London serviced offices property tour February 2018
rdireit.com Itinerary
Time Inspection Location Description Hosted by time 15:00 30 min Euston Room, Liverpool Street Presentation: Mike Watters, Stephen Oakenfull, Adrian Horsburgh – RDI REIT 46 New Broad Street • Welcome and introduction Giles Fuchs, CEO, Office Space in Town London EC2M 1JH • Portfolio and sector overview 15:30 20 min Liverpool Street Tour of Liverpool Street Georgia Sandom, General Manager 46 New Broad Street Giles Fuchs, CEO, Office Space in Town London EC2M 1JH 15:50 15 min Transfer by bus to St. Paul's & Farringdon, 20 Little Britain London EC1A 7DH 16:05 20 min St Paul's & Farringdon Tour of St Paul’s & Farringdon Georgia Sandom, General Manager 20 Little Britain Giles Fuchs, CEO, Office Space in Town London EC1A 7DH 16:25 25 min Transfer by bus to Monument, 20 St Dunstans Hill, London EC3R 8HL 16:50 10 min State Room, Monument Q&A session Mike Watters, Stephen Oakenfull, Adrian Horsburgh – RDI REIT 20 St Dunstans Hill Giles Fuchs, CEO, Office Space in Town London EC3R 8HL 17:00 20 min Monument Tour of Monument Amelia Woolley, General Manager 20 St Dunstans Hill Giles Fuchs, CEO, Office Space in Town London EC3R 8HL 17:30 Monument Drinks and canapes on The Deck 20 St Dunstans Hill London EC3R 8HL Welcome
RDI and Office Space in Town property tour Earnings accretive acquisition in line with strategic priorities 1
Transaction summary St Dunstans, Boundary Row, Monument Waterloo • Four London serviced offices valued at £161.7m • Existing debt of 45% LTV, in line with strategic priority to reduce Group leverage • Consideration of approximately £72.5m for 80% interest including transaction costs <1% • £10.3m EBITDA; implied NIY >6% • Average lot size: £40.4m
• Anticipated yield on equity >9% Little Britain, New Broad Street, St Paul's & Farringdon Liverpool Street
RDI remains buyers of strong property fundamentals High quality London serviced office portfolio yielding >6% 2
Deal rationale Office Space in Town portfolio provides • Increased allocation of capital to areas of long‑term premium serviced space at mid-market rates economic growth and sectors supported by structural change North • Differentiated serviced office business model £600 – £800 Northern Fringe /Shoreditch • Owned model with a proven sustainable track record £450 – £600 • Established and experienced operator with aligned interests St Paul’s & Farringdon Liverpool Street • Uniquely designed and wholly refurbished space £663 average City Core £644 average £500 – £800 • The offering is defined by the premium service Midtown Eastern Fringe £500 – £650 £450 – £550 • Asset management opportunities Strand £650 – £750 Monument • Scalable platform £777 average Southbank • RDI has right of first refusal on future Office Space £650 – £800 in Town developments Waterloo • Simple integration of future acquisitions and £635 average Cost per desk per month potential repurposing of existing RDI assets
• RDI experienced with investing in Higher value Lower value operational/serviced real estate Source: Knight Frank, Flexible Office Services Alignment with strategic priorities to continue delivering superior, sustainable and growing income Well located assets complementing existing portfolio 3 Locations weighted towards areas in London expected to deliver medium to long-term growth
Farringdon Barbican Liverpool Street Whitechapel
Moorgate New Broad Street, Tottenham Chancery Lane Little Britain, Court Liverpool Street Holborn Road St Paul’s & Farringdon
St Paul’s Bank 127 Charing Cross Road Aldgate Mansion House Fenchurch Street Covent Garden Blackfriars Cannon Street Tower Hill Leicester Square Temple Charing Cross Monument St Dunstans, Monument
Embankment Holiday Inn, Southwark Wapping
London Bridge Southwark Waterloo Boundary Row, Borough Waterloo OSIT portfolio
Existing RDI portfolio Newington House Coburg House
High average occupancy and enquiry levels underpinned by strong occupier demand RDI's new partnership with Office Space in Town 4 Experienced operator with strong alignment of interests
• Experienced, high quality management team Ownership structure • Manage six London and five regional serviced agreement Management offices, including the four acquired assets • Alignment of interests through 80% 20% 20% co-investment • Management fee based on % of EBITDA HoldCo • Non‑compete arrangements and right of first refusal on future Office Space in Town developments • Strong cultural fit focused on sustainable PropCo OpCo income growth
Assets
Boundary Row, Little Britain, New Broad Street, St Dunstans, Waterloo St Paul's & Liverpool Street Monument Farringdon
RDI experienced investors in operational/serviced real estate Introducing the Office Space in Town team 5
Giles Fuchs Niki Fuchs Chief Executive Managing Director
Simon Eastlake Sarah Singlehurst Julie Ward Tracey Holloway Development Director Sales Director Financial Director Quality & Control Director
Georgia Sandom Katie Rice Amelia Woolley Roy Jones General Manager, General Manager, General Manager, General Manager, Liverpool Street St Paul's & Farringdon Monument Waterloo Office Space in Town has a long history in serviced offices 6
Top 10 Serviced Offices 2018 In December 2017, three of RDI and Office Space the acquired assets were in Town partnership included on Easy Offices' top 10 serviced offices
January 2014 London Waterloo September 2015 Acquired and fully Monument refurbished Acquired and fully refurbished April 2012 Liverpool Street Acquired and substantially refurbished April 2013 St Paul's & Farringdon Acquired and fully refurbished March 2012 Private equity 2009 backing Office Space in Town opened 1979 for business Fuchs family's first serviced office in Northampton RDI and Office Space in Town is a scalable partnership Competitor landscape changing from providing a product 7 to providing high quality service Office Space in Town does not compete directly with lower margin co-working models
Traditional office space (c.93% of Central London) • Providing a product • Inflexible longer leases • Generally larger, corporate tenants Corporate
Serviced offices (c.80% of flexible office space) • Providing a high quality and tailored service • Occupier demand from large corporates and smaller, growing businesses • Flexibility to manage costs and adapt • More ‘corporate’ space
Co-working space (c.20% of flexible office space) • Provides greater community and creative freedom • Experiencing significant growth and demand from small
companies and start ups (c.7% of Central London) Flexible office space • High density, but generally shorter average stay and less profitable • Generally noisy, disruptive and confidentiality risk Trendy Longevity of income 8 Prioritising client satisfaction and retention over density and rate
Well located properties Well designed, innovative spaces
• Each asset uniquely designed hin 5 wit mi ts nu e te • No Office Space in Town branding on buildings s s s a w 4 a • Good sound insulation
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f n Two of the properties t o i h t e a are <10 minutes walk from n t s new Elizabeth line, e d ar n es u Crossrail stations t undergro
Premium and personable service Own the assets and the profit margin
• Getting the best price doesn't ensure the best service Owned Leased • Hi-tech and reliable model model IT with no hidden costs
• Control over use, design and service provisions • Flexibility in density, rates and cost management • Freedom to realise asset management opportunities The Office Space in Town offering 9 Not defined by our physical product, but rather by our premium service
Physical product Premium and personable service
Premium office space Included for all clients: Additional service fee: • Direct access to the hands-on management team • High quality IT service, bandwidth and wifi at a flat rate, with no hidden costs Premium meeting rooms • Inspiring office space and reliable business facilities Hi-tech audio-visual and communications facilities • Quiet, professional and confidential work environment • Tailored catering options Shared space: • Moving in made easy • Office customisation • Kitchen areas • Bespoke tailoring of packages and flexible terms • • Breakout areas to allow for growth and change of client requirements • Luxury bedrooms (St Dunstans only) • Cafes • Lower upfront costs • Venues and catering for private functions • Gym • Personalised call answering, message management, • Additional support services, e.g. photocopying, mail forwarding and general administration dry cleaning, etc • 'Access all areas' lounge card • Regular client socials and community networking • Cleaning, free UK landline calls and more… Revenue drivers 10 Pipeline of further asset management and revenue opportunities
Membership/ Indicative Description Desks/Clients Pricing Average length product contribution
• Private offices with capacity for 1,827 desks Pricing based per room • Initial contract average 1-60 people (1) per month: 11 months Office/ 146 clients (2) 80% • Flexible terms to allow for growth £500 – £900+ implied • Length of stay average desk rental • (1) and change rate per desk 30 months • Access to all buildings in the portfolio • 37 individually designed meeting Pricing based on a per Average annual spend, rooms room per hour basis: including catering: Capacity for 4-100 people Meeting • • £20-£250 per hour • Over £6.5k per internal 7% rooms • Suitable for bespoke meetings, • Larger spaces and client training courses, seminars, meetings are done on a • Over £250k by external interviews, product launches, etc. delegate rate clients • Catering facility provided • Contracted IT and telephony, Pricing based on individual Average annual spend: including bandwidth, handsets, tailored packages: Contracted • Over £82 per desk at 10% call charges, IP, rack rental, etc. service fees • Introduced target 100% occupancy, • Beverage charges package price of including call charges £85 per head in 2017 Including office customisation, Pricing per product or n/a Adhoc • • 3% support services, photocopying, service service fees postage, etc.
(1) As of December 2017. (2) Licence fee only. Afternoon programme London Liverpool Street – New Broad Street 12 ‘Historic London board game’
Market value: £29.4m Notes
Capital value per sqft: £830
Nearest tube: Liverpool Street
Lettable area: 35,419 sqft
Number of desks: 352
Number of clients: 35
Implied rent per sqft: £63(2)
Average stay(1): 30 months
Historic performance Occupancy (%) Average monthly desk rate (£) licence fees only
96 640 644 93 90 91 623 545
2014 2015 2016 2017 2014 2015 2016 2017
(1) Source: Data as at 31 December 2017. (2) £80 excluding gym. London St Paul’s & Farringdon – Little Britain 13 ‘Old English culture and English authors’
Market value: £32.3m Notes
Capital value per sqft: £984
Nearest tube: St Paul's & Farringdon
Lettable area: 36,908 sqft
Number of desks: 328
Number of clients: 27
Implied rent per sqft: £50(2)
Average stay(1): 23 months
Historic performance Occupancy (%) Average monthly desk rate (£) licence fees only
95 93 661 663 90 92 613 577
2014 2015 2016 2017 2014 2015 2016 2017
(1) Source: Data as at 31 December 2017. (2) £72 excluding gym. 14 London Monument – St Dunstans International Property Awards UK 2016 ‘Sunseekers Luxury Yachts’ Best office interior London
Market value: £63.7m Notes
Capital value per sqft: £1,090
Nearest tube: Monument
Lettable area: 58,432 sqft
Number of desks: 694
Number of clients: 58
Implied rent per sqft: £78
Average stay(1): n/a
Historic performance Occupancy (%) Average monthly desk rate (£) licence fees only
90 777 694 71
2016 2017 2016 2017
(1) Source: Data as at 31 December 2017. Note: St Dunstans only trading since 2015. Outlook and conclusion 15 Sustainable and growing income underpinned by strong occupier demand
• Continued delivery against strategic priorities Portfolio quality and income credentials enhanced • Relentless focus on superior, sustainable and Increased exposure to long-term economic growth geographies growing income 31 August 2015 Pro forma(1) • Portfolio quality and income credentials enhanced • Reducing LTV 33% • Office Space in Town, a clear income-led 39% opportunity to enhance the portfolio 16% 29% Greater London Major cities
Exposure to UK Shopping centres significantly reduced 31 August 2015 Pro forma(1)
22% 21% 19% 34%
19% 27% UK Shopping centres 33% 25% Other retail Commercial Hotels
Medium-term guidance unchanged and continue to target 3% – 5% growth in underlying earnings per share (1) Pro forma reflects the portfolio as at 31 August 2017 adjusted for major transactions post year end. Q&A 17 A Appendices RDI pro forma portfolio 18
% of Annualised EPRA Weighted EPRA portfolio by Market gross rental topped Reversionary average occupancy Pro forma portfolio market value value (£m) Properties income (£m) ERV (£m) EPRA NIY up yield yield lease length (by ERV) % Indexed UK Shopping Centres 19% 316.5 6 26.2 27.1 6.4% 6.8% 8.0% 8.0 96.7% 27.5% UK Retail Parks 10% 169.9 5 11.4 10.8 5.8% 6.2% 6.0% 7.7 96.2% 4.7% UK Other Retail 2% 28.3 3 2.3 2.3 7.5% 7.5% 7.8% 16.6 100% — UK Retail 31% 514.7 14 39.9 40.2 6.3% 6.6% 7.3% 8.4 96.8% 19.4% UK Offices – Greater London 6% 90.2 3 3.4 4.4 2.8% 3.3% 4.6% 5.1 95.9% 23.7% UK Offices – Flexible London 10% 161.7 4 10.3 10.3 6.0% 6.0% 6.0% 2.2 94.4% — UK Offices – Regions 7% 113.6 15 9.6 9.2 6.9% 7.7% 7.6% 3.3 95.8% 23.0% UK Distribution & Industrial 7% 117.6 4 6.3 7.5 4.8% 5.0% 6.0% 5.0 96.3% — UK Automotive 3% 42.8 36 2.9 2.3 6.3% 6.3% 5.0% 12.3 100% 100.0% UK Commercial 33% 525.9 62 32.5 33.7 5.4% 5.7% 6.0% 4.3 95.8% 18.2% Greater London RBL portfolio 11% 184.4 7 11.9 12.5 6.0% 6.0% 6.4% 8.3 100% — Edinburgh 2% 39.1 1 2.6 3.0 6.1% 6.1% 7.1% 8.5 100% 3.4% IHL Hotels – RBL portfolio 5% 75.4 5 6.0 6.0 7.5% 7.5% 7.5% 10.0 100% — IHL Hotels – Travelodge portfolio 2% 29.0 4 1.6 1.6 5.3% 5.3% 5.3% 21.1 100% 100.0% Enfield Travelodge 1% 16.1 1 0.7 0.7 4.2% 4.2% 4.2% 29.9 100% 100.0% UK Hotels 21% 344.0 18 22.8 23.8 6.2% 6.2% 6.5% 10.3 100% 10.5% Total UK 85% 1,384.6 94 95.2 97.7 5.9% 6.2% 6.6% 7.5 97.2% 16.9% German Shopping Centres 11% 181.3 3 9.4 10.6 4.2% 4.3% 5.5% 4.8 99.4% 94.5% German Supermarkets and Retail Parks 4% 68.7 11 4.8 4.9 5.9% 5.9% 6.6% 5.2 96.8% 94.4% Europe 15% 250.0 14 14.2 15.5 4.7% 4.7% 5.8% 4.9 98.6% 94.5% Total 100% 1,634.6 108 109.4 113.2 5.7% 6.0% 6.5% 7.1 97.4% 27.0%
As at 31 August 2017, adjusted for major transactions post year end. Serviced office portfolio summary 19
Little Britain, New Broad Street, St Dunstans, Boundary Row, St Paul's & Liverpool Street Monument EC3R Waterloo SE1 Farringdon EC1A EC2M
Market value: £63.7m £36.3m £32.3m £29.4m Capital value per sqft: £1,090 £902 £984 £830 Nearest tube: Monument Southwark St Paul's & Farringdon Liverpool Street Lettable area: 58,432 sqft 35,796 sqft 36,908 sqft 35,419 sqft Number of desks: 694 453 328 352 Number of clients: 58 29 27 35 Average monthly desk rate(1): £777 £635 £663 £644 (licence fees only) Implied rent per sqft: £78 £66 £50 £63 Occupancy(1): 90% 99% 92% 96% Average stay(1): n/a 30 months 23 months 30 months Illustrative opportunities: Shared space Hotel Space Additional desks and revenues synergies reconfiguration conferencing space
(1) Source: Data as at 31 December 2017. Structural and behavioural change set to continue 20 driving demand for flexible, cost efficient space
• Globalising markets drive • Businesses require flexibility and • Collaboration and increased satellite offices, ability to adapt and save costs attracting talent outsourcing and offshoring • More flexible workforce with • Overflow and project space • Technology supports mobility employees demanding flexibility and work life balance
Occupier trends:
Currently 92% of all London companies Large corporates taking up more Employment rates in key sectors for have <9 staff. Estimated net growth of flexible space flexible offices anticipated to grow at 1.8m small firms in next decade twice the rate of wider economy
160 Share of total flexible office space: 20% 40% 20% Business with 0 to 49 employees (small) 2.0 150 Business with 50 to 249 employees (medium) 2.0% Business with 250 or more employees (large) 1.9% 140 Major international 1.7% 1.5 1.5% 130 investment bank
120 indicated an increase 1.0
0.9% 110 in flexible space to
0.5 100 account for 30% of
90 total footprint
0.0 Overall growth Information and Professional, Adminstrative Financial 80 in jobs across the communications scientific and and support and insurance whole economy sector technical service activities
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 annually activities sector activities sector sector Source: Capital Economics Source: Capital Economics