406 CITY 16 A13 A429 M4 15 Slough LONDON 17 7 30 A346 6 4 1 A34 3 2 31 Southampton International Airport and Parkway railway station LYNEHAM A4 14 M4 Reading A329(M) A205 Gravesend are located 5 miles to the north west of the property at Junction 5 14 13 13 HEATHROW A20 A2 2 A350 12 A2 Rochester 10 Staines 1 11 1 of the M27. 2 Gillingham 11 A232 Chatham 4 4 u investment Camberley 3 M20 3 A34 M25 M25 2 10 A22 3 4 A249 The Airport serves 48 European destinations with annual passenger A338 A33 4 Woking 9 5 6 summary A339 A24 A23 M26 7 9 5 7 numbers approaching 2 million and the station provides a direct service A228 8 A3 M25 5 6 Maidstone 8 A21 6 M3 to London Waterloo with a fastest journey time of 1 hour 11 minutes. A26 u location 7 Guildford A22 A31 A229 8 A24

A36 GATWICK A303 A303 9 Tunbridge Wells 10 A264 A34 Crawley A21 u demographics A338 M3 A264 A31 11 M23 A3 A26 9 A22

10 11 u situation & A36 A354 A272 12 A23 retail warehousing 13 14 A21 4 SOUTHAMPTON A338 3 4 2 5 A24 A22 A26 1 7 1 SOUTHAMPTON A283 u description 8 A3(M) A27 Hastings A259 A31 9 3 M27 10 A27 11 A27 5 12 Hove A31 12

A22 u accommodation, A338 Bognor Eastbourne tenure & planning A348 Portsmouth Regis u tenancy u income & cpi u tenant covenant u development, epc & vat u investment rationale proposal & contacts CHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT t previous next u

Demographics

The retail catchment for Hedge End is extensive with 186,391 people A303 living within a 10 minute drive time. Allowing for a drive time of 20 Alton minutes, this catchment increases to 745,237 and draws from most The Property

A34 of Southampton and key centres such as , Eastleigh, A338 20 minute drive time M3 and Fareham, as well as parts of Portsmouth. A31 The Hedge End catchment population is affluent, with the two most represented social groups of AB and C1 accounting for circa 48% 9 of adults of working age. The city of Southampton is the principal Winchester catchment for the scheme. Southampton ranks 19 in the UK in terms 10

of the volume of comparison retail spend available in the catchment 11 area and is forecast to see above average percentage growth in the available pool of comparison spending over the forecast period u investment M3 2013–18. summary 12 NEXT PLC A36 Romsey CHARLES WATTS WAY The below table compares the demographics of other Next “Fashion, 13 A3 u location HEDGE END Home and Garden” stores in the South East and illustrates the 14 Eastleigh dominance of Hedge End. 4

A338 4 2 3 5 u demographics 20 minutes Drive Time Social Groups AB/C1 7 1 1 u situation & Hedge End 745,237 285,443 Southampton 8 retail warehousing Camberley 610,902 279,173 A3 (M) Maidstone 524,194 200,482 A31 u description 9 3 Shoreham 504,191 210,660 Hythe 10 11 M3 5 A27 u accommodation, High Wycombe 369,112 213,749 Fareham 12 12 tenure & planning A31 Fawley u tenancy Gosport

A338 Portsmouth u income & cpi Cowes u tenant covenant Christchurch Ryde u development, Bournemouth epc & vat Newport u investment rationale proposal & contacts Prime Retail Investment Opportunity t previous next u NEXT GROUP PLC

Situation

The subject property is situated in a prominent position on Charles Watts Way (A334), which directly links the Hedge End retail area onto Junction 7 of the M27 motorway, approximately 250m to the west of the egress to the site. Access to the scheme is shared with the entrance and exits of Hedge End Retail Park onto the westbound dual carriageway of Charles Watts Way.

Hedge End Retail Park is directly adjacent to the development. Occupiers on the park include DFS, Oak Furnitureland, ScS, Carphone Warehouse, Starbucks and Kiddicare. The M&S and Sainsbury’s stores are located directly opposite on the north side of Charles Watts Way. u investment summary u location

BRADBEERS RETAIL PARK Y ALLIED CARPETS, PONDEN HOMES A W

BENSONS/HARVEYS, CARPETRIGHT R , BURGER KING A B

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u 2 demographics 4

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B M27 B303 5 BO Retail Warehousing in Hedge End u TLEY situation & RO 2 AD 4 3 3 B&M (UNDER OFFER) B retail warehousing HEDGE END PARK CURRYS, PC WORLD WICKES Hedge End is an established and substantial retail warehouse destination area comprising approximately 735,000 sq ft B30 35 B OTL Y EY A ROA of retail space. It is anchored by the Marks and Spencer (137,000 sq ft) and Sainsbury’s (105,000 sq ft) superstores, opposite u description W D

GRANG the subject property. R E R

A O

B Y A

L A D

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O TT T A W B&Q WAREHOUSE ES RL u accommodation, A Hedge End Retail Park, owned by M&G Real Estate, comprises 86,000 sq ft and benefits from a bulky goods planning consent, H C

tenure & planning MARKS & SPENCER / SAINSBURY’S A with the exception of the Kiddicare and Carphone Warehouse units which have Open A1 non-food consent. Kiddicare W 3 3 I

L 4 D G E R Y N A took the former Best Buy unit as part of a package of other former Best Buy stores. The other tenants include DFS, Oak

A L N W A G S N E T SUBJECT PROPERTY E R T O A A Furnitureland, ScS, Carphone Warehouse and Starbucks. The tone of the park is circa £35 psf, the most recent letting being to W D u tenancy S LE AR H HEDGE END RETAIL PARK Oak Furnitureland at a headline rent of £32.50 psf in 2012. The DFS 2013 review is currently at arbitration. 4 C S WAY 33 DFS, OAK FURNITURELAND, SCS ATT A S W 7 KIDDICARE, CARPHONE WAREHOUSE LE AR STARBUCKS CH 4 33 U A P Other retail warehousing includes a Homebase (39,500 sq ft) and a PC World/Curry’s Megastore (45,336 sq ft) adjacent to u income & cpi P D E HEDGE END ROA R Y AM A TH N R W NO O E ER the M&S. The scheme has a bulky goods consent and is let at circa £22 psf. There is also the more secondary Bradbeers Retail IK W R P LO

T N R H U T A Park, where tenants include Harveys, Carpetright, Bradbeers and Burger King. The park is 70,000 sq ft and benefits from

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O D OA u tenant covenant A R a bulky goods planning consent. The park has two available units and the tone is circa £20 psf. M27 D AM TH OR R N WE LO u development, There is a large B&Q (105,000 sq ft), also on Charles Watts Way and a former Wickes (45,000 sq ft) opposite Centre 27 Retail epc & vat Park, which is rumoured to be under offer to B&M Bargains. Wickes recently relocated to a 15,000 sq ft unit on Hamilton Trade Park at a rent of £16 psf. u investment rationale proposal & contacts Prime Retail Investment Opportunity NEXT GROUP PLC t previous next u

Description

The property is of a striking design, comprising a modern quality purpose built three-storey retail store with external garden centre, entrance lobby and a café, which is occupied by Costa Coffee. The principal elevations are of full height frameless glazing, a design sought after by retailers. The building is clad with limestone and high quality decorative features. The high specification of the construction and tenant’s fit out sets it apart from other Next Fashion, Home and Garden stores and is substantially superior to the traditional out of town retail warehousing formats. Next have invested large sums into the specification and u investment design of Hedge End and view it as their flagship summary Fashion, Home and Garden store across the UK. u location The principal customer access is from the car park into a large entrance lobby at the Lower Ground Floor. There are two glass customer lifts to one u demographics side of the prominently positioned up/down escalators to the ground floor. There is also an u situation & entrance on the west elevation for the benefit of retail warehousing customers entering from Hedge End Retail Park with access via stairs, escalators and lifts to the u description First Floor. The shell has a BREEAM rating of “Very Good” u accommodation, with a score of 68%, (“Excellent” rating higher tenure & planning than 70%). u tenancy There are 211 designated car spaces all at ground level, providing a ratio of 1:174 sq ft, (over the 36,743 sq ft area). There are a further 330 spaces u income & cpi on Hedge End Retail Park. Servicing is at the rear of the southern elevation with an additional service tunnel, which is served by a lift, and was u tenant covenant installed by the tenant. u development, The site area is approximately 3.2 acres (1.29 epc & vat hectares). u investment rationale proposal & contacts t previous next u CHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT

u investment summary u location u demographics u situation & Accommodation Tenure retail warehousing The lease with Next stipulates that the hypothetical area for the store for the Freehold. u description purposes of review and calculation of rent at years 10 and 15 is 36,743 sq ft. The property however comprises the following Gross Internal Areas, u accommodation, in accordance with the RICS Code of Measuring Practice (6th Edition): Planning tenure & planning The property benefits from an Open A1 non-food consent, which GIA (sq ft) GIA (sq m) u tenancy was received on 21st March 2013. It states: Ground Floor 33,605 3,122 “The retail store hereby approved shall be no greater than 8,310 First Floor (including Café) 25,909 2,407 u income & cpi sq m gross external area and shall incorporate the following Lower Ground Floor (including Service Tunnel) 19,733 1,837 floorspace restrictions: a. No more than 5,609 sq m of permitted SUB-TOTAL 79,247 7,366 floorspace shall be used for sales purposes (net sales area); and u tenant covenant b. No more than 2,724 sq m of the permitted net sales floorspace Conservatory 3,358 312 shall be used for fashion items including, clothing, shoes, bags u development, Garden Centre 3,918 364 and jewellery.” epc & vat TOTAL 86,523 8,042 Further planning information is provided in the sale dataroom. u investment rationale proposal & contacts CHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT t previous next u

t previous next u Tenancy

NEXT GROUP PLC

An Agreement for Lease was completed with Next on 23rd February 2013, annexed to which is a lease for a term of 21 years and 3 months which commenced on 28th June 2013, when the vendor completed the enabling works. The lease is an institutional FR&I Lease with a commencing rent of £1,454,313 pax, paid quarterly in advance.

The lease benefits from five yearly upwards only rent reviews throughout the term. The first review (7th August 2019) is subject to a fixed uplift based on the Consumers Prices Index, (CPI), with a collar and cap of 1.5% and 3%.

The reviews in years 10 and 15 are Open Market and are to be based on a notional building. The hypothetical premises assume: u investment summary • Same location on a level site, u location • A ground floor GIA of 36,743 sq ft with the benefit of an 8,000 sq ft garden centre, • 206 car parking spaces, • Same planning consent, u demographics • A high quality shell constructed by the landlord, u situation & • The tenant is permitted to install a mezzanine up to 85% retail warehousing of the ground floor GIA, and • A hypothetical lease term of 10 years. u description Further information is provided in the sale dataroom. u accommodation, tenure & planning u tenancy u income & cpi u tenant covenant u development, epc & vat u investment rationale proposal & contacts Prime Retail Investment Opportunity t previous next u NEXT GROUP PLC

Current income pax

£1,454,313 per annum exclusive.

The rent equates to a rate of £39.58 psf, assuming the area of 36,743 sq ft as stated in the rent review clause.

The letting reflects a clean transaction with the total incentive provided to the tenant totalling 4 months rent free

Further information is provided in the sale dataroom. u investment summary Consumer Prices Index (CPI) u location The first rent review in year 5 will be increased in accordance with the CPI, but subject to a collar of £1,566,707 pax u demographics (1.5%) and cap of £1,685,947 pax (3%). u situation & The annual rates for CPI since retail warehousing 2008 have been: u description Year Annual CPI Rate u accommodation, 2008 3.6% tenure & planning 2009 2.2% u tenancy 2010 3.3% u income & cpi 2011 4.5% 2012 2.8% u tenant covenant 2013 2.6% u development, epc & vat (ONS) The average since 2008 is 3.17%. u investment rationale proposal & contacts Prime Retail Investment Opportunity NEXT GROUP PLC t previous next u

t previous next u

NEXT PLC 25/01/2014 26/01/2013 Turnover £3,740,000,000 £3,562,800,000 Pre-tax Profits £695,200,000 £666,500,000 Tangible Net Worth £241,800,000 £240,900,000 Net Current Assets £633,600,000 £391,800,000

NEXT GROUP PLC 2014 26/01/2013 Turnover £197,700,000 £212,300,000 u investment Pre-tax Profits £53,000,000 £322,500,000 summary Tangible Net Worth £1,296,600,000 £1,747,900,000 Net Current Assets £1,267,600,000 £1,885,400,000 u location u demographics Tenant Covenant In 2014 Next are forecasted to produce higher profits than Marks and Spencer for the first time. Most recently Next has increased its full-year pre-tax profit growth forecasts by £25 million to £815 million after sales increased 10.7% in the second quarter. u situation & Next Plc is one of the UK’s largest specialist clothing retailers, with 541 UK outlets totalling retail warehousing approximately 7,008,000 sq ft. Recent domestic expansion has primarily focused on the stand-alone “Fashion, Home and Garden” format. Next Plc has consistently achieved strong The Dun & Bradstreet Reports for Next Plc and Next Group Plc can be found in the sale dataroom. u description profitability despite the recent economic challenges. In January 2014 it reported that sales rose 5.4% to over £3.7bn, this consolidated on the increase reported in January 2013 of 3.1% to £3.5bn. In addition, underlying pre-tax profits were up 11.8% to £695m, again improving u accommodation, on January 2013, which reported an increase of 9% to £622m. Next Plc is listed on the London tenure & planning Stock Exchange and is a member of the FTSE 100 index, the only other outright retailers being J Sainsbury Plc, Tesco Plc, Kingfisher Plc (owner of B&Q), Marks and Spencer Group, Sports u tenancy Direct International, Wm Morrison Supermarkets Plc and Burberry Group Plc. Next Plc is the most expensive share in the entire FTSE 100 at 7,175.00p (September 2014). Experian rate Next Plc. as “Very Low Risk” with a Delphi Score of 100 out of 100. Dun and Bradstreet give a u income & cpi rating of 5A1.

The lease is signed with Next Group Plc., a wholly owned subsidiary of Next Plc. Next Group Plc. u tenant covenant has a Delphi Score of 100 out of 100 and a Dun and Bradstreet rating of 5A1. For the year ending 25th January 2014, they reported a turnover of £197,700,000; pre-tax profits of £53,000,000; u development, a Tangible Net Worth of £1,296,600,000 and Net Current Assets of £1,267,600,000. epc & vat u investment rationale proposal & contacts t previous next u CHARLES WATTS WAY HEDGE END SOUTHAMPTON SO30 4RT

Next “Fashion, Home and Garden”

Next have stated that their principal focus for expansion will be the Fashion, Home and Garden format, which was originally trialled in Shoreham and “comfortably beat their targets” (Next Half Year Report July 2012). It has identified 19 sites to bring the concept to in the next five years. Hedge End will be their first purpose built unit, with Shoreham, Camberley, Warrington, Solihull and Ipswich being conversions of existing retail warehouses. Other new stores due to open within the next 12 months are Maidstone, Sheffield, Wilmslow and High Wycombe.

Next’s preferred route is new bespoke units so they can tailor their specific needs. Due to the lengthy and uncertain nature of the planning procedures, Next have had to look at conversions of existing retail warehouses which are more deliverable. This makes Hedge End extremely unique, being Next’s first purpose built “Fashion, Home and Garden” store.

A list of the Next Fashion, Home and Garden stores include: u investment summary Approx. Size Town Year Open Landlord (GIA – sq ft) u location Shoreham 2011 60,000 Hampshire CC Pension Fund u demographics The Development Ipswich 2012 60,500 Standard Life The site formerly comprised a Halfords, latterly Interios unit, and the old Wildern Mill. Planning u situation & Camberley 2013 78,000 British Land for the development comprised a mix use scheme with a separate residential development retail warehousing comprising 41 homes. The commercial element is self-contained and completely divorced from the residential. u description Warrington 2013 60,000 M&G Real Estate The Developer and Next entered into an Agreement For Lease to construct the retail store and Solihull 2014 61,000 F&C REIT car park. u accommodation, tenure & planning Hedge End* 2014 (open) 87,000 Town Quay Developments The Developer provided the cleared site and Next constructed the building and car park, subject to the provisions set out in The Agreement For Lease. u tenancy Maidstone* 2014 (Q4) 62,000 Under offer EPC u income & cpi Sheffield* 2015 (Q2) 60,000 British Land The property has an EPC rating of 26. A copy of the EPC is provided in the sale dataroom. u tenant covenant High Wycombe* 2015 (Q2) 72,000 Under offer VAT

Handforth Green* 2015 (Q4) 80,000 Cheshire East Council The property has been elected for VAT which will therefore be chargeable on the sale price u development, unless the transaction can be treated as a Transfer of Going Concern (TOGC). epc & vat *Purpose Built Stores u investment rationale proposal & contacts Prime Retail Investment Opportunity t previous NEXT GROUP PLC

Capital Allowances

The vendor is to retain the benefit of all Capital Allowances. Investment Rationale

The investment offers purchasers a unique opportunity to acquire a landmark retail property.

The purchaser will benefit from:

• A rare South East Open A1 (non-food) retail investment opportunity • A large affluent catchment • Located within an established retail warehouse destination u investment • Excellent accessibility linking directly with the M27 Motorway (Junction 7) summary • Substantial critical mass with Hedge End Retail Park, Sainsbury’s and M&S superstores within the immediate location u location • A modern, quality bespoke retail store of 86,523 sq ft (GIA) built by Next • The rent reflects a low overall rate of £16.81 psf • UK’s first purpose built Next “Fashion, Home and Garden” store u demographics • 20 years unexpired to Next Group Plc (D&B rating of 5A1) • A fixed increase at Year 5 (in accordance with CPI, u situation & collar & cap of 1.5% & 3%) retail warehousing Further Information u description Proposal James Baillie green&partners 020 7659 4839 u accommodation, Our client is seeking offers in excess of £28,940,000 (Twenty-Eight Million, Nine Hundred [email protected] tenure & planning and Forty Thousand Pounds), subject to contract and exclusive of VAT. David Freeman 020 7659 4848 u tenancy A purchase at this level reflects a Net Initial Yield of 4.75%, assuming purchasers costs 020 7659 4830 of 5.8%. [email protected] www.greenandpartners.co.uk u income & cpi Assuming an average CPI of 2.5% over the next 5 years, it will provide a Reversionary Yield of By Town Quay 5.37% and a Nominal Equivalent Yield of 5.23%. Developments Ltd u tenant covenant

The agents for themselves and for the vendors or lessors of the property whose agents they are give notice that: (i) these particulars are given without responsibility of The agents or the vendors or lessors as a general outline only for the guidance of prospective purchasers or tenants, and do not constitute the whole or any part of an offer or contract; u development, (ii) The agents cannot guarantee the accuracy of any descriptions, dimensions, references to condition, necessary permissions for use and occupation and other details contained herein and any prospective purchaser or tenant should not rely on them as statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy of each of them; (iii) no employee of The agents (and their joint agents where applicable) has any authority to make or give any representation or warranty or enter into any contract whatsoever in relation to the property; (iv) VAT may be payable on purchase price and/or rent, all figures are quoted exclusive of VAT, intending purchasers or epc & vat lessees must satisfy themselves as to the applicable VAT position, if necessary by taking appropriate professional advice; (v) except in respect of death or personal injury caused by the negligence of The agents, its employees or servants, The agents will not be liable, whether in negligence or otherwise howsoever, for any loss arising from the use of these particulars save to the extent that any statement made in these particulars has been made fraudulently. September 2014. Designed and produced by Creativeworld Tel: 01282 858200. u investment rationale proposal & contacts