Valuation Report

VALUATION REPORT

Westfield Stratford City London

On behalf of Stratford City Shopping Centre (No. 1) Limited Partnership

Valuation Date: 28 May 2014

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY

2 VALUATION REPORT

3 PROPERTY REPORT

4 APPENDICES

5 LETTER OF ENGAGEMENT

1 EXECUTIVE SUMMARY

Executive Summary WESTFIELD STRATFORD CITY

The Property • Prime shopping centre completed in 2011 within a major regeneration area of East London. • Anchored by John Lewis and M&S, supplemented by a wide range of fashion multiples and complemented by an extensive leisure and dining offer which includes a casino, cinema and gym. • Westfield Stratford is the largest urban shopping and leisure destination in Europe.

Tenancies and Covenant Strength The Property offers an expected income weighted unexpired term of approximately 12 years 6 months (6 years 8 months to nearest break); this is considered good and is representative of a prime shopping centre. Within our valuation and calculation of the weighted average unexpired lease term, we have reflected planned asset management initiatives including four proposed lease surrenders and new lettings. In addition, a small number of leases contain rolling break options where such leases could be determined at any time; we have forecast when such leases will be determined. There is only a small percentage of income expiring within the next two years, most of which relates to short term leases, principally on The Street. Over 40% of the passing rent expires within 5 years, on account of the number of break clauses falling within this timescale. We consider the prospects for re-letting are good, given the strong trading performance of brands inside the centre and the low level of vacancy. The rental levels at Stratford appear relatively low in the context of its peer group, considering its London location. Unit sizes are generally larger than many of the older UK regional centres and this will have an impact, nevertheless we consider there is scope for rental growth at Stratford. Approximately 87% of the retail income is secured against national multiple retailers, which is representative of a prime shopping centre. Approximately 8% of the retail income relates to independent retailers and 4% relates to regionally represented fascias. This is not unusual for a prime shopping centre. The majority of this income relates to the Great Eastern Market, which offers shoppers a point of difference, and

temporary lettings. The Property has a low vacancy rate with only 1.10% of the total floorspace currently vacant (1.46% based on rental value), the occupancy rate therefore is 98.90%. Including accommodation which is held for development or under offer, the vacancy rate is 2.10% by floor area and 2.40% by rental value. Most of the vacant retail accommodation is within The Street. Media and commercialisation accounts for a higher proportion of the overall income stream than we have seen in other major regional shopping centres (6.75% of income compared to 4% - 5% elsewhere). Stratford is however a newer centre which has been designed to accommodate several large digital screens which account for a significant element of this revenue stream. Turnover rent accounts for approximately 5.4% of the total passing rent, which is higher than many other prime shopping centres. Leases which include provision for the payment of turnover rent have become increasingly common in recent years, and whilst they present a variable amount of income for a landlord, they also enable the landlord to share in strong brands’ trading success.

Net Income The net income of the Property comprises the following: Westfield Stratford Amount (£ pa) % of gross rent Shopping Centre rent 72,134,258 74.58% The Street rent 6,031,137 6.24% Food court and Restaurant rent 5,081,440 5.25% Car park income (net) 5,377,525 5.56% Brand Partnership and Media income (net) 6,100,000 6.31% CCHP income, Storeroom, IT and Kids Carts (net) 1,996,300 2.06% Total Income 96,720,660 100.00%

Void costs and lease shortfalls 2,279,575 Landlord marketing contribution 1,600,000 Total Expenses 3,879,575 NET INCOME 92,841,085

Turnover rent is contained within the shopping centre income and The Street income and accounts for 5.39% of the total gross rent. Income for the in-line and Chestnut Plaza restaurants is included within The Street income. Market Value £1,955,000,000 (One Billion Nine Hundred and Fifty Five Million Pounds) Yield Profile Net Initial Yield 4.52% Equivalent Yield 4.91% Reversionary Yield 4.92%

The Equivalent Yield is the time weighted average yield based on the net income over the life of the valuation cashflow.

The Reversionary Yield is the yield based on the net income at the end of the valuation cashflow (June 2059); the net income assumed in 2059 comprises our opinion of the aggregate rental value of the Property minus landlord’s contribution towards marketing and an assumed void rate of 2.50% of the total rental value. Strengths  The largest urban shopping and leisure destination in Europe, totalling 1.9m sq ft and attracting over 38 million visitors annually. The centre ranks number one in the Trevor Woods Going Shopping Survey (2013), which ranks shopping centres according to overall attractiveness to shoppers, retailers and investors.  London’s economy dominates the UK; income and spending levels per capita are higher than the UK average. London’s population is forecast to grow from 8.3 million at present to over 10 million by 2031.  Very well served by public transport, benefiting from two London Underground lines, London Overground, mainline railway, Docklands Light Railway and extensive bus services. 5,000 car parking spaces are also provided.  Good anchors including John Lewis and Marks & Spencer, and a comprehensive line up of fashion houses, complemented by a substantial leisure and dining offer.  Stratford has been the focus of a major regeneration project, led by the 2012 Olympic Games. Westfield Stratford City forms the centre-piece of the project and is surrounded by new housing, student housing, office accommodation and the Olympic Park.  Prime rental values are approximately £300 - £325 per sq ft Zone A, which is relatively low in the context of other major regional UK shopping centres. We consider there are good prospects for rental growth; where retail space has been remerchandised within the internal malls, higher rents have been secured suggesting rental growth has already started to occur. Shopping centres that opened over a decade ago such as Bluewater, West Quay in Southampton and The Oracle in Reading experienced good rental growth from opening to first review (a period of five years) of 50%, 26% and 21% respectively, albeit in a stronger market.  The Property has a low vacancy rate with only 1.10% of the total floorspace currently vacant (1.46% based on rental value), the occupancy rate therefore is 98.90%. Including accommodation which is held for development or under offer, the vacancy rate is 2.10% by floor area and 2.40% by rental value.  Levels of tenant incentives have fallen from 12-18 months on first letting to around 3 – 6 months (within the centre), although The Street requires higher levels of incentives.  The UK commercial property market experienced a notable upturn in demand and transaction volumes over the last 12 months and there is currently no sign of this abating. There is a shortage of openly marketed stock, particularly prime assets, and we would envisage strong demand for the Property in the event of it being marketed.  A 30% interest in Bluewater (with management control) has been marketed and the outcome of a second round of bidding is awaited, we understand the three bidding parties are all UK

listed property companies. This will be the best available comparable to the subject property and pricing is expected to achieve 4.75% equivalent yield or lower.

Risks and Mitigating Factors  The Street has been challenging for the owners and has experienced high levels of vacancy and temporary leasing. Recently TK Maxx have signed a lease and are in the process of fitting out their unit, we anticipate their presence in this part of the scheme will increase footfall and retailer interest. There remains a risk however that further retailers may vacate this part of the scheme, with 42% of The Street’s income expiring by way of lease expiry or break option in 2016. Retailers will have limited opportunity to relocate within the centre as the internal malls are virtually fully let, however retailers are likely to use the opportunity to renegotiate their rental terms.  The property is a large lot size, and there would be few purchasers that would be in a position to purchase this stake outright, however we anticipate there would be extensive demand from investor partnerships (such as UK REITs with a sovereign wealth fund).  Approximately 8% of the income is receivable from sources other than traditional leases, such as media, commercialisation, IT services, and energy supply. Media and commercialisation income makes up 6.31% of this, and half of this income is received by way of 5 year contracts.  The car park income has not stabilised yet and our valuation assumes that car park income will increase over the next few years. Car park income appears to be growing and we anticipate that it will continue to do so however there is a risk that a purchaser may take a more cautious view.

2 VALUATION REPORT

CBRE Limited Toronto Square Toronto Street Leeds LS1 2HJ

Fax +44 (0)113 394 8800 Switchboard +44 (0)113 394 8811

Valuation Report

Report Date 28 May 2014

Addressee Stratford City Shopping Centre (No 1) Limited Partnership C/o Westfield Level 6, Mid City Place 71 High Holborn London WC1V 6EA

The Property Westfield Stratford City.

Property Description Shopping Centre and car park.

Ownership Purpose Investment.

Instruction To value on the basis of Market Value the Freehold interest in the property as at the valuation date in accordance with your instructions.

Valuation Date 28 May 2014.

Capacity of Valuer External.

In accordance with the letter of engagement (hereinafter the Purpose of Valuation ‘Instruction’) addressed to Stratford City Shopping Centre (No. 1) Limited Partnership (the ‘Client’), CBRE has examined the Property and carried out a valuation (the ‘Valuation’) to determine the Market Value, as at the Valuation Date, of the freehold and leasehold interests (as appropriate) in the Property.

We understand that this Valuation Report is required firstly, to confirm the Market Value of the real estate asset as at the Valuation Date. Furthermore this Valuation Report will be included in a CMBS Valuation Report (the ‘Report’) to be used for the placement of the Securities with institutional investors pursuant to Regulation S. Investors will rely on the Valuation Report in making their decision to invest in the Securities.

Market Value £1,955,000,000 (ONE BILLION NINE HUNDRED AND FIFTY FIVE MILLION POUNDS) exclusive of VAT. Where a property is owned by way of a joint tenancy in a trust for sale, or through an indirect investment structure, our valuation represents the relevant apportioned percentage of ownership of the value of the whole property, assuming full management control. Our valuation does not necessarily represent the 'Market Value' (as defined in the Red Book) of the interests in the indirect investment structure through which the property is held. Our opinion of Market Value is based upon the Scope of Work and Valuation Assumptions attached, and has been primarily derived using comparable recent market transactions on arm’s length terms.

Compliance with The valuation has been prepared in accordance with the RICS Valuation Standards Valuation – Professional Standards January 2014 (“the Red Book”).

We confirm that we have sufficient current local and national knowledge of the particular property market involved, and have the skills and understanding to undertake the valuation competently.

Where the knowledge and skill requirements of the Red Book have been met in aggregate by more than one valuer within CBRE Ltd, we confirm that a list of those valuers has been retained within the working papers, together with confirmation that each named valuer complies with the requirements of the Red Book.

Assumptions The property details on which the valuation is based are as set out in this report. We have made various assumptions as to tenure, letting, taxation, town planning, and the condition and repair of buildings and sites – including ground and groundwater contamination – as set out below. We have been supplied with gross internal floor areas by the borrower but we have not been supplied with zoned areas. We have derived our own estimation of zoned areas by measuring a sample from scaled plans.

If any of the information or assumptions on which the valuation is based are subsequently found to be incorrect, the valuation figure may also be incorrect and should be reconsidered.

Variation from Standard None Assumptions

Verification We recommend that before any financial transaction is entered into based upon these valuations, you obtain verification of the information contained within our report and the validity of the assumptions we have adopted. We would advise you that whilst we have valued the Property reflecting current market conditions, there are certain risks which may be, or may become, uninsurable. Before undertaking any financial transaction based upon this valuation, you should satisfy yourselves as to the current insurance cover and the risks that may be involved should an uninsured loss occur.

Valuer The Property has been valued by a valuer who is qualified for the purpose of the valuation in accordance with the Red Book.

Independence The total fees, including the fee for this assignment, earned by CBRE Ltd (or other companies forming part of the same group of companies within the UK) from the Addressee (or other companies forming part of the same group of companies) is less than 5.0% of the total UK revenues.

Conflicts of Interest CBRE provide six monthly valuation advice to the joint owners of the property for accounting purposes. CBRE are also retained as leasing agents in respect of the property. We do not consider our prior involvement in the property to present a conflict of interest however we have disclosed the facts to you and you have confirmed to us that it is in order for us to carry out this instruction on your behalf.

Reliance This report is for the use only of the party to whom it is addressed for the specific purpose set out herein and no responsibility is accepted to any third party for the whole or any part of its contents. We have agreed with you that this report may be relied upon by the Addressee and is intended for their benefit and that of their successors and assigns in connection with the finance documents (howsoever such term shall be defined in the relevant Facility Agreement (the "Finance Documents")) and the transactions contemplated thereby including, without limitation, any Securitisation (the "Transactions"). The Facility Agreement is the credit agreement between Westfield Stratford City Finance Plc as the Issuer and Stratford City Shopping Centre (No. 1) Limited Partnership (acting by its General Partner) as Borrower (the “Facility Agreement”).

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This report may also be relied upon by (i) Deutsche Bank AG London Branch (ii) Credit Agricole CIB, London Branch (iii) each borrower finance party howsoever such term shall be defined in the Facility Agreement (each a "Borrower Finance Party" and together, the "Borrower Finance Parties"); and (iv) any trustee with respect to any securities issued by any Borrower Finance Party in connection with a securitisation (a "Securitisation") of a loan or any part thereof made pursuant to the Facility Agreement (a "Facility”).

We would draw to your attention the following: 1. Nothing in this appointment shall exclude or limit a party’s liability for death or personal injury caused by that party’s negligence, or for fraudulent misrepresentation. 2. Neither party to the appointment shall be liable to the other party for any indirect, special or consequential loss or damage howsoever caused, whether in contract, tort, negligence or otherwise. 3. A party shall not be liable to the other party for any failure or delay in performance of its obligations under this appointment where such failure or delay is due to reasons outside its reasonable control. 4. Subject to condition 5 below, our maximum liability (in contract, tort, negligence or otherwise) to you howsoever arising in relation to any property to which the appointment relates, shall in no circumstances exceed 25% of the value (on the basis identified in the appointment or if no basis is expressed Market Value as defined by the RICS) on the date of this instruction of that property. 5. Our maximum aggregate liability to you arising from, or in relation to, this appointment (in contract, tort, negligence or otherwise) howsoever arising shall not in any circumstances exceed £100 million. 6. You agree that you will not bring any claim relating to this appointment (in contract, tort, negligence or otherwise) personally against any CBRE Limited officer, director, employee, member or consultant.

We have also agreed with you that copies of our Report may be disclosed without liability to: I. the Addressees' respective agents and advisers or any of them, in connection with the Finance Documents and the Transactions; II. the Addressees' respective affiliates and their respective affiliates, employees, officers, directors, agents, professional advisers, successors and assigns or any of them, in connection with the Finance Documents and the Transactions, for the purposes of information only; III. any actual or prospective purchaser, transferee or assignee of, or participant in, the Facility to be made available pursuant to the Facility Agreement; IV. any servicer or special servicer of a Facility; V. any actual or prospective investor (including its agent or advisers) in any securities issued in connection with any Securitisation; VI. any rating agencies (actually or prospectively) rating such securities issued in connection with any Securitisation and their respective advisers for the purposes of information only; or VII. where disclosure is required by law, court order, regulation, public authority, or in respect of legal proceedings in connection with the Report.

Publication Neither the whole nor any part of our report nor any references thereto may be included in any published document, circular or statement nor published in any way without our prior written approval of the form and context in which it will appear except as mentioned in the paragraph below. We have agreed with you that this Report or a reference to this Report (and the methodologies and concepts on which the same is based) may be included or quoted or otherwise summarised in any information memorandum, offering circular, private placement memorandum, registration statement, prospectus or term sheet and website publication www.ise.ie as may be required to comply with any applicable laws, regulations or official guidelines relating to the issuance of any Securitisation or for any investor or potential investor to be in compliance with any applicable law, regulation or requirements of any governmental, banking, taxation or similar body relating to maintaining an investment in, or the regulatory capital treatment of, any securities issued in such Securitisation. Yours faithfully

NICK KNIGHT MRICS PETER STOUGHTON-HARRIS MRICS Executive Director Executive Director RICS Registered Valuer RICS Registered Valuer For and on behalf of CBRE Ltd For and on behalf of CBRE Ltd

T: 020 7182 2000 T: 020 7182 2675 E: [email protected] E: [email protected]

CB Richard Ellis – Valuation Advisory T: 020 7182 2000 F: 020 7182 2273 W: www.cbre.co.uk Report Version: 2014 SINGLE CERT r1.dotm

Scope of Work & Sources of Information

Sources of Information We have carried out our work based upon tenancy information supplied to us by Westfield (dated 21 May 2014), as set out within this report, which we have assumed to be correct and comprehensive. We have been provided with a copy of the Certificate of Title prepared by Ashurst LLP.

The Property Our report contains a brief summary of the property details on which our valuation has been based.

Inspections We inspected the property internally on 12 May 2014.

Areas We have been provided with gross internal floor areas by Westfield. Our analysis of passing rents and estimates of rental value for the unit shops within the scheme have been based on ITZA areas derived from scale as built floor plans. The anchor stores, leisure units, fashion MSUs, kiosks and units within the Great Eastern Market are analysed and valued reference to overall gross internal areas. We scale measured ITZA areas for 40 unit shops. This exercise was carried out during November/December 2011. Our sample was chosen to be representative of the range of unit sizes, and different pitches for each level of the scheme. Our sample enabled us to derive ratios between Area ITZA and GIA for each category of unit within each pitch at each level of the scheme, thus enabling us to ascribe ITZAs for the remainder of the unit shops. Once the ITZA for each unit had been calculated, additional adjustments were made for unusual configuration and return frontages. Mezzanine areas have not been included within the ITZAs, but additional sales floors have been where appropriate (i.e if not a MSU); similarly storage areas have been included where they are within the unit demise.

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Environmental Matters We have not undertaken, nor are we aware of the content of, any environmental audit or other environmental investigation or soil survey which may have been carried out on the Property and which may draw attention to any contamination or the possibility of any such contamination. We have not carried out any investigations into the past or present uses of the Property, nor of any neighbouring land, in order to establish whether there is any potential for contamination and have therefore assumed that none exists.

Repair and Condition We have not carried out building surveys, tested services, made independent site investigations, inspected woodwork, exposed parts of the structure which were covered, unexposed or inaccessible, nor arranged for any investigations to be carried out to determine whether or not any deleterious or hazardous materials or techniques have been used, or are present, in any part of the Property. We are unable, therefore, to give any assurance that the Property is free from defect.

Town Planning We have not undertaken planning enquiries.

Titles, Tenures and Details of title/tenure under which the Property is held and of lettings Lettings to which it is subject are as supplied to us. We have not generally examined nor had access to all the deeds, leases or other documents relating thereto. Where information from deeds, leases or other documents is recorded in this report, it represents our understanding of the relevant documents. We should emphasise, however, that the interpretation of the documents of title (including relevant deeds, leases and planning consents) is the responsibility of your legal adviser. We have been provided with a Certificate of Title prepared by Ashurst LLP which has been taken into account in our valuation.

We have not conducted credit enquiries on the financial status of any tenants. We have, however, reflected our general understanding of purchasers’ likely perceptions of the financial status of tenants.

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Valuation Assumptions

Capital Values The valuation has been prepared on the basis of "Market Value", which is defined as:

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

The valuation represents the figure that would appear in a hypothetical contract of sale at the valuation date. No adjustment has been made to this figure for any expenses of acquisition or realisation - nor for taxation which might arise in the event of a disposal.

No account has been taken of any inter-company leases or arrangements, nor of any mortgages, debentures or other charge.

No account has been taken of the availability or otherwise of capital based Government or European Community grants.

Rental Values Rental values indicated in our report are those which have been adopted by us as appropriate in assessing the capital value and are not necessarily appropriate for other purposes, nor do they necessarily accord with the definition of Market Rent.

The Property Where appropriate we have regarded the shop fronts of retail and showroom accommodation as forming an integral part of the building. Landlord’s fixtures such as lifts, escalators, central heating and other normal service installations have been treated as an integral part of the building and are included within our valuations. Process plant and machinery, tenants’ fixtures and specialist trade fittings have been excluded from our valuations. All measurements, areas and ages quoted in our report are approximate.

Environmental Matters In the absence of any information to the contrary, we have assumed that:

(a) the Property is not contaminated and is not adversely affected by any existing or proposed environmental law;

(b) any processes which are carried out on the Property which are regulated by environmental legislation are properly licensed by the appropriate authorities.

(c) the property possesses current Energy Performance Certificates (EPCs) as required under the Government’s Energy Performance of Buildings Directive, and that they have an energy efficient standard of ‘E’, or better. We would draw your attention to the fact that the Energy Act 2011 is due to come into force in England and Wales no later than 1 April 2018 (although it may be earlier), and in Scotland, no earlier than 1 April 2015. From such date, it will be unlawful for landlords to rent out a residential or business premise unless they have reached a minimum energy efficient standard – most likely, ‘E’ – or carried out the maximum package of measures funded under the ‘Green Deal’ or the Energy Company Obligation (ECO). (d) the properties are either not subject to flooding risk or, if they are, that sufficient flood defences are in place and that appropriate building insurance could be obtained at a cost that would not materially affect the capital value.

High voltage electrical supply equipment may exist within, or in close proximity of, the Property. The National Radiological Protection Board (NRPB) has advised that there may be a risk, in specified circumstances, to the health of certain categories of people. Public perception may, therefore, affect marketability and future value of the Property. Our valuation reflects our current understanding of the market and we have not made a discount to reflect the presence of this equipment.

Repair and Condition In the absence of any information to the contrary, we have assumed that: (a) there are no abnormal ground conditions, nor archaeological remains, present which might adversely affect the current or future occupation, development or value of the Property; (b) the Property is free from rot, infestation, structural or latent defect;

(c) no currently known deleterious or hazardous materials or suspect techniques have been used in the construction of, or subsequent alterations or additions to, the Property; and (d) the services, and any associated controls or software, are in working order and free from defect.

We have otherwise had regard to the age and apparent general condition of the Property. Comments made in the property details do not purport to express an opinion about, or advise upon, the condition of uninspected parts and should not be taken as making an implied representation or statement about such parts.

Title, Tenure, Lettings, Unless stated otherwise within this report, and in the absence of any Planning, Taxation, and information to the contrary, we have assumed that: Statutory & Local (a) the Property possesses a good and marketable title free from any Authority requirements onerous or hampering restrictions or conditions; (b) the building has been erected either prior to planning control, or in accordance with planning permissions, and has the benefit of permanent planning consents or existing use rights for their current use;

(c) the Property is not adversely affected by town planning or road proposals; (d) the building complies with all statutory and local authority requirements including building, fire and health and safety regulations;

(e) only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of the Property to comply with the provisions of the Disability Discrimination Act 1995;

(f) all rent reviews are upward only and are to be assessed by reference to full current market rents;

(g) there are no tenant’s improvements that will materially affect our opinion of the rent that would be obtained on review or renewal;

(h) tenants will meet their obligations under their leases, and are responsible for insurance, payment of business rates, and all repairs, whether directly or by means of a service charge;

(i) there are no user restrictions or other restrictive covenants in leases which would adversely affect value;

(j) where more than 50% of the floor space of the property is in residential use, the Landlord and Tenant Act 1987 (the “Act”) gives certain rights to defined residential tenants to acquire the freehold/head leasehold interest in the property. Where this is applicable, we have assumed that necessary notices have been given to the residential tenants under the provisions of the Act, and that such tenants have elected not to acquire the freehold/head leasehold interest. Disposal on the open market is therefore unrestricted;

(k) where appropriate, permission to assign the interest being valued herein would not be withheld by the landlord where required; (l) vacant possession can be given of all accommodation which is unlet or is let on a service occupancy; and (m) Stamp Duty Land Tax (SDLT) will apply at the rate currently applicable in the UK. However, we would draw your attention to the fact that in Scotland, SDLT will be replaced by a Land and Buildings Transaction Tax (LABTT) with effect from 1 April 2015. In advance of the rates and tax bands being set for LABTT, we have assumed that they will be the same as for SDLT.

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3 PROPERTY REPORT

Location

Stratford is located approximately three miles north east of the City of London with Bromley-by- Bow to the south, West Ham to the east, Leyton to the north and Hackney to the west. Stratford is located at the intersection of the A11 and A12. The A11 provides westbound access towards The City. The A12 (East Cross Route) is a dual carriageway which provides northbound access to the A406 North Circular, Romford and further into Essex towards Chelmsford and Colchester; the A12 southbound provides access via the Blackwall Tunnel towards North Greenwich, Bexleyheath and further into Kent. Stratford has good access to the motorway network, with the M11 and M25 accessible via the A12 and A406. Stratford is particularly well served by public transport, providing an interchange for a range of rail and bus services: • Stratford mainline railway station provides westbound services to London Liverpool Street (less than 10 minutes travel time) and eastbound services to various destinations across the east of England including Brentwood, Chelmsford, Colchester and Ipswich along the Great Eastern Mainline railway. There are also northbound services to Hertford and Bishops Stortford along the West Anglia line. • London Overground operate westbound services towards Clapham Junction and Richmond every fifteen minutes. • Docklands Light Railway operate frequent services towards Canary Wharf and Woolwich Arsenal via Canning Town. • London Underground operate Central Line and Jubilee Line services from Stratford Underground Station. • Southern operate half-hourly services to Dover Priory and Ramsgate via Ashford and Ebbsfleet along the High Speed line (HS1) from Stratford International Station. We detail below travel approximate times by public transport to some key locations within London:

Destination Route Approximate Journey Time

Liverpool Street Central Line 9 minutes

Canary Wharf Jubilee Line 9 minutes

London Bridge Jubilee Line 16 minutes

Oxford Circus Central Line 19 minutes

St. Pancras South Eastern (high speed) 7 minutes

Crossrail will also serve Stratford, linking it with Shenfield to the east and Liverpool Street, the West End, Paddington, Maidenhead and Heathrow airport to the west. The 72 mile line is due to open by late-2018. A location map is attached at Appendix A.

Situation

The property is located on a site which is north of Stratford town centre and mainline railway and immediately west of the Olympic Park; the HS1 railway line borders the site on its northern side. The site, which is triangular in shape, is bounded by Montfichet Road, Hitchcock Lane and Westfield Avenue. Vehicular access from the south and east is via Stratford High Street and Montfichet Road, and from the north via Waterden Road and Westfield Avenue through the Olympic Park. The older shopping centre in Stratford, the Stratford Centre lies immediately on the opposite side of Stratford rail station to the subject property and is linked by a large pedestrian footbridge. Stratford has undergone considerable change in recent years, including major upgrades to the area’s infrastructure, new housing developments, and a new retail and leisure hub at Stratford City and the Queen Elizabeth (Olympic) Park. The area is one of the capital’s largest regeneration projects ever undertaken and it is expected that further development and inward migration will occur over the next decade.

Below is a plan of the Queen Elizabeth Park.

Catchment Analysis and Local Economy

London’s population has grown every year since 1988 and is currently growing at twice the rate of the rest of the country. With a population of 8.3 million at present, forecasts suggest that London’s population may reach 10 million by 2031. London’s population is younger than the UK average (at 34 years compared to an average UK age of 40) and makes the greatest contribution towards GDP of any region in the UK, contributing 22% of the country’s GDP, but accounting for only 13% of the country’s population (according to ONS data). Average weekly earnings for full time employees in London totalled £613 (in 2012) compared with £506 for the rest of the UK. We have been provided with the CACI Retail Footprint (2013) in relation to Westfield Stratford. This states that the population within the catchment area is 4,361,535 and the weighted population Westfield Stratford attracts after accounting for competing retailing locations is 541,071, representing a penetration rate of 12.40%. The total annual weighted potential expenditure in relation to Westfield Stratford is estimated to be £2.63 billion per annum. According to CACI’s 2013 Trade Area Map, Stratford’s primary catchment area principally comprises the surrounding areas of east London, extending as far as the City of London in the west, along the northern side of the Thames into the Docklands, as far as Beckton, and further into Essex taking in Woodford, Chigwell and Epping. The secondary catchment extends across a much wider area, and takes in much of the north eastern quadrant of London inside the M25 motorway, and further north into Essex and Hertfordshire towards Chelmsford, Harlow, Bishops Stortford and Hertford.

According to CBRE’s National Survey of Local Shopping Patterns, Stratford’s principal competition from a retailing perspective comprises Central London, Romford and Ilford, which attract 12.55%, 7.75% and 6.65% of Stratford’s catchment population respectively. According to Promis, the socio-economic profile of both the catchment and shopping population of Stratford shows an over-representation of Social Class AB residents, C1 residents and DE

residents, and a notable under-representation of Social Class C2 residents (skilled manual labour). We detail below the proportions of adults within each category at Westfield Stratford compared to Bluewater and Westfield London, two similarly sized centres within the Greater London area. The data used is from Promis:

Socio No of % of Index v No of % of Index v No of % of Index v Economic adults total UK avg adults total UK avg adults total UK avg Group

Bluewater Westfield Stratford Westfield London

AB 36,123 24 107 24,885 24 109 19,286 33 146

C1 51,310 34 112 32,665 32 105 19,236 32 107

C2 32,220 21 105 15,609 15 75 7,845 13 65

DE 30,768 20 76 28,883 28 106 12,707 21 80

Description

Westfield Stratford City is Europe’s largest urban shopping and leisure destination and attracts around 38 million visitors annually. Completed in 2011, the estate totals approximately 185,800 sq m (2 million sq ft) retail, office and leisure accommodation, comprising 246 shops and 51 food and drink outlets, 30 kiosk locations, 3 hotels, including a 17 screen cinema, bowling alley and London’s only “super-casino”. The office building and three hotels, whilst forming part of the estate, have been sold off separately and do not form part of the valuation. The Property comprises an enclosed mall arranged over four levels and an open-air mall, which provides an access point to the Queen Elizabeth Olympic Park. The centre is anchored by John Lewis (including Waitrose) and Marks & Spencer; other major retailers include Primark, Forever 21, TopShop, Zara, Hollister, Apple and Boots.

The shopping centre currently trades 10am to 9pm Monday to Friday, 9am to 9pm Saturday and 12 noon until 6pm on Sunday. The restaurants are open daily until late and the casino is open 24 hours. The enclosed mall runs east to west, is gently curved and arranged over four levels (lower ground, ground, first and mezzanine).

The mezzanine floor is located above the First Floor and provides restaurants and access to the cinema, bowling alley and casino. The casino also has an entrance from The Street, which enables 24 hour access.

The First Floor level has a fashion focus, with most of the major mass market fashion houses represented in large format stores (River Island, TopShop, Zara, Next, Uniqlo), supplemented by smaller unit shops.

The Ground Floor level is the largest of all levels and is fashion led, but with a more aspirational focus particularly from the mid-section of the mall towards John Lewis; brands here include Reiss, Cos, Tommy Hilfiger, All Saints, The Kooples and Gant. Young fashion is generally represented on the stretch between M&S and Primark, and along the spur mall towards The Street, with Vans, Footlocker, Urban Outfitters, Superdry and Fred Perry represented here.

The Lower Ground Floor benefits from the greatest footfall levels (principally because of its direct access from Stratford Underground station); this level provides a mixture of cafes, mobile phone

shops, health and beauty, kids clothing and a fast-food dining area.

Vertical circulation is facilitated by five sets of escalators along the malls and two areas adjacent to the mall which provide lifts and escalators. The lifts also provide access to one of the centre’s three car parks. The malls are air conditioned and benefit from a glass ceiling which provides natural lighting to the top level. Shop fronts are fully glazed and on the first floor level where many of the large fashion houses are represented, there are double-height fascias. The centre has been designed to accommodate digital advertising, which is provided throughout the mall; the centre also provides Wi-Fi free of charge for visitors. “The Street” is an open-air mall, which connects M&S with John Lewis along the southern side of the site. There are access points to the internal mall adjacent to John Lewis, M&S and at the mid- section of The Street adjacent to Hugo Boss, opposite the entrance to the Olympic Park and the escalator to Car Park B. A number of restaurants are provided around the entrance to the Olympic Park in an area known as “Chestnut Plaza”. The brand mix and identity of The Street has struggled since opening and vacancy rates have been relatively high and in stark contrast to the internal malls.

The three hotels (Holiday Inn, Staybridge Suites and Premier Inn) are all situated above the shopping centre and have been sold on long leases. Access to the Holiday Inn / Staybridge Suites is at Chestnut Plaza, on The Street. Access to Premier Inn is outside the mall, by the entrance to John Lewis on the

northern elevation of the centre, adjacent to Stratford International Station. Access to Stratford Underground station is provided directly into the Lower Ground Floor level; access to Stratford mainline railway and Docklands Light Railway is via a footbridge adjacent to M&S at Ground Floor level; access to Stratford International DLR and mainline railway is adjacent to the John Lewis department store. There are three car parks (A, B and C); Car Park A is adjacent to John Lewis and provides 1,600 spaces over 9 levels, Car Park B is adjacent to M&S and provides 1,400 spaces at Lower Ground Floor level and one below, Car Park C is located at Second Floor level and provides 2,000 spaces at Second Floor level and two further levels above. Whilst some entrances close in the evenings, car parking is available 24 hours. John Lewis and Waitrose have a dedicated nine bay basement level service yard, accessible via Westfield Avenue; M&S have a dedicated three bay basement service yard and the rest of the scheme is serviced via three basement level service yards located along the northern side of the Property. Westfield have allowed for the fact that there may be demand for more retail accommodation in future and have strengthened the structure of Car Park B to allow for part of the car park to be converted to retail accommodation (up to 140,000 sq ft), and a further basement level to be created beneath to provide replacement car parking.

Town Planning

Stratford is part of the London Borough of Newham in Greater London, which is governed by Newham London. There are several planning documents, which currently govern the site of the subject property. At the national level the National Planning Policy Framework is in operation, followed by the London Plan by Greater London Authority (adopted in 2011). At the local level, the planning documents that are enforced are The Stratford Metropolitan Masterplan Framework (adopted 2011) and The Local Plan (adopted 2012). We understand that most weighting is attached to the latter two planning documents regarding planning permission decisions. The Stratford Metropolitan Masterplan Framework has three key aspirations, which are: • To counter churn and create a more stable, balanced community • To be viewed as London’s future third city after the City and Westminster • To create a diverse and innovative economy. In order to achieve these aspirations, the plan sets out the following objectives: • Develop Stratford into London’s eastern gateway • Secure the benefits of Stratford City and the Olympic Park for local residents • Link together Stratford City, the Olympic Park in legacy, the existing town centre and local communities to create an integrated and coherent Metropolitan Centre • Ensure the existing town centre shares the economic growth of Stratford City and the

Olympic site • Strengthen the Council’s powers to ensure high quality development The plan lists several aims for the Stratford Old Town area, which are making The Broadway the historical and civic heart of the town; increasing the amount of retail, leisure, workspace and apartments; building a large supermarket and introducing a two-way boulevard for the Great Eastern Road among other objectives. Fundamentally, Stratford Old Town and Westfield are to form the heart of the city mixing everyday shopping needs with alternative shopping. We have reviewed the Core Strategy policies shown on the Proposals Map that apply to the subject property and comment on them below. Policy J1 - Supports development in the borough that relates to investment in the new economy to maximise employment, including Stratford Metropolitan area. Policy S1- Focuses on major development opportunities within the Arc of Opportunity. The Council aims to identify opportunities to provide 37,500 homes between 2012 and 2027, whilst creating new jobs for residents and the creating mixed and balanced communities.

Policy S6 sets out further detail of how this will be achieved within Stratford and West Ham and divides the area into 13 zones that have their own specific objectives. Westfield Stratford is included within Zone S05, which has been earmarked for the renewal and expansion of retail floor space (mainly comparison) together with other town centre uses, residential and public realm and permeability improvements. The key aim is to integrate the area with Stratford City and Olympic Legacy sites. INF1 & 2 – The subject property is flanked by railways. These policies encourage investment that will enable further investment and regeneration in Newham as well as a more sustainable pattern of movement. Initiatives that the council aim to implement include Crossrail 1 which will be completed by 2018 and securing international trains among other improvements. The proposals map also shows the subject property within the designations set out by the London Legacy Development Corporation. In 2012, the Mayor of London established the London Legacy Development Corporation “To promote and deliver physical, social, economic and environmental regeneration of the Olympic Park and its surrounding area” and to ensure “the long-term success of the facilities and assets within its direct control”. As the Local Planning Authority for its area, the Legacy Corporation is required to prepare a Local Plan, which covers the Olympic Park and parts of Newham, Hackney, Waltham Forest and Tower Hamlets. The Local Plan is currently in a draft stage, but underwent the first round of public consultation in early 2014. It lists existing challenges within the defined area and puts forward fourteen objectives relating to business growth, housing and jobs as well as various other policy areas. The LLDC has subdivided the site into four parts: Hackney Wick and Fish Island; North Stratford and Eton Manor; Central and South Stratford, and Queen Elizabeth Olympic Park South and Bromley-by-Bow, Three Mills and Pudding Mill. The subject property is included within the Central Stratford and South Stratford sub-area. The vision for this site is: “A thriving centre for business, retail, leisure, cultural, visitor and sporting activity, incorporating new and existing residential communities, set in the context of one of the best-served public transport hubs in London and providing a location for high quality education and research activity. The new areas of development at Westfield Stratford City will be

complemented by the development of a significant new office-focused development in and around The International Quarter, with new leisure, education, cultural, visitor-focused and business development activity, and delivery of new and regenerated housing areas. The developing character and form of the area will be driven by its prominence as a Metropolitan Centre with an international focus and excellent transport links.” We have been advised that there are likely to be significant changes to the proposals with a further round to be held in August and adoption scheduled in spring 2015. The plan will provide strategic guidance for all the developments in the area and form part of decisions about planning applications in the area until 2030. We have been informed by the council that this is not currently a material consideration for planning applications at present.

Outstanding applications at the subject property We have carried out a search on the property and we are not aware of any major applications that are outstanding on the property. Recent planning applications and permissions generally relate to change of use, alterations to the elevations and documentation of various planning conditions being met.

Legacy of the Olympic Park We have provided a summary of the future of the key venues of the Olympic site below.

Queen Elizabeth Olympic Park: Queen Elizabeth Olympic Park is home to five iconic permanent venues (Olympic Stadium, Aquatics Centre, Copper Box, Lea Valley Velopark and the Lee Valley Hockey and Tennis Centre). It is the largest urban park to be built in Europe for 150 years, extending to 560 acres, the same size as Hyde Park and Kensington gardens combined. It comprises 252 acres of open space and 111 acres of bio diverse landscapes with plans to include a nature themed community hub and playground. The park will host international sporting competitions, concerts and community events. Last summer it hosted musical and outdoor events for 700,000 people. There are plans to construct 5,000 new homes across five new neighbourhoods creating 42,000 jobs. This is set to increase to 35,000 new homes and 100,000 new jobs by 2025.

Olympic Stadium: The stadium has capacity to seat 60,000 and a 99 year lease has been agreed with West Ham for their occupation from 2016. The stadium will also be the host to the Rugby World Cup in 2015 and the IAAF World Athletics Championships in 2017.

Aquatics Centre: The centres contain two 50 m Olympic sized swimming pools and one 25 m Olympic sized diving pool with capacity for 2,500 people. The centres opened to the public in March 2014 with a projected 800,000 visitors per annum. There is an outstanding bid to host the European

Swimming Championships.

Copper Box: In July 2013 the Copper Box opened which contained 24 marked courts for six different sports and seats up to 7,500. The venue includes 30 concession outlets, a cafe, meeting rooms, fitness centre and crèche and is projected to host 400,000 visitors per annum. It is also home to the MK Basketball Team.

Lee Valley Velo Park: The Lee Valley Velo Park opened in March 2014 and is the first facility in the world to provide four types of cycling in a single location. The venue is a permanent 6,000 seater velodrome, BMX circuit, mountain bike course and a one mile road cycle track.

Arcelor Mittel Orbit: Designed by Anish Kapoor and Cecil Balmond, the Arcelor Mittel Orbit is the UK’s tallest sculpture constructed of 200 tonnes of steel with capacity for 300 people. It opened in early 2014 and is projected to attract 3 million visitors per annum.

Lee Valley Hockey and Tennis Centre: The venue opened in April 2014 and comprises two hockey pitches with 3,000 (permanent) or 15,000 (temporary) seat capacity. It is the home to England and Great Britain Hockey as well as including four indoor and six outdoor tennis courts. There is a development plot for a future five a side commercial football centre, club house and 10 pitches.

Major developments in Stratford

This section provides an overview of major developments within the pipeline in Stratford. Commercial developments

Here East (London Olympics Media Centre): Construction will commence in 2014 for a new digital quarter for East London that will create 7.500 jobs. The former Press and Broadcast Centres for the London 2012 Olympic games will accommodate a one million sq ft digital technology hub. BT Sport currently occupy 80,000 sq ft as a state of the art broadcasting centre with three further pre lets agreed to data centre operator Infinity, Loughborough University and Hackney Community College who are anticipated to take occupation in 2015. The development will be funded by Delancey with a projected end value of £350m

The International Quarter: The largest commercial district on the park is positioned north and south of Westfield Stratford City and will provide four million sq ft of mixed use accommodation developed in a 50/50 Joint Venture between Lend Lease and LCR. It will include over 300 new homes, 275,000 sq ft of hotel provision, and 52,000 sq ft of retail space along with childcare and community facilities.

Sugar House Lane/Strand East: The site comprises 29 acres owned by Inter IKEA (Land Prop) and has planning consent for a major mixed use development comprising 400,000 sq ft of commercial space, 1,200 residential units and a 350 bed hotel.

Westfield Stratford City: Planning consent was granted for 1.1 million sq ft of offices across four buildings. The first phase was completed in 2011 with the remaining buildings First Avenue (560,000 sq ft), The Square (200,000 sq ft) and Station Square (95,000 sq ft) available on a pre-let basis.

Residential development

Chobham Manor: This will be the first of five new neighbourhoods on the park, to provide 828 new homes including town and mews houses, maisonettes and flats that will be developed by Taylor Wimpey and London and Quadrant. A new school, Chobham Academy, opened for first intake in September 2013 providing capacity for 1,800 students between the ages of 3 and 19 years. The first phase due for completion mid 2015.

East Wick/Sweet Water: The second and third neighbourhoods will provide an additional 1,520 homes, a new primary school, two nurseries, community space, library; health centre and retail space will be incorporated into the development.

Marshgate Wharf and Pudding Mill: The last two neighbourhoods to be developed will provide a further 2,348 homes, an arts education and cultural centre featuring shops, restaurants, bars, street art and open air performance space. This is also the proposed site for University College London and Victoria & Albert Museum.

East Village: The former Olympic Athletes Village has become London’s largest private rented sector village and is made up of 2,818 new homes covering 67 acres. To date over £557million has been invested into the project with an estimated 6,000 residents by June 2015. Future development plots to provide a total of 4,000 homes on the site.

Manhattan Gardens: A Manhattan Loft Corporation development including a 42 storey residential tower providing 248 units completing in 2016.

Olympian Tower: This is being developed by the Unex Group Construction started in November 2012. It will include a landmark 27 storey mixed use tower adjacent to the Stratford Bus Station, 260 residential units and 50,876 sq ft of office and retail accommodation.

Chobham Farm: The land is owned by London and Continental Railways and has planning granted for 1,100 homes.

Angel Lane: At Angel Lane, we understand that Westfield has planning permission for a mixed use development site including a 759 bed student housing scheme, which is being developed by Unite with potential for additional residential development.

Cherry Park: This site is owned by Westfield and has planning consent granted for 1,224 residential units.

Westfield Avenue: Unite have recently completed a 25 storey student housing development, providing approximately 1,000 rooms.

Stratford Centre: At Stratford Centre, we understand that CEPF Chariot Sarl is in the application stages for a foodstore with non-food retail units and student accommodation totalling 83,000 sq ft.

Highways

We have contacted Newham Council’s Highways department who have clarified that the following roads have not been adopted by the council and that it is Westfield’s responsibility to maintain them: • Westfield Avenue • Roundhouse Lane • Hitchcock Lane • Montfichet Road We understand that International Way has been adopted by the council. The council have also confirmed that they are not aware of any planned highways works within the vicinity of the subject property.

The Property is not listed and does not fall within a conservation area.

In summary we are not aware of any planning issues which would adversely impact upon value; the ongoing regeneration and creation of new housing in the area surrounding the shopping centre will increase the shopping population and should therefore impact positively upon the trading potential of the property.

Services and Amenities

We understand that all mains services are connected to the property. There is a CCHP (Combined Cooling, Heating and Power) plant at the property which produces most of the energy required on site from gas and bio-fuel boilers. Stratford Utilities Limited (SUL) is responsible for the acquisition and distribution of electricity to the Westfield Stratford Shopping Centre and other non-retail tenants. SUL operates a private electricity network buying predominantly high voltage (11kv) electricity and selling this as low voltage at retail tariffs to the Landlord and tenants. Stratford CCH Limited (SCCHL) is responsible for the distribution and management of heating and cooling water for Westfield Stratford Shopping Centre and other non-retail tenants. SCCHL operates a network to supply heating and cooling to the Landlord and tenants. SCCHL is contracted to procure its heating and cooling supply services from Cofely which are distributed via the Community Energy Network. Cofely own and operate the Community Energy Network which is served by two on-site Energy Centres and connected to the secondary SCCHL network.

State of Repair

We have not been provided with a Building Survey report and are therefore unable to comment on the condition of the structure or of the M&E. From our limited inspection of the asset, the property appeared to be in good condition as would be expected of three year old building. The property appears to be managed to a high standard and we would anticipate it will have a useful economic life of in excess of 25 years. Environmental Condition

We have not been provided with an Environmental Survey. The property has recently been constructed and surveys were undertaken as part of this process. The Energy Act 2011 is due to come into force in England and Wales no later than 1 April 2018 (although it may be earlier), and in Scotland, no earlier than 1 April 2015. From such date, it will be unlawful for landlords to rent out a residential or business premise unless they have reached a minimum energy efficient standard – most likely, ‘E’ – or carried out the maximum package of measures funded under the ‘Green Deal’ or the Energy Company Obligation (ECO). The subject Property completed in 2011 and has been built to a high standard; we would therefore expect no areas of the Property to be rated “E” or below. The site is partially affected by flooding, however, the Environmental Agency flood risk map shows that the area benefits from flood defences.

Tenure

We have been provided with a copy of the Certificate of Title prepared by Ashurst LLP which is in final form, bearing reference JGC/JLS/STR12.00100. The Property is held freehold with title absolute and is registered under title number EGL557876. A small part of the Property (Bridge 20) is held under a 999 year lease at a peppercorn rent and is registered under title number EGL557849. We confirm we have read the Certificate and that it does not contain anything which would cause us to alter our opinion of the value of the Property.

Tenancies

We have been provided with tenancy information by Westfield which we have relied upon in preparing our valuation. We have also been provided with lease summaries prepared by DAC Beachcroft of 22 tenancies which make the greatest contribution towards the Property’s income. The Property is subject to 327 tenancies, principally on institutionally acceptable full repairing an insuring terms. The standard form of lease is not contracted out of the 1954 Landlord and Tenant Act. Where leases are longer than five years, there is provision for a upwards only rent review in the fifth year to Market Rent. 41 leases contain fixed rental uplifts. • John Lewis / Waitrose are let on 240 year leases with a tenant’s option to determine in September 2040. • M&S have a 49 year lease with a tenant’s break option in September 2036. • Shop units are typically let on 10 year leases, most containing 5 year tenant only break options. • Restaurants are typically let on 15 year leases without break. • Kiosks and units within the Great Eastern Market are typically let on 5 year leases. • There are 8 short term lettings of less than 12 months in length. • The casino is let on a 25 year lease, bowling alley on a 15 year lease and cinema on a 20 year lease, all without break options. 140 leases contain tenant break options and 23 contain landlord break options. Excluding vacant accommodation and the eight short term lettings, a further eight leases contain service charge caps which give rise to a landlord shortfall. The total landlord liability resulting from these shortfalls is £820,809 per annum. We have been provided with a sample of lease summaries in relation to the tenants with the greatest rent liability, which we have reviewed. Lease lengths vary from 10 to 20 years, some have tenant break options between years 5 and 10. Several leases contain a prohibition on alienation within the first two or three years, which is relatively common when a key tenant signs a new lease. Rent reviews are typically five yearly and the rent is reviewed to Market Rent on an upwards only basis; a small number of leases contain fixed rental uplifts. Several of the leases of the larger units in the centre contain service charge caps, however not all of these currently give rise to a shortfall.

Competing Centres

According to CBRE’s National Survey of Local Shopping Patterns, Westfield Stratford’s primary competitor is central London, which constrains Stratford’s catchment to the west. The table below shows the percentage of Stratford catchment residents attracted by Stratford and its competing centres for comparison goods shopping. Stratford’s “penetration rate” into its catchment area is 9.50%, which is considered good. The data below differs slightly from the CACI data in relation to Westfield Stratford, however we do not have CACI data in relation to Stratford’s competition. Competing Centre Population

Competing Centre Population Attracted Catchment % of Total Shopping Population Rank London Central 359,071 12.55 1 Stratford 271,848 9.50 45 Romford 222,171 7.76 32 Ilford 190,318 6.65 84 Lakeside Shopping 146,679 5.13 22 Centre Harlow 102,450 3.58 104 Wood Green 90,203 3.15 83 Lewisham 74,076 2.59 130 Walthamstow 73,232 2.56 183 Enfield 61,825 2.16 109 Sub-Total 1,591,873 55.63

Smaller Centres 841,697 29.41 Other 427,915 14.95 Total 2,861,485 100.00 (Source: NSLSP; 2011 Census Area Statistics; Crown Copyright Reserved)

The West End of London is the UK’s premier retailing destination and achieves the highest level of expenditure in the country. There are six key central London retail sub-markets: the West End (Oxford Street, Regent Street and Bond Street); Covent Garden; Kensington; Knightsbridge; Kings Road and the City. We detail below a summary of the retail provision of the most relevant submarkets, as well as Westfield London, the subject property’s sister centre located in West London at Shepherd’s Bush. The West End The Oxford Street, Regent Street and Bond Street area, located two and a half miles to the east of the subject property, is the UK’s premier shopping destination. The three streets combined have retail floor space totalling over six million square feet. Most UK multiples and many international multiples have at least one unit and many fascias have multiple representation. Zara, H&M and Uniqlo all have three or more stores in this area. International retailers are attracted to this area to debut their UK representations, recent examples of this are J Crew, Victoria’s Secret, Abercrombie and Fitch, and Anthropologie. Swatch announced in March that they are due to open a flagship store on Oxford Street and the rent reflects in excess of £800 per sq ft Zone A. There are five department stores - House of Fraser, Selfridges, John Lewis, Debenhams and Fenwicks. Variety stores are also strongly represented with two Marks & Spencer stores as well as a large BHS. Demand from retailers for Oxford Street and Regent Street is strong when compared to other key

central London submarkets. The western end of Oxford Street is the strongest pitch with rents at £800 sq ft Zone A (up from around £620 per sq ft in 2010). On the eastern end of the street, rents fall towards £400/£450 per sq ft Zone A. On Regent Street, prime rents have risen from around £450 per sq ft Zone A to £640 per sq ft Zone A in the last three years, most recently set by the letting to Hackett. Prime rents did not suffer during the recession, indicating the resilience and continuing appeal of this area to retailers. One of the reasons for this continued appeal is the breadth of shoppers attracted to the area. Oxford Street exerts a strong pull on shoppers across the Greater London area and beyond, to include towns such as Watford, Croydon and Bromley. Additionally, tourists travel to London from elsewhere in the UK and international tourists continue to flock to London and the West End benefits strongly from this. The continued weakness of sterling has increased the relative spending power of tourists, and this has buoyed rents within luxury retailing pitches in particular. Bond Street is one of the world’s premier luxury retailing pitches, and rents within the southern section of the street (where occupiers include Louis Vuitton, Prada, Tiffany and Watches of Switzerland) have increased to over £1,300 per sq ft (£965 per sq ft in 2010) and large premiums are being paid in addition by retailers to secure representation. Covent Garden This shopping area is based around a 17th century piazza and is centred on the old Covent Garden fruit and vegetable market, converted into a shopping destination 30 years ago. In addition to attracting shoppers from London and the wider UK, the area also has significant tourist appeal which generates significant revenue for retailers who are active in the area. Renowned for fashion and speciality shopping, the retail area has spread beyond the piazza and into the surrounding streets in recent years and has been successful in attracting a significant number of national multiples. The market itself consists of small units populated principally by speciality retailers such as L’Occitane, Molton Brown, Lush and Crabtree & Evelyn. The north side of the outer edge of the piazza is gradually being redeveloped to provide suitable accommodation for national multiples and Fred Perry, Nicole Fahri, Paperchase, and LK Bennett have taken units in recent years. The site of the old Rock Garden music venue reopened as Apple’s largest store in the world at the time, more recently Burberry and Melissa have also opened flagship stores. James Street, which runs between Covent Garden underground station and the piazza enjoys heavy footfall; tenants include Boots, Fossil, Dune and Karen Millen. Crossing James Street is Floral Street, home to more high-end retailers such as Paul Smith, Agnes B, Jack Wills, United Nude and Ted Baker. Running parallel with Floral Street is Long Acre, a popular retailing thoroughfare, where Marks and Spencer have a two storey variety store. Other tenants include Zara, Reiss, H&M and Gap. Prime Zone A rents in Covent Garden are approximately £7,000 per sq m (£650 per sq ft) Zone A. Westfield London Westfield London opened in autumn 2008 and is located just under three miles west of Central London. The centre has 4,500 car spaces and is well served by public transport, being located close to White City and Shepherds Bush (both Central line) and Wood Lane and Shepherds Bush Market (both Hammersmith and City line underground stations).

The property comprises an enclosed two level retail centre in a figure-of-eight configuration with a restaurant mezzanine level and a 14 screen Vue cinema on the third floor. The centre totals approximately 150,000 sq m (1,614,600 sq ft) and is anchored by Marks & Spencer, Debenhams, House of Fraser and Waitrose. There are approximately 246 units with tenants including Apple, Bershka, Boots, Hollister, Next, River Island, Topshop, Uniqlo and Zara. There is also a high-end retail area called The Village which has attracted labels not normally associated with shopping centres including Burberry, Dior, Gucci, Louis Vuitton, Mulberry and Tiffany. Rental values in the centre have experienced growth in recent years; the centre’s first round of rent reviews is currently taking place, and the tone is likely to be set around 40 – 50% ahead of the initial passing rents which were set at around £300 - £325 per sq ft Zone A. There is currently a 33,000 sq ft extension under construction at Marks and Spencer which is due to be completed by mid-2014. Full planning permission has been granted at the land that is north of Westfield for an additional 800,000 sq ft of space for a major mixed-use development linked to Westfield London to include 1,500 new homes, a new John Lewis store which will cover four floors equating to 230,000 sq ft and a further 570,000 sq ft of retail and leisure accommodation. The development is due to start in 2015 and will be completed in 2017.

Lakeside Lakeside is located approximately a mile east of junctions 30 and 31 of the M25, 24 miles east of central London and approximately 15 miles south east of Stratford. The A13 lies approximately half a mile to the north. Lakeside was opened in 1990 and comprises a covered scheme, comprising a total of approximately 133,180 sq m (1,430,000 sq ft) of retail accommodation over two trading levels. The Boardwalk extension was completed in 2007 and provides an additional 59,000 sq ft of retail space for 11 new restaurants and a refurbished nine screen Vue cinema. The scheme is anchored by five stores, including Marks and Spencer, Debenhams, House of Fraser, Primark and BHS. Prime Zone A rents currently stand at £3,660 per sq m (£340 per sq ft) headline. Lakeside provides car parking for approximately 13,000 cars. There are also two retail parks nearby called the Lakeside Retail Park and The Junction. Lakeside which are anchored by Ikea, JJB, Tesco and Argos and TK Maxx, Marks & Spencer Outlet, Asda Living and Best Buy respectively. These parks, combined with the shopping centre provide a huge draw for the population of Essex and beyond. intu Lakeside has received outline planning consent for an £180 million investment which will include an extended retail offer and improved transportation links. The investment will include the addition of 438,000 sq ft (40,704 sqm) of additional space at the northern end of the centre incorporating up to 40 new stores. The works will also include improved transport infrastructure comprising a new bus station linked to Chafford Hundred rail station, provision of a road to the north of the centre and a subsidised shuttle bus. There will also be a new landscaped external street and public square. There are also have plans for a major new leisure space at intu Lakeside which would be a new

leisure destination comprising new cafes, restaurants and leisure uses around the existing Vue cinema as well as family entertainment venues, bars and health and fitness facilities, focused around a new public square. There has been a public consultation and concept feasibility studies are currently progressing to develop further leisure uses and enhance the evening economy at intu Lakeside. Planning permission has also been granted for a £5million hotel which will contain a restaurant, however, there are on-going discussions to secure a hotel operator. Hammerson own a site off West Thurrock Way which includes an area known as Lakeside Autopark that is occupied by a number of motor dealers, a former Gala bingo club and adjacent restaurants as well as a previously developed site that has been vacant for many years. They are currently in the pre-application stages, but have announced plans to redevelop the sites to build a new Morrisons supermarket, two restaurants and a petrol station totalling 100,000 sq ft.

Bluewater Bluewater is located on the eastern outskirts of Dartford in Kent, approximately 21 miles east of central London and 18 miles south east of Stratford. The property is well connected with the A2 approximately half a mile to the south-east and junctions 1B and 2 of the M25 within two miles. Bluewater is a “top-five” UK centre in terms of floorspace and retail sales. It was built in 1999 in a former chalk quarry. The centre is a covered scheme, comprising a total of approximately 158,000 sq m (1,700,000 sq ft) of retail, leisure and exhibition floorspace; the retail malls are arranged in a triangular shape, over two trading levels. There are approximately 330 retailers at Bluewater in addition to 40 restaurants, bars and cafes and a 13 screen cinema. The scheme is anchored by three department stores, John Lewis at the northern point of the triangle, Marks and Spencer at the eastern point and House of Fraser at the western point. Prime Zone A rents currently stand at £4,305 per sq m (£400 per sq ft) headline. Other major tenants include Next, Boots, WH Smiths, River Island, New Look, Top Shop (who have up-sized at the centre in the last year), Zara, Mango, Uniqlo and Hollister. More recently, there have been new lettings to Five Guys, Mayoral (a Spanish children’s wear brand), Timberland, Jack Wills, Reebok, Victoria’s Secret, Adidas, Tommy Hilfiger and Wallis. Bluewater provides car parking for approximately 13,000 cars. The owners, Lend Lease were granted outline planning permission to extend the scheme by 20% in June last year. The extension will be at the West Village resulting in an additional 325,000 sq ft of space and follows the recent opening of the dining and entertainment area (The Plaza) and the events and exhibition space (Glow).

Canary Wharf Retail floorspace in Canary Wharf totals approximately 68,748 sq m (740,000 sq ft) (Promis) and comprises two principle retail areas: Cabot Place/ Canada Place and the much smaller Jubilee Place. Jubilee Place is a two storey mall at lower ground floor and basement level anchored by Boots, Waterstones, Reiss, Neal’s Yard and Marks & Spencer Simply Food. The basement level is an extension which opened in 2014 and introduced new brands to the centre including Rituals, Cos, Schuh and Banana Republic. Cabot Place provides retail accommodation at Street level and two upper floors and is linked at lower ground floor (Promenade) level with Canada Place to provide a linear mall. Canada Place has a further four upper floors at the western end, occupied by Waitrose, a restaurant and a

sports club. Tenants include Tesco Metro, Zara, Austin Reed, Boots, Gap, Next, HMV and Ted Baker. There are also more upmarket retailers including L’Occitane, Molton Brown, Jo Malone and LK Bennett. The centres also include a high proportion of restaurants and cafes to provide for the estimated 100,000 people that work at Canary Wharf. Canary Wharf is open seven days a week and caters to both local residents and office workers. Office occupiers include HSBC, Citi, KPMG, Morgan Stanley, Allen & Overy and Reuters. Car parking is available for 2,900 cars. We are aware of several new developments in the vicinity. Wood Wharf is a residential/office based development by British Waterways, Canary Wharf Group, Ballymore Properties and Wood Wharf General Partners to include a hotel and retail totalling 283,000 sq ft. A new masterplan was commissioned in 2013 and outline planning permission has been granted. There is a site at the Isle of Dogs Crossrail Station, North Dock that has full planning permission to be redeveloped as a new Crossrail station plus retail and leisure. The station is currently under construction, while the, retail & leisure have not been started. Canary Wharf Group has full planning permission to develop the 65,000 sq ft retail element of a large office scheme at Riverside South. They are currently awaiting pre-lets before construction.

Economic Overview

World Economy The International Monetary Fund estimates that the global economy will experience growth during 2014 of 3.7% and 3.9% in 2015, up from 2.9% during 2013. The improvement in expected performance is principally because the pace of growth within advanced economies is increasing, principally driven by the US economy. The US economy is expected to increase 2.8% during 2014 and 3.0% in 2015 (up from 1.9% in 2013), buoyed by increased domestic demand and reduced “fiscal drag” as the government reduces its public spending cut backs. The Euro area is emerging from recession and modest growth of 1% is expected during 2014 and 1.4% in 2015, although growth will be uneven across the Euro zone. Emerging Economies are still expected to deliver higher levels of growth than Advanced Economies in 2014 (5.1% versus 2.2%). Growth within China is expected to be 7.5% in 2014 and 7.3% in 2015, down slightly from 7.7% in 2013. Consumer prices in Advanced Economies are anticipated to experience modest levels of growth (1.7-1.8%) over the next two years, whereas emerging economies are anticipated to experience much higher levels of around 5.5%. UK Economy Within the UK, GDP has notably increased over the last 12 months, and the CBI (Confederation of British Industry) is forecasting GDP growth of 3% in 2014 and 2.7% in 2015. GDP is now close to its pre-recession level, according to the National Institute of Economic and Social Research (NIESR). The UK economy is currently the highest level of growth within the G8 countries. The rate of increase in inflation has been falling in recent years and is currently at 1.8% (April 2014), marginally skewed by the timing of Easter and the amount spent on travel, and it is expected remain below the government’s target level of 2% for the next two years. Unemployment fell 133,000 during the first quarter of 2014 to a five-year low of 2.2 million people, representing an unemployment rate of 6.8% according to the Office for National Statistics (ONS). Over the same period, the number of people in full time work increased 0.3% to 18.9 million and the number of people in part time work increased 0.6% to 6.7 million. Earnings are rising at approximately 1.7% per annum, on par with inflation at present, however earnings are expected to overtake inflation this year. When the government introduced its “Help To Buy” scheme in the March 2013 budget, it was a clear attempt to inject life into the housing market and boost activity; house prices have risen far quicker than anticipated, having grown 8% over the last year (16% in London). This sudden increase has led Mark Carney, governor of the Bank of England, to assert that house price inflation is one of the biggest threats to the economic recovery; the government is now considering what action it may have to take to cool the market. The CBI is predicting an increase in interest rates to 0.75% by the first quarter of 2015, which is two quarters earlier than previously expected. UK 5-year swap rates are 2.03% as at May 2014, up from 1.17% a year ago. 10 year UK gilt

rates currently stand at 2.66% compared to 2.00% a year ago. The value of sterling fell 30% as the UK fell into recession and many economies predicted that the UK’s economy would be hit harder than most because of its heavy weighting towards financial services. However, the UK increased the value of its exports through its devalued currency which helped boost economic growth, furthermore London has become a magnet for foreign investment as a result of its perceived “safe haven” status. The combined effect of this has led to sterling appreciate by approximately 10% over the last year, and this may now threaten the UK’s export market competitiveness.

£million and Quarter on Quarter Growth

Source: ONS UK borrowing stood at £107.7 billion as at April 2014, down from £115 billion in for the previous financial year. The government aims to eliminate the budget deficit by 2017, as government borrowing is expected to reduce and tax revenues increase. Consumer confidence and retail sales have improved considerably on the back of a strengthening economy, as demonstrated below:

The most recent statistics published by the British Retail Consortium reveal that retail sales during April 2014 were 4.2% higher (like-for-like) compared with the same month last year, which is a considerably higher than 2.2% reported for the prior year. Online food sales increased by 11.8% in December 2013 compared with the same month in 2012, and were up 1.8% on November 2013. Consumer spending has been affected by the government’s austerity measures, but it has delivered a better performance than many commentators were expecting; in real terms it is only 6% lower than at the start of the recession. Consumer habits are changing over time and spending is therefore being distributed differently as shown in the chart below. The biggest percentage increase in spending has been in clothing and footwear, which has risen almost 44% since the start of 2008, followed by recreation and culture (+5.6%) and housing (+5.5%); there have been considerable reductions in spending on alcohol and tobacco (-16%) and education (-14%), which is shown on the chart below:

70,000

60,000

50,000

40,000

30,000

20,000 Quarterly spending £ million

10,000

0 2008 Q1 2009 Q1 2010 Q1 2011 Q1 2012 Q1 2013 Q1 Food and drink (£ m) Alcohol and tobacco (£ m) Clothing and footwear (£ m) Housing (£ m) Household goods and services (£ m) Health (£ m)

Data source: ons.gov.uk

Retail Leasing Market Overview

The retail market has structurally changed over the past five years and continues to evolve, which would have happened recession or not. After several years of rising vacancy rates and falling rents, the occupier markets have started to stabilise. London has demonstrated exceptional resilience to the market downturn, benefiting from increased tourism spending, particularly on luxury goods, and a rising population. Prime regional locations experienced stabilisation in tenant demand and rental levels over a year ago and signs of rental growth are emerging as vacancy rates have fallen. Many landlords are however finding that unit extensions or amalgamations are required in order to satisfy retailer space requirements. Secondary locations have proved more challenging, with occupier demand selective and uncertainty over rents remains in many locations. Smaller towns which are overshadowed by larger more dominant retail locations, particularly in areas of northern England where the recession has had a significant impact on disposable incomes, have suffered more. The reduction in the number of service sector operators (estate agents, travel agents, banks etc), coupled with the reduction in the number of chain fashion multiples present in smaller towns has led to considerably higher vacancy rates in some locations. Overall, the amount of retail space occupied continues to increase and the number of retailers looking to expand has increased over the last year, although the market remains polarised in favour of large dominant locations. IPD’s monthly index is recording marginal declines in rental value for retail property, showing -0.2% for All Retail for Q1 2014 and -1.3% for the whole of 2013. International retailers looking to expand in the UK include Victoria’s Secret and Lindex. Other retailers with expansion plans for 2014 include Paperchase, Fat Face, Specsavers, Jigsaw, and most coffee chains. The large fashion houses such as H&M, River Island, Next and TopShop have selective demand and continue to sign up for the limited amount of new space emerging in the development pipeline. The market demand from the large space occupiers continues to be selective. Debenhams and House of Fraser are both looking for a range of stores from 6,503 – 7,432 sq m (70,000 - 80,000 sq ft) up to 12,077 sq m (130,000 sq ft). John Lewis is looking to increase the number of their stores, albeit relatively slowly, including their ‘John Lewis at Home’ concept.

Polarisation Polarisation is a firmly established trend in the retail sector and the gap between the best and worst in each trading category is continuing to widen. The stronger trading locations benefit from good tenant demand, hence rents have held up and most tenants that have been in administration are continuing to trade, usually paying the original passing rent. The strongest retail locations in the UK continue to benefit from new market entrants to the UK from abroad, including American Eagle, Lindex and Victoria’s Secret. Demand in secondary locations remains more selective, as the weaker schemes either have increasing vacancy rates or more units let on short, flexible leases, sometimes with the tenants only covering the outgoings or not paying any rent. CBRE are aware of polarisation even within a shopping centre, whereby the better traders have seen in excess of 20% sales growth year-on- year, whilst in the same scheme, the less popular traders have seen trade decline by a similar amount. There are a few exceptions to this trend, for example in secondary towns which are not

oversupplied with retail space, where there is a strong convenience-led or food-anchored retail line-up. The Local Data Company’s latest survey shows that 13.9% of all shops in the UK are currently vacant and medium-sized locations (200 – 400 shops) are most under threat. The vacancy rate has fallen from its peak of 14.6% during 2012. Margate had 36% of its retail units lying vacant in early 2013, the highest level in any town in the UK, but this had reduced to 30.8% by September 2013 and Morecambe was then named the town with the highest level of vacancies at 37.1%. Stronger schemes such as Birmingham’s Bullring have less than 2% vacancy rate. Cambridge has the lowest overall vacancy rate at 7% of all shops. The risk associated with secondary shopping locations, particularly those where retailer occupancy levels have suffered due to the recession has made many retailers seek to mitigate the risk of new store openings by requesting flexible lease terms or extensive incentives to off-set new store opening costs. Market conditions are particularly challenging where there is extensive local supply of floorspace or strong competition from nearby schemes; in certain instances the configuration of some units has become obsolete and this is adding to the expense of asset management.

Multi-Channel Retailing The strongest performing retailers have adopted multi-channel retailing and now offer a choice of in-store, online and click and collect options for shoppers plus computer terminals in-store showing the chain’s full range where the stores are not large enough to carry the full range, such as John Lewis. Those that have had the best recent performances are brands that target their customers seamlessly through a combination of internet, mobile, television and in-store retailing, termed by many as the “omni-channel”. The increase in online sales has impacted on the number, location and size of physical units that retailers require, as online sales are now estimated to account for approximately 10.5% of the UK’s sales excluding fuel as at October 2013. The UK leads the world with the proportion of online food sales – for example, the online UK grocery business is five times larger than that in the USA. Over 50% of internet sales captured to date have been cannibalised from non-store channels (mail order, delivery and TV shopping) and electronically transferrable goods (video, e-books and music) with no logistical obstruction to the transfer of sales online. The impact of the internet on High Street has therefore been much less than initially feared. Retailers need a large scale to maximise online efficiencies as the costs of providing a continually updated website and the costs of delivery are significant. Primark have not developed online sales as there is no money to be made in selling low transactional volumes online. Due to the high costs of home delivery that are not fully passed onto the consumer, retailers are focusing on click and collect to enable their existing strong distribution chains to be used and to hope that the consumer may purchase other products whilst in-store. Many retailers, even those that have fared less well have seen an increase in online sales in 2013; Debenhams have seen an increase of 27% year on year, Fat Face up 55% on the year, House of Fraser up 57.7%, New Look up 48%, Marks & Spencer up 22.7% and John Lewis up 10%. Next have been one of the retailers that have most embraced multi-channel retailing and over Christmas 2013 saw their high street shops sales increase by 7.7% but saw online sales growth of 21%. Much of the growth in 2013 has come from the expansion of the smartphone and tablet

apps, allowing ease of price comparison whilst in the home or on the high street. Grocery accounts for c 16% of all UK online sales, but only 3.11% of all food sales were online in 2012; hence the continuing growth of UK food store floorspace.

Administrations Administrations were on the increase - in 2010, there were 165 retailers that went into administration, which rose in 2011 to 183 and again in 2012 to 194. The 2013 tally has reduced slightly to 183 retailers and it is hoped that the worst has now passed, despite recent casualties including Internacionale, Dwell, Republic, Blockbuster and Garage Shoes. Republic have now closed a further nine units and rebranded the remainder as USC fascias. It is estimated that in 2012 over 48,000 retail jobs were lost to company administrations, double the 2011 tally, but the pace appears to have slowed a little with 25,000 job losses in 2013. Tie Rack and Gilly Hicks are closing all their UK high street units.

Changing Retail Formats A number of the larger retailers have developed new formats such as John Lewis at Home, Next at Home and Arcadia’s Outfit and have turned to out of town retail warehouse property to satisfy their large space requirements as a result of limited shopping centre development, including the discount shops. A success within the occupational market has been the expansion of the discount value retailers. Retailers who target this value-based customer, including Wilkinson’s, Primark, Lidl, Aldi, Home Bargains, 99p Stores and Poundland have reported improved retail sales and opened new stores in various formats. Supermarkets remain dominant in the UK retail sector with format flexibility essential to drive sales and increase market share. Waitrose, Tesco and Sainsbury’s have all established convenience store and online formats and more recently Morrison’s have followed suit. Within fashion retailing, the move to fewer, larger store formats continues. Many retailers have expressed a desire or need to reduce the number of stores that they occupy and it is likely that they will stay in the better locations and withdraw from their more tertiary stores. The table below from NSLSP shows how, between 1971 and 2011 retailers could reduce the number of stores that they occupied to still obtain a 50% market share, which has had a profound impact on secondary centres – this has reduced from 90 locations to 75 locations since 2009.

Source:CBRE

Most retailers now consider a ten-year lease to be the norm in good locations (five years in weaker locations) and lease renewals are considered on a unit-by-unit basis. The market has also witnessed a rise in base-and-turnover or turnover-only leases, most notably in the fashion sector.

Shopping Centre Development Shopping centre development activity has been subdued in recent years - no major shopping centres opened in 2012 and in 2011, half the anticipated floorspace opened related to Westfield Stratford. Shopping centre construction activity is currently at just 35% of the level recorded immediately before the onset of the credit crunch. There is retailer appetite for modern, well-configured units. Trinity Leeds, which provides approximately 92,903 sq m (1,000,000 sq ft) of retail completed in March 2013 and pre-let well. British Land and USS’s Whiteley Shopping Centre near Fareham opened in May and was 85% pre-let to tenants including Marks & Spencer, Tesco, Topshop and Next. Trinity Square in Gateshead also opened in May and a second Spenhill development New Square in West Bromwich, anchored by Tesco’s and Primark and opened in July 2013. Quintain’s Designer Outlet at Wembley opened in October 2013. Stanhope, forward funded by British Land recently completed development of Old Market in Hereford, an open-air shopping centre which opened 93% let by floor space. The scheme is anchored by Debenhams, Waitrose, Arcadia, H&M and Odeon. This will be the only new shopping centre opening in 2014. The majority of proposed schemes were put on hold at the start of the development crisis in 2008 which will create a gap in the development cycle, with few new shopping centre openings in 2013/2015. The supply of available credit has improved in recent months and developers are increasing looking once again at opportunities that were put on hold. The lack of new development has meant that retailers have had to expand in the existing schemes, often by adding a mezzanine floor and rents have improved for these units.

Major schemes on hold but now being progressed include the Westgate Centre in Oxford, Croydon, Northern Quarter in Portsmouth, Hammerson’s schemes in Leeds, Sheffield and their West Quay, Southampton extension, Westfield London extension, Broadway in Bradford and the Buchanan Galleries extension in Glasgow. Westfield obtained a revised planning permission for a smaller scheme in Bradford then sold it to Meyer Bergman, and construction has now started on the 570,000 sq ft centre.

Comparable Rental Evidence and Opinion of Rental Value

We detail below the levels of passing rent, most recent evidence and rental values applied to each section of the centre. We have assessed restaurants separately at the end of this section. Lower Ground Floor Passing rents on this level range from around £100 per sq ft at the Waitrose end of the mall, to £350 per sq ft Zone A for small units in the section towards M&S. Rental levels vary according to location; units towards Waitrose reflect lower levels as a result of lower footfall levels and the nature of the tenant mix which is dominated by childrenswear, toys and services. Units towards M&S command higher rents, this part of the centre achieves the highest levels of footfall and the tenant mix is focussed on high volume, mass market brands. Rental levels vary according to unit size as well as location, with small units (1,500 sq ft or less) commanding the highest levels of rent. The levels of rent achieved within certain units will be limited in some instances by use, for example café rents rarely exceed £150,000 per annum without compromising the operator’s profit margin as they are generally unable to handle sales volumes of more than around £1 - £1.5million from a typical unit shop.

Rental evidence Lower Ground Floor:

Lease Annual rent Incentives Zone A Date

1 5 year lease £120,000 3m rent free £168 headline 2014 and net

2 5 year lease £122,500 £148 headline 2014 and net

3 10 year lease £145,000 (year 9m rent free £170 headline 2013 (TBO year 5) 2) £150,000 and 9m capital £133 net thereafter

4 5 year lease £200,000 1m rent free £203 headline 2013 and net

5 10 year lease £167,000 £340 headline 2013 (TBO year 6) 10 years (TBO year 6)

6 10 year lease £225,000 3m rent free £224 headline 2013 (TBO after 2 and net years 6 months)

Evidence suggests that rental values at the western end of the mall are lowest, rising towards the central area around the food court, rising further along the stretch between Superdrug and M&S. The Great Eastern Market comprises small kiosk size units and we have not analysed these, we have valued them as rack-rented.

We have applied rental values as follows:

Rental Values, Lower Ground Floor:

Location Unit type Net Zone A

Lower Ground Floor – East c. 1,000 sq ft £275 psf (Superdrug to Primark) 1,500 – 2,500 sq ft £250 psf 2,000 – 7,000 sq ft £275 psf

Lower Ground Floor – East 1,500 – 2,000 sq ft £225 psf (Foodcourt to Starbucks) 1,500 – 2,000 sq ft £250 psf 2,000 – 6,000 sq ft £275 psf

Lower Ground Floor – West 1,500 – 2,500 sq ft £200 psf (Build A Bear to Timpson) 500 – 2,000 sq ft £150 psf

Lower Ground Floor – West 1,500 – 2,500 sq ft £200 psf (French Eye to Foyles) 2,000 – 3,000 sq ft £175 psf 250 – 6,000 sq ft £150 psf

We have applied net effective rental values in our valuation because in most cases the next lease event will be a rent review rather than a lease renewal. A small number of units, for example those which are located at the end of a pitch, have been valued at slightly different rates to those outlined above. Where units lack depth and therefore have a high proportion of Zone A space in relation to the overall gross internal area, we have applied discounts to the Zone A rental value in line with market practice. Where the ITZA area forms approximately • 50% - 60%, we have applied a 5% discount; • 60% - 65%, we have applied a 10% discount; • 65% - 70%, we have applied a 15% discount; • 70% +, we have applied a 20% discount. There are a small number of units of irregular configuration, which are likely to be less appealing to retailers than a unit of regular configuration. We have also applied discounts, generally of around 10% - 20% to account for this. Ground Floor (Internal) Passing rents on this level are within a much closer range; footfall is more evenly distributed and there is a strong fashion focus which keeps retailer demand high in this area. Passing rents range from around £150/£200 per sq ft at the John Lewis end of the mall, to £350 per sq ft Zone A for small units in the section towards M&S. The prime pitch appears to stretch from Forever 21 right across to the entrances adjacent to Russell & Bromley and Cos. Rental levels vary according to unit size, with small units (1,500 sq ft or less) commanding the highest levels of rent. Slightly lower rental levels have been achieved within The Gallery, which connects with The Street. Passing rents here typically range between £200 and £275 per sq ft Zone A, with nearer £300

per sq ft Zone A passing in relation to the small units of around 1,000 sq ft or less. The most recent lettings along this level comprise the following:

Rental evidence – Ground Floor (Internal):

Lease Annual rent Incentives Zone A Date

1 10 year lease £190,000 6m rent free £330 headline 2014 £315 net

2 10 year lease £190,000 3m rent free £365 headline 2014 (TBO year 5) and net

3 10 year lease £305,000 5m rent free £305 headline 2013 £300 net

4 10 year lease £130,000 £312 headline 2013 (TBO year 5)

5 10 year lease £195,000 6m rent free £237 headline 2013 (TBO year 5) £225 net

6 10 year lease £280,000 18m rent free £266 headline 2012 (TBO year 5) £200 net

Rental values – Ground Floor (Internal):

Location Unit type Net Zone A

Ground Floor – Prime < 1,000 sq ft £325 psf (Forever 21 to Cos) 1,000 – 1,500 sq ft £300/315 psf 1,500 – 12,500 sq ft £275 psf

Ground Floor – Prime < c. 1,000 sq ft £300 psf (Fat Face to Russell & 1,500 – 3,500 sq ft £275 psf Bromley) 1,000 – 3,000 sq ft £300 psf

Ground Floor (near John 2,000 - 3,500 sq ft £250 psf Lewis) 500 – 1,500 sq ft £300 psf

Ground Floor (The Gallery) 1,250 – 10,000 sq ft £250 psf £250 psf < 1,000 sq ft £300 psf

We have applied net effective rental values in our valuation because in most cases the next lease

event will be a rent review rather than a lease renewal. Ground Floor – The Street The Street has struggled with high levels of vacancy since the centre opened and temporary leases have become commonplace. In recent months progress has been made to attract new retailers including David’s Bridal and TK Maxx and prospects to lease the remaining accommodation appear to be improving. Levels of passing rent in relation to standard size unit shops reflect generally between £135 per sq ft Zone A (mostly on the stretch towards John Lewis) and £285 per sq ft Zone A (generally around Chestnut Plaza and closer to M&S). Several units have not secured long term leases and are occupied temporarily to mitigate void costs and some units have subsequently been renegotiated. Approximately 16.5% of the rental value of The Street is currently vacant and 12.2% of the rental value is currently subject to temporary lettings. Recently granted long term leases are at considerably discounted levels compared to the rents originally agreed when the centre was in the course of development. The most recent unit shop lettings along The Street have reflected headline rents of between approximately £75 and £115 per sq ft Zone A and larger space in the order of £30 per sq ft overall. There is not a clear rental tone because of the range of unit sizes in this part of the scheme, also many of the recent lettings have been on a short term basis. We consider that the arrival of TK Maxx will enhance retailer interest in the remaining units as TK Maxx are generally a strong footfall driver. The closest TK Maxx store at present is in Ilford, therefore it is possible that Westfield Stratford will attract a greater proportion of shoppers from the Ilford store in future. We have applied rental values as follows:

Rental values – The Street:

Location Unit type Net Zone A Comment

All shop units < 10,000 sq ft £125 psf Hugo Boss and Armani valued at a higher rate as they have

frontage within the mall. Peripheral units (eg close to Four Dials or Chestnut Plaza) valued at lower rates of between £75 and £110 per sq ft Zone A. In-line restaurants assessed separately at £45 - £47.50 per sq ft overall

Large units c. 12,000 sq ft £30 psf overall

Restaurant units – Chestnut 1,000 - 2,000 sq ft £67 - £68 psf Plaza 2,500 – 3,500 sq ft £49 psf 5,000 – 6,000 sq ft £31 - £35 psf

All of the units along The Street are either over-rented, rack-rented (if recently let) or vacant/temporarily leased. We have therefore applied headline rental values within our valuation as there are no rental uplifts assumed at rent review and in most cases, the next relevant event will be a new lease. First Floor Retail The first floor was the first floor to let up during development. It is a popular level because of the large number of MSUs (medium size units), particularly along the main mall. The MSUs are let at rents reflecting £22.50 per sq ft to £52 per sq ft, depending on size. Unit shop passing rents generally reflect £250 to £300 per sq ft Zone A; the busiest stretch appears to be between H&M and Bershka / Dorothy Perkins, whilst the pitch closest to John Lewis notably quieter and let off lower levels of rent (generally £150 to £200 per sq ft Zone A). As with other levels, small units within the prime pitch appear to command a premium in Zone A terms and reflect higher levels of rent. The Gallery, which connects the main mall with the food court and access to the mezzanine and lower level Gallery, is a less prominent pitch and rental levels here are at a discount to the prime stretch. Passing rents are mostly between £100 and £175 per sq ft Zone A with the exception of Phones 4U which is let at over £200 per sq ft Zone A. The most recent lettings and offers along this level comprise the following:

Rental evidence – First Floor:

Unit Tenant Annual rent Incentives Zone A Date

1 10 year lease Stepped rent: 6m rent free £256 headline 2013 (TBO year 5) yr 1 £325,000 6m capital £218 net yr 2 £330,000 yr 3 £335,000 yr 4 £340,000 yr 5 £345,000

2 3 year lease £243,490 6m rent free £285 headline 2013 £271 net

3 10 year lease £182,500 6m rent free £354 headline 2013 (TBO year 5) £336 net

We have applied rental values in relation to the MSUs having regard to unit size and location, as follows:

Rental values – First Floor:

Location Unit type Net Zone A

MSUs 40,000 sq ft £37.50 psf 38,300 sq ft £40.00 psf 31,800 sq ft £37.50 psf 27,000 sq ft £42.50 psf 21,400 sq ft £42.50 psf 17,200 sq ft £47.50 psf 14,700 sq ft £30.00 psf c. 14,000 sq ft £50.00 psf

Unit shops - prime < c. 1,000 sq ft £325 psf ZA 1,500 – 4,000 sq ft £275 psf ZA 4,000 – 12,000 sq ft £250 psf ZA Units adj. to JLP £200 psf ZA Units adj to JLP £225 psf ZA

Unit shops - Gallery Stepped tone adopted, £200-£250 psf rising towards prime £150 psf pitch

We have applied net effective rental values in our valuation because in most cases the next lease event will be a rent review rather than a lease renewal.

Large Stores There are two department stores at the Property, occupied by John Lewis and M&S. John Lewis: John Lewis occupy a 267,000 sq ft department store by way of a 240 year lease from September 2010 (with a tenant break option in 2040) and are currently paying an annual base rent of £600,000 per annum (£2.25 per sq ft), which will step up to £700,000 per annum (£2.62 per sq ft) in September 2014. The lease provides that the rent shall be the higher of the base rent or the turnover rent (0.75% of gross turnover). We understand that no turnover rent is currently payable by John Lewis. In September 2015, the rent will be reviewed to 75% of the average aggregate base and turnover rent over the three years preceding the rent review date. We have valued the base rent in our valuation of £600,000, rising to £700,000 per annum in September 2014 and £750,000 in September 2015.

M&S: M&S occupy a 206,300 sq ft department store by way of a 49 year lease from June 2010. The rent passing is £2,061,660 per annum (£9.99 per sq ft) and there is a fixed uplift in September 2014 to £2,370,909 per annum (£11.49 per sq ft). In September 2016, the rent will be reviewed to Market Rent. Instances of department store new lettings are rare and the majority of evidence is therefore drawn from rent reviews which are considered on a national level. Third party determination is almost inevitable and there is normally a considerable time lag between the valuation date and the settlement. Evidence of settled rent reviews in relation to 150,000 to 250,000 sq ft stores across the UK is relatively thin, although there are several reviews outstanding where the parties are in negotiation or have applied for third party determination. We have considered the following completed evidence in forming our opinion of rental value of the M&S store at the subject Property:

Store Location Size (sq ft) Date Rent (per annum) Rent (per sq ft)

Army & Navy Victoria, London 152,000 September 2012 £1,636,000 £10.75

House of Fraser Metrocentre, 138,000 June 2011 £1,971,000 £14.25 Gateshead

Frasers Glasgow 165,000 November 2011 £2,456,000 £14.20

Debenhams Leicester 153,576 June 2011 £1,457,000 £9.50

The evidence set by Frasers in Glasgow and House of Fraser at Metrocentre relates to smaller stores. Frasers is located on Buchanan Street, Glasgow’s prime pitch. Rental levels within the unit shops along the prime pitch of Metrocentre reflect a similar zone A tone to the subject Property, however the House of Fraser unit is approximately one third smaller than the subject store. The rent reviews of the House of Fraser and Debenhams stores at Westfield London are currently outstanding, and when settled will provide a very useful indication of Market Rent for the M&S store at Stratford. We have applied £11 per sq ft in our valuation, which is slightly below the level of the fixed uplift which is due in September 2014 (£11.50 per sq ft).

We detail below the prime Zone A rental values within the several of the UK’s leading shopping centres:

Shopping Centre Headline Zone A Rental Value

Westfield London £450

Brent Cross £430

Trafford Centre £405

Meadowhall £375

Bluewater £365

Lakeside £345

Metrocentre £320

Westfield Stratford £300

Cribbs Causeway £300

The rental levels at Stratford appear relatively low in the context of its peer group, considering its London location. Unit sizes are generally larger than many of the older UK regional centres and this will have an impact, nevertheless we consider there is scope for rental growth at Stratford. The MSUs rents at centres such as Bluewater and Meadowhall are also around 20% higher, with c. 40,000 sq ft units commanding rents in the order of £45 per sq ft. Most regional centres have witnessed good levels of rental growth since opening; we are aware of the following rental increases which have been achieved at first rent review, although the occupational market performance has not been as strong as the period during which these uplifts were secured: • Canary Wharf – 102% • Bluewater – 50% • West Quay, Southampton – 26% • The Oracle, Reading – 21% • Festival Place, Baskingstoke – 18% Bluewater opened in 1999 West Quay in 2000; Oracle in 1999 and Festival Place in 2002, hence they all saw a booming occupational market between opening and their first rent reviews, over their first five years of trading. The increases above also demonstrate that the larger more dominant schemes saw the largest percentage increases in rent. The working population at Canary Wharf increased from 27,000 to 64,000 between 1999 and 2004 and now stands at 100,000, hence the strong level of increase in rents. Prime rental values of the retail accommodation are approximately £300 - £325 per sq ft Zone A, which is relatively low in the context of other major regional UK shopping centres. We consider there are good prospects for rental growth; where retail space has been remerchandised within

the internal malls, higher rents have been secured suggesting rental growth has already started to occur.

Restaurants – Chestnut Plaza and Second Floor Restaurants Second floor restaurants (LR001 to LR010) Typical operators are national multiple sit-in restaurants, such as Gourmet Burger Kitchen, TGI Fridays, Giraffe and Wagamamas. The size of the units is relatively larger compared to the fast food concepts, such as those on the lower ground floor and range from 3,250 sq ft to 7,850 sq ft. Rents range from £32 to £46 per sq ft according to size. Leases mainly commenced in April/June 2011 with the exception of Ping Pong, which recently undertook an assignment from Jommalaysia. The rent increased from £140,000 per annum (£37 per sq ft) to £175,000 per annum (£46 per sq ft). There are seven restaurant operators paying turnover rent in addition to base rent; in aggregate they currently generate £885,716 per annum in turnover rent. Percentage turnover rates vary from 6% to 10%, with the majority being 8% or 9%. All tenants pay turnover rent with the exception of Strada. Factoring in turnover rent payable, rental levels reach up to around £80 per sq ft for the most popular restaurant units (TGI and Nandos). Variable trading performance between brands is inevitable, some will achieve more turnover rent than others, therefore we have valued all restaurants as rack rented in our valuation. Chestnut Plaza (R1001 to R1006) Restaurants range in size from 1,050 sq ft to 5,650 sq ft and rents range from (£31 - £68 per sq ft). All of the leases date from centre opening and we have valued them as rack-rented. Leases also contain provision for the payment of turnover rent, with turnover percentages ranging from 7% to 9%. At present, we understand that none of the tenants here currently pay turnover rent. We have had regard to other major regional schemes, such as Bluewater in Kent and Meadowhall in Sheffield. The line-up at Bluewater includes comparable tenants, such as Zizzi, Cote, Loch Fyne, Byron and Carluccio’s at rents of £40.00 - £45.00 per sq ft on units of 4,050 – 6,000 sq ft. A similar line up of tenants is in occupation at the Oasis in Meadowhall in Sheffield, such as Giraffe, Carluccio’s, Handmade Burger Co, Ask and Wagamamas. We understand that units for food operators range in size up to 4,600 sq ft and rents vary, achieving in excess of £130 per sq ft. However, generally speaking the passing rents for units of 2,000 – 4000 sq ft are in the region of £40 – £60 per sq ft. The restaurant units within the subject Property appear to be let at market levels of rent and we have valued them as rack rented income streams. We anticipate that further income growth should occur as the centre grows in popularity, which should benefit the trading levels achievable within the restaurant units. We summarise below the rental values we have attributed to the various elements of the Property:

Location Rental value (per Rental value (per sq ft) Comment annum)

Large Stores £7,116,170 £2.25 - £23.50 M&S, John Lewis, Primark, Forever 21, John Lewis

Lower Ground Floor £13,685,400 £140 - £325 Zone A

Ground Floor (Internal) £23,994,200 £225 - £325 Zone A Includes The Gallery

First Floor £21,788,700 £150 - £325 Zone A Includes The Gallery

Mezzanine Level £4,206,825 Assessed overall Restaurants and food court

The Street £7,790,450 £110 - £125 Zone A Includes Chestnut Plaza restaurants

Leisure £3,336,760 £11.20 - £27.35 Cinema, casino, bowling alley and gym

Turnover Rent £1,811,435 Where turnover rent is received in addition to rather than in lieu of full Market Rent.

Car Park £9,000,000 Stabilised net income

Brand Partnership, Media, £13,138,665 Stabilised net income CCHP, IT, Kiddy Carts and Other Income

TOTAL £105,868,605

Investment Market Overview

The commercial property investment market experienced a notable upturn in demand during 2013. The banks returned quickly to the new lending market since summer 2013 and with finance available from both the traditional UK high street clearing banks and overseas banks, particularly German and American sources, lending margins have reduced. The combined effect of greater levels of available debt finance, greater levels of equity and an improved economic outlook led to considerably higher levels of demand and investment activity in 2013; in total over £53 billion was traded during the year, the highest level since 2006. The shopping centre sector of the market mirrored the increase in activity, with investment volumes reaching £4.2 billion, almost double the levels achieved in 2012 and the highest level achieved since 2006. Interestingly this was achieved without any large lot size regional centres trading, normally there is at least one major regional transaction per year which would influence the total transaction volume level:

2007 £3,915,400,000 2008 £1,123,600,000 2009 £2,001,700,000 2010 £3,356,200,000 2011 £3,673,600,000 2012 £2,333,700,000 2013 £4,200,000,000

There is demand from a range of purchasers at present, with international sovereign wealth funds and UK REITs acquisitive for prime retail; private equity and the institutions are notably acquisitive for mid yielding stock and demand for higher yielding secondary stock is evident from property companies and some UK fund managers. A lack of openly marketed stock may limit investment volumes during 2014, but it is also likely to buoy pricing over the near term. As at May 2014, CBRE’s opinion of prime shopping centre assets stands at 5.00% (5.25% in December 2013), good secondary at 6.75% (7.25% in December 2013) and secondary at 8.50% (9.00% in December 2013). All sectors are trending positive for both prime and secondary assets. Investors continue to have primary regard to the initial income and the quality and longevity of the income stream, and the potential to add value through asset management. In recent months investors have demonstrated a willingness to move up the risk curve and this is being evidenced by the number of secondary assets trading and yield compression occurring in this part of the market. The following table demonstrates how prime and best secondary yields have moved since 2001 – they were closely mirrored until 2009, when secondary started to decline quicker. The gap between prime and secondary reached its widest margin during 2012 and 2013, more recently the gap has narrowed as investment activity has increased and investors have sought greater returns by investing further up the risk curve.

Source: CBRE

CBRE estimate that in 2013, there were 54 shopping centre transactions and overseas purchasers accounted for approximately 39% of this market, particularly North American purchasers who accounted for 24% of the market. The values for super-prime properties have been driven by significant levels of overseas cash, particularly sovereign wealth funds, who have exploited Sterling’s relative weakness (although it is now strengthening again) and the UK REITS who have raised considerable amounts of relatively cheap finance in 2013 on the bond market. Both the IPD and the CBRE Indices recorded capital value growth in May 2013 for the first time since 2011. IPD all capital values increased by 3.8% during 2013 overall, with the final quarter alone delivering a 3.0% increase. Central London offices delivered the strongest capital value performance of +12.2% during 2013, whilst shopping centres delivered the weakest performance of -1.2%. In 2014, capital values have continued to rise and IPD All Property has experienced a 2.3% increase in the first quarter of 2014 with all sectors recording capital value increases. Capital value appreciation is likely to continue over the near term; this is being driven more by the weight of capital available for commercial property rather than rental growth expectations. Within the retail sector, ERVs were under downwards pressure during 2013 and declined 1.3% over the year; shopping centre ERVs fell 1.9% over the year. In 2014 the pace of decline appears to have moderated, with the retail sector (and shopping centre sector) recording a 0.2% fall in the first quarter. Forecast Looking ahead, there does not appear to be any reduction in the banking activity and therefore, a continuing recovery for the shopping centre market is anticipated.

There has also been an increase in non-bank lenders entering the real estate debt market, with insurance companies and a growing number new debt funds targeting the sector. Real estate debt is attracting allocations from fixed income investors, potentially creating a major pool of capital for lending to commercial property. Many of the new lenders have as yet relatively under- developed platforms and selective lending criteria which limit their ability to deploy capital quickly. Nonetheless, it is clear the amount of capital targeting the real estate debt market is expanding. The majority of 70 lenders recently surveyed by CBRE’s Debt Advisory team were running behind their lending targets. Looking ahead, there will be substantially more senior debt available to the UK real estate sector in 2014 than in 2013, with a range of new institutions and lenders becoming active alongside the banks. Much debt capital is likely to be focused on London, pushing more lenders towards regional markets to secure lending opportunities. Margins are likely to tighten further and the maximum available leverage will rise with lending terms improving on a broader range of assets. The market has converged between prime and secondary sectors, with continuing good prospects anticipated for prime assets, due to robust tenant demand and a limited supply of available prime investments. An absence of prime assets is likely to further buoy demand for best secondary assets, many of which appeal either to the institutions or to debt-backed purchasers. Many poorer secondary centres have continued to suffer from store closures as a result of administrations, CVAs or lease expiries and this has led to an increase in vacancy rates and a reduction in rental and capital values. Where vacancy levels have increased, in many centres the relatively high business rates payable are acting as a deterrent to re-letting units, due to the postponement of the rates revaluation – this is not likely to improve in 2014. Net income levels in secondary locations are likely to remain under downwards pressure over the near term. The forecast table below indicates that rents may start improving in 2014, but will remain at relatively modest levels for the foreseeable future. The best schemes in the country are likely to outperform this average, but likewise the more tertiary centres are likely to underperform.

The chart below shows CBRE’s opinion of capital growth forecasts for commercial property:

Sovereign wealth funds are likely to continue to invest in the UK with interest coming from Singapore, China, Taiwan and Africa who all have increasing reserves available as their economies grow. The key issue for the market is how far this improved supply of capital remains concentrated on prime quality assets in core markets, predominantly London or spreads to a wider range of assets and markets and in so doing, supports a broader recovery in the UK real estate sector. UK REITs are expected to acquire further assets during 2014; three of which have made bids for Lend Lease’s stake in Bluewater. Private equity houses continue to demonstrate appetite and the institutions also have capital to invest. A good spread of demand is expected over the short term which CBRE anticipate will lead to modest yield compression as shown below:

Comparable Investment Market Evidence

We provide details below of recent shopping centre investment transactions within the UK and mainland Europe which we have considered in arriving at our opinion of yield for the subject property. Bluewater, Kent Bluewater, which is located 18 miles south-east of London on the southern banks of the River Thames at the intersection of the M25 and M2 motorways, is one of the most successful shopping centres in the UK, drawing around 27 million visitors annually. Originally completed in 1999, Bluewater totals 1.7 million sq ft comprising over 300 stores and 50 cafes/restaurants anchored by John Lewis, House of Fraser and M&S; all the major fashion houses are represented including TopShop, H&M, Zara, Hollister, Uniqlo, Next, River Island and Forever 21. The centre is arranged over two levels in a triangular shaped mall, with spur malls leading to the centre’s restaurant and leisure offer which comprises The Village (which includes Cote, Byron, Loch Fyne, Carluccio), The Wintergarden (various fast food formats), a 13-screen cinema, further restaurants and an events centre known as “Glow”.

The centre achieves strong levels of footfall consistently throughout the scheme, largely on account of its natural mall circuit. Vertical circulation is also effective as the car park feeds in to both lower and upper mall levels and several major stores trade over both levels. Rental values range between £225 and £365 per sq ft Zone A and restaurant rental values are understood to be between £40 and £50 per sq ft. The centre has recently been through its first round of lease renewals (now that it is 15 years old), therefore the level of over-renting is relatively small (the passing rent is on average 1% over-rented). The vacancy rate is understood to be approximately 2.5% of rental value and the weighted average unexpired lease term is 7 ½ years including break options. The centre is owned by a syndicate of investors which includes Lend Lease (Europe), Lend Lease Retail Partnership, M&G, GIC and Hermes; Lend Lease (Europe) are in the process of selling a 30% interest in the Property (with management control). A two stage bidding process is being

held, with strong interest being expressed from parties including British Land with Norges, Land Securities, Hammerson and M&G. We understand three parties are participating in a second round of bidding, the outcome of which is expected by the end of June. At this stage, the level of bidding is not known, although it is broadly expected to sell for a price reflecting an equivalent yield of 4.75% or less; this would imply a net initial yield of sub 4.50% including any income which is subject to rent free periods. Assuming a transaction completes, this will be the most relevant evidence for the subject Property being a super-regional shopping centre located on the outskirts of London. Rental levels, brand mix, critical mass are all considered comparable, however Westfield Stratford is a newer asset which has not yet experienced its first round of rent reviews; we consider that the rental growth prospects at Westfield Stratford are superior to Bluewater and that the investment community would price it at a lower level of yield to account for this.

Centro, Oberhausen, Germany In February 2014, Unibail Rodamco acquired a 50% interest in one of Europe’s largest shopping and leisure destinations from Stadium Developments for €885 million, reflecting 4.25% net initial yield assuming full purchaser’s costs, although we understand the property is held in a Special Purpose Vehicle which would not attract full property tax. Many of the leases contain index-linked rent reviews and the equivalent yield therefore reflects closer to 4.75%. Centro is a leading centre in Germany, drawing at a regional level within Germany and also from across the country’s border with the Netherlands. Originally built in 1996, the centre was extended in 2012 and comprises approximately 2 million sq ft retail and leisure floorspace. The retail accommodation totals approximately 1.3 million sq ft over two mall levels, together with 39 restaurants and a 9 screen cinema; there is also a concert arena and theme park. The centre attracts approximately 25 million visitors annually. The layout of the retail comprises a two level linear-mall, which is in a very similar configuration to Meadowhall in Sheffield which was created by the same developers, Stadium Group. Centro is almost fully let with a strong line-up of mass market and premium fashion retailers including H&M, various Inditex brands, Hollister, Esprit, Diesel, Gants, G Star and Superdry. The anchor stores are Galeria Kaufhof, Sinn Leffers and Peek & Cloppenburg. We consider the transaction relevant to the subject property as it is one of a small number of class-leading European shopping centres. Germany’s economy is considered to offer comparable stability and growth potential to the UK, although German 10 year bond yields are

lower than UK 10 year bond yields, at 1.50% versus 2.00% in the UK. CBRE’s opinion of prime shopping centre yields currently stands at 4.50%, compared with 5.00% in the UK. The Centre:MK, Milton Keynes Midsummer Place and The centre:MK account for 100% of the retail floorspace within Milton Keynes. The Grade II listed freehold Centre:MK was the original scheme and opened in 1979 and was refurbished/extended in 2012 and currently comprises 1,303,000 sq ft with over 181 units arranged over a single level enclosed mall.

The shopping centre is anchored by John Lewis, House of Fraser and Marks & Spencer. John Lewis, in particular, accommodates a very good range of ladieswear concessions that include Country Casuals, Hobbs, Joules, Jigsaw, Mango, Oasis, Planet, Precis, Reiss, Ted Baker, East, Fat Face, Barbour, Fenn Wright Manson, Gerry Weber, Phase 8, Whistles and Warehouse. There are external boulevards that front the surface level car parks and main entrances to the centre provide smaller units, many of which are occupied by a mix of services such as banks, betting offices and estate agents. A catering offer has been developed in recent years (Queens Court) and includes Carluccio's, Cafe Rouge, Nando's and Yo! Sushi. A number of popular A3 outlets have also taken space along the main malls, such as Jamie's Italian, Wagamama and Patisserie Valerie. The Centre:MK links in to Midsummer Place, which is anchored by Debenhams. Midsummer Place is orientated towards younger fashion and accommodates several flagship fashion retailers, such as Hugo Boss and Hollister. Prime pitch in Milton Keynes has traditionally been wholly situated within the Centre:MK, running along Midsummer Arcade from Market Square to its junction with Acorn Walk. However, a dip in top achieved prime rents within theCentre:MK since the end of 2009, compared with the apparent resilience of rental levels within Midsummer Place, means that there is little difference between top rents in the two centres. Prime rents in Centre:MK are currently around £200 per sq ft Zone A and the weighted average unexpired lease term is in the order of 9 years 10 months (to lease expiry) and 9 years factoring in tenant break options. In January 2014 Hermes sold a 50% interest in the property to AustralianSuper Fund for £270m, representing a net initial yield of 5.30%, which was broadly considered rack-rented. Centre:MK is a prime centre in an affluent catchment area and is ranked within the top 25 shopping centres in the country; although a strong centre it is considered inferior to Stratford, which is considered class-leading. Centre:MK is older and listed, which can present challenges when trying to satisfy modern retail

requirements, particularly for larger space.

Bullring, Birmingham Hammerson and CPPIB acquired Future Fund’s 33% interest in Bullring in May 2013 for £307 million, representing a net initial yield of 5.25%. The property is held long leasehold (250 years at a nominal rent), dates from 2003 and totals 1.25 million sq ft arranged over three retailing levels. It is anchored by Selfridges and Debenhams and comprises Birmingham’s prime retailing offering a brand mix which includes Apple, H&M, Lacoste, Superdry and Forever 21. Prime rents in the centre are currently in the order of £280 per sq ft Zone A, although there is a spread of rental levels across the Property’s various retailing pitches. The vacancy rate at the time of sale was less than 1% of rental value and the average unexpired term around 6 years. Bullring is a flagship asset and comprises one of the UK’s best regional city centre shopping destinations. The investment market has strengthened since the date of this transaction and CBRE’s opinion of prime shopping centre yields has compressed from 5.25% to 5.00% during this time. Westfield Stratford has an advantage over Bullring being located in London, which offers greater levels of affluence and projected population growth. Meadowhall, Sheffield In October 2012, Norges Bank Investment Management acquired a 50% interest in Meadowhall for £762.5 million, reflecting a net initial yield of 5.15% on the net income produced by the shopping centre. The property is held long leasehold at a peppercorn rent. The centre, which dates from 1993 and totals 1.4m sq ft retail floorspace, dominates retailing in South Yorkshire and is considered a super-regional centre; there is little competition to the centre in its core catchment area as Sheffield’s city centre retailing offer is poor. Anchored by Debenhams, House of Fraser and M&S, the centre offers an extensive retailing line up with a strong fashion content including All Saints, Armani Exchange, Kurt Geiger, Superdry, Urban Outfitters and Zara. Prime rents are approximately £375 per sq ft Zone A, although some fringe pitches have lower rental values of £150 to £200 per sq ft Zone A. The property offers an average weighted unexpired lease term of 9.25 years and the let space is only marginally over- rented. The vacancy rate is less than 2% of rental value. We understand that a good level of interest was received in respect of the property during the marketing process from both international sovereign wealth funds and UK REITs and that multiple bids were received. We detail below a summary of the transactional evidence compared to the subject Property:

WESTFIELD Bluewater Oberhausen Centre:MK Bullring Meadowhall STRATFORD

Date On market Feb 2014 Jan 2014 May 2013 Oct 2012 Size 1.9m sq ft 1.7m sq ft 2m sq ft 1.3m sq ft 1.3m sq ft 1.4m sq ft Anchors John Lewis, John Lewis, Galeria John Lewis, Selfridges, Debenhams, M&S House of Kaufhof, Sinn M&S, House Debenhams House of Fraser Fraser, M&S Leffers, Peek & of Fraser Cloppenburg Prime Rental £200 - £325 £225 - £365 €130 overall £160 - £200 £280 Zone A £300 - £375 Values Zone A Zone A Zone A Zone A (per sq ft) Vacancy (% 1.46%* 2.50% 5.50% 1.00% 2.00% ERV) Average 6 years 8 7 ½ years c. 5 years 9 years 6 years 9 ¼ years Unexpired months Term (to break) Price £1,955m £550m €885m £270m £307m £762.5m (quote) % ownership 100% 30% 50% 50% 33% 50% Yield (initial / 4.52% / 4.91% Est 4.50% / 4.25% / 4.75% 5.30% / 5.25% / 5.15% / 5.20% equivalent) 4.75% 5.30% 5.25% *the vacancy rate quoted does not include accommodation under offer or held for development.

Income Summary and Analysis of Passing Rents

Property Income Summary The net income of the Property is made up by follows: Westfield Stratford Amount (£ pa) % of gross rent

Shopping Centre rent 72,134,258 74.58% The Street rent 6,031,137 6.24% Food court and Restaurant rent 5,081,440 5.25% Car park income (net) 5,377,525 5.56% Brand Partnership and Media income (net) 6,100,000 6.31% CCHP income, Storeroom, IT and Kids Carts (net) 1,996,300 2.06% Total Income 96,720,660 100.00%

Void costs and lease shortfalls 2,279,575 Landlord marketing contribution 1,600,000 Total Expenses 3,879,575 NET INCOME 92,841,085

Turnover rent is contained within the shopping centre income and The Street income and accounts for 5.39% of the total gross rent. The ten tenants who make the greatest contribution towards the rent roll comprise the following:

Tenant Rent (per % Retail NIA (sq ft) % NIA Lease Expiry annum) income

Forever 21 (UK) Ltd £2.2 million 2.59% 68,552 3.5% March 2026 H&M Hennes & Mauritz UK Ltd £2.1 million 2.57% 49,049 2.5% April 2025*

Marks & Spencer plc £2.1 million 2.56% 207,706 10.7% June 2059 Aspers (Stratford City) Limited £1.7 million 2.07% 62,829 3.2% September 2036

Primark Stores Ltd £1.4 million 1.68% 67,123 3.5% March 2031

New Look Retailers Ltd £1.3 million 1.54% 31,828 1.6% June 2021 John Lewis plc (incl Waitrose) £1.2 million 1.50% 299,392 15.5% September 2250

Vue Entertainment Ltd £1.1 million 1.32% 75,240 3.9% September 2031 Boots UK Ltd. £1.1 million 1.32% 23,846 1.2% March 2026

Nike BV £1.1 million 1.28% 16,865 0.9% March 2021

TOTAL £15.3 million 18.43% 902,430 46.50% March 2050

*Weighted average lease expiry date of H&M’s two leases.

Lease expiry profile The property offers an expected income-weighted average unexpired lease term of 12 years 6 months years to lease expiry and 6 years 8 months to break (excluding the car park, media, CCHP and other ancillary income). This is in line with other prime shopping centre assets which generally offer unexpired terms of seven to ten years. Historically, unexpired terms for new shopping centres were frequently in excess of 15 years, however as unit shop leases have shortened (5 year break options are relatively common), average unexpired terms for new shopping centres rarely now exceed 10 – 12 years. Within our valuation and calculation of the weighted average unexpired lease term, we have reflected planned asset management initiatives including four proposed lease surrenders and new lettings. In addition, a small number of leases contain rolling break options where such leases could be determined at any time; we have forecast when such leases will be determined. We detail below the lease expiry profile (including break options) as a percentage of passing rent:

Lease expiry profile % income

Less than 2 years 7.10%

2-5 years 38.70%

5-10 years 37.50%

10 -15 years 7.00%

15+ years 9.70%

There is only a small percentage of income expiring within the next two years, most of which relates to short term leases, principally on The Street. Approximately 46% of the passing rent expires within 5 years, on account of the number of break clauses falling within this timescale. We consider the prospects for re-letting are good, given the strong trading performance of brands inside the centre and the low level of vacancy. Assuming the low void rate and high level of retailer interest continues, rental tension should persist and therefore in the majority of cases, lease expiries will present an opportunity to increase the rent. In relation to The Street, there is a risk that further vacancy may arise in 2016 when several retailers have break options or lease expires. We anticipate that trade in this part of the scheme will improve with the arrival of TK Maxx, although their impact is not yet known as their store has not yet opened. If retailers do not exercise their break options to vacate, it is likely they will use the opportunity to renegotiate their rental terms. Relocating elsewhere within the centre is unlikely to be a viable option as the internal malls are virtually fully let; this will help the landlord’s negotiating stance. There are eight units on The Street that have lease expiries or break options in 2016, whose aggregate rental liability is £2,432,970 per annum. All of the units are over-rented in our opinion, with an aggregate rental value of £1,643,500 per annum. We have assumed in each case that these retailers will either negotiate a rent free period and rent reduction to remain in

occupation, or will vacate. We have allowed void/rent free periods totalling between 12 and 24 months and assumed that our opinion of rental value will apply thereafter. Nike are the largest rent payers and we believe they present the greatest risk of either vacating or renegotiating their lease terms. Hugo Boss occupy a unit which technically forms part of the Street frontage, but also has frontage to the internal malls. We have assumed that they will remain in occupation and that their rent will revert to our opinion of rental value which is almost the same as the passing rent.

Range of passing rents Rents within the internal malls generally reflect rents of between £150 and £350 per sq ft Zone A, although the majority of standard size unit shops are between £200 and £300 per sq ft Zone A. This is considerably lower than most other “super-regional” UK shopping centres; although many other regional centres currently have rental values at £350 - £375 per sq ft Zone A, many of the passing rents were determined prior to the recession and reflect higher levels of rent of around £400 per sq ft Zone A in places such as Bluewater, Meadowhall and Trafford Centre. Westfield Stratford’s rateable values are also lower than many other regional centres, which helps keep gross occupancy costs under control; given we are seeing signs of rental growth, we would expect there will be a corresponding increase at the 2017 at the business rates revaluation. We consider that Westfield Stratford offers strong potential for future rental growth, given its high footfall levels and London demographic.

Income Quality Approximately 87% of the retail income is secured against national multiple retailers, which is representative of a prime shopping centre. Approximately 8% of the retail income relates to independent retailers and 4% relates to regionally represented fascias. This is not unusual for a prime shopping centre. The majority of this income relates to the Great Eastern Market, which offers shoppers a point of difference, and temporary lettings. Turnover rent accounts for approximately 5.4% of the total passing rent, which is higher than many other prime shopping centres. Leases which include provision for the payment of turnover rent have become increasingly common in recent years, and whilst they present a variable amount of income for a landlord, they also enable the landlord to share in strong brands’ trading success. Food and beverage makes a considerable contribution towards turnover rent, currently providing around £1.9 million per annum over the level of base rent payable. In aggregate this is more than most other prime shopping centres, however Westfield Stratford offers a more extensive and diverse range of catering options than most other centres. This, in conjunction with the strong leisure offer, acts as a further anchor for the development.

Tenant Covenant Strength Detailed financial investigations of the tenants are outside the scope of this report. However, we

have reviewed Experian reports of a sample of the tenant companies where the proposed rent is in excess of £1,000,000 per annum per unit and we comment below on the findings:

Company John Lewis plc Commercial Delphi Score (100/100) Accounts Year Ending 26 January 2010 Turnover £8,465,500,000 Pre-tax Profit £198,000,000 Risk 176:1 – Very low

Company Marks & Spencer plc Commercial Delphi Score (100/100) Accounts Year Ending 30 March 2013 Turnover £10,026,800,000 Pre-tax Profit £564,300,000 Risk 176:1 – Very low

Company Waitrose Limited Commercial Delphi Score (100/100) Accounts Year Ending 26 January 2013 Turnover £5,416,100,000 Pre-tax Profit £262,300,000 Risk 176:1 – Very low

Company Next plc Commercial Delphi Score (100/100) Accounts Year Ending 25 January 2014 Turnover £3,740,000,000 Pre-tax Profit £695,200,000 Risk 176:1 Very low

Company New Look Limited Commercial Delphi Score (94/100) Accounts Year Ending 30 March 2013 Turnover £20,000,000

Pre-tax Profit £19,964,000 Risk 101:1 - Very low

Company Arcadia Group Limited Commercial Delphi Score (98/100) Accounts Year Ending 25 August 2012 Turnover £133,196,000 Pre-tax Profit £20,962,000 Risk 176:1 - Very low

We believe that the property investment market would view the tenant companies as providing good security of income.

Gross to net income ratio The gross to net income ratio of the retail income, excluding the car park, media and other revenues, is approximately 95%. This is considered a strength and is explained by the centre’s low level of vacancy (3% of rental value) and the small number of lease shortfalls on account of the centre’s modern lease structures. We detail below a summary of the Property’s non-recoverable costs:

Description Amount (£ per annum) Comment

Gross income £96,720,660 All Property income including retail, leisure, restaurants, car park, media and ancillary income Landlord contribution to marketing £1,600,000 Void costs £1,202,372 Non recoverable rates, service charge and insurance Lease shortfalls £1,077,202 Service charge caps and shortfalls on temporary lettings Total costs £3,879,574 Net income £92,841,085

Car Park Income The car park income has not yet stabilised in our opinion. The car park was open for 3 months from centre opening during 2011 and in 2012 it was closed during the Olympics, after which there was a concessionary tariff in place to encourage occupancy, therefore the first full year of operation was 2013. The tariff is currently £2.50 for2 hours, £2.50 per hour thereafter with a cap at £5 for 24 hours on weekdays; the cap increases to £8 for 24 hours at weekends. The tariff is competitive, particularly for all day parking for a London location.

We have been provided with historic income and a projection for 2014 by the Borrower:

Year Gross income (per Gross income per Net income Net income per annum) space space

2012 actual £2,800,000 £560 £600,000 £120

2013 actual £8,300,000 £1,660 £5,377,525 £1,075

2014 (projection) £10,900,000 £2,180 £8,400,000 £1,680

We are aware of car parks in large city centres which produce gross incomes per space of around £2,000 to £2,500 and gross to net income ratios of 60% to 70%. We are also aware of modern car parks attached to Greater London shopping centres which achieve gross income per space of £2,500 to £3,500 and gross to net ratios 70% to 75%. We are unable to disclose more specific details due to confidentiality. The gross to net income ratio in relation to the car park is approximately 65%. Gross to net income ratios vary according to the level of tariff, usage and age of the car park. Modern, well occupied car parks can produce gross to net ratios of around 75%; older, less efficient and less popular car parks can produce gross to net ratios of 50% or less. Westfield Stratford’s car park is operated efficiently, with levels being opened and closed according to demand, thus saving electricity. Based on Westfield’s projection for 2014, the gross to net income ratio will reach 72% which we do not consider unreasonable. We have been advised of the current level of net rent being received in relation to the car park and have made allowance in our valuation for increases in net rent in future years as car park usage is anticipated to stabilise:

Year Net Income in valuation (per annum)

Current income £5,377,525

December 2014 £6,500,000

December 2015 £7,750,000

December 2016 £7,750,000

December 2017 £9,000,000

IT services Westfield receive income from mobile phone operators for providing services and wi-fi, based on each operator paying rental for the mobile networks plus an amount for hosting IT equipment on behalf of tenants. We are advised this currently totals £73,000 per annum. The Wi-Fi services are free to use by the public. Retailers and commercialisation partners are charged to use the system.

Media and Commercialisation

Westfield are well-known in the market for maximising the levels of commercialisation that can be achieved from centres, from media and from mall leasing. Westfield Stratford is one of the most modern shopping centres in the UK and has been designed to accommodate extensive digital media sites both within the malls and externally along The Street, and the building’s fascias. Westfield achieved £6.1 million net media and commercialisation revenues in 2013 and have budgeted to achieve £8.4 million in 2014. As a percentage of the property’s income (6.78% excluding car park income), it is a relatively high figure in relation to other centres; most other regional shopping centres achieve 5% or less. This is not surprising given the in-built technology and high levels of footfall Westfield Stratford achieves: 38 million versus 25 million in most other regional malls. We have considered the Property’s proportion of net media and commercialisation income in relation to a sample of other regional malls of which we have detailed knowledge; we are unable to disclose the identity of the various centres as we are bound by client confidentiality. All of the centres below do not charge for parking therefore when calculating the proportion of media income at Westfield Stratford, we have excluded car park income.

Centre age Media and Commercialisation Percentage of total gross rent Income (£ per annum)

0 – 5 years £6,100,000 6.78%

15 – 20 years £3,750,000 4.25%

20 – 25 years £2,700,000 3.40%

25 – 30 years £2,800,000 5.85%

25 – 30 years £1,900,000 3.60%

All of the centres in the sample are regional malls totalling 1.3m sq ft floorspace or more. Westfield Stratford is considerably more modern than the rest of the sample and its ability to accommodate digital technology influences the level of media income the centre generates. The remaining centres mostly generate less than 5% of income but with digital media revenues making up a much smaller proportion of this income compared to Westfield Stratford. As the economy returns to growth and consumer confidence increases, advertising revenues are likely to increase therefore there should still be prospects for income growth from media revenues. We understand that approximately 50% of the gross revenue (c. £4 million per annum) is currently received from 5 year contracts from parties including CBS Media and American Express. We have been advised of the level of net rent currently received in relation to Brand Partnership and Media income, which we detail below. We have also made allowance in our valuation for increases in Brand Partnership and Media revenue in future as this income is anticipated to increase and stabilise over the next few years:

Year CBRE valuation

Current income £6,100,000

December 2014 £7,400,000

December 2015 £7,400,000

December 2016 £7,400,000

CCHP Stratford Utilities Limited (SUL) is responsible for the acquisition and distribution of electricity to the Westfield Stratford Shopping Centre and other non-retail tenants. SUL operates a private electricity network buying predominantly high voltage (11kv) electricity and selling this as low voltage at retail tariffs to the Landlord and tenants. SUL currently procures electricity in advance from E.ON Energy as their main incumbent supplier. Stratford CCH Limited (SCCHL) is responsible for the distribution and management of heating and cooling water for Westfield Stratford Shopping Centre and other non-retail tenants. SCCHL operates a secondary network to supply heating and cooling to the Landlord and tenants. SCCHL is contracted to procure its heating and cooling supply services from Cofely which are distributed via the Community Energy Network. Cofely own and operate the Community Energy Network which is served by two on-site Energy Centres and connected to the secondary SCCHL network. SCCHL buys the heating and cooling supply from Cofely at rates agreed annually in advance. The Landlord and tenants are charged using a defined index linked price formula which includes the Heren Index - a margin is applied by SCCHL to heating tariff. We are advised that net income from utilities has increased from £800,000 per annum in 2012 to £1.6 million in 2013 and is projected to reduce slightly to £1.5 million in 2014. There will be energy price fluctuations which could impact on the level of profit, as could having to price match with the electricity cost that the retailers can currently obtain electricity themselves.

Key Valuation Factors

Strengths  The largest urban shopping and leisure destination in Europe, totalling 1.9m sq ft and attracting over 38 million visitors annually. The centre ranks number one in the Trevor Woods Going Shopping Survey (2013), which ranks shopping centres according to overall attractiveness to shoppers, retailers and investors.  London’s economy dominates the UK; income and spending levels per capita are higher than the UK average. London’s population is forecast to grow from 8.3 million at present to over 10 million by 2031.  Very well served by public transport, benefiting from two London Underground lines, London Overground, mainline railway, Docklands Light Railway and extensive bus services. 5,000 car parking spaces are also provided.  Good anchors including John Lewis and Marks & Spencer, and a comprehensive line up of fashion houses, complemented by a substantial leisure and dining offer.  Stratford has been the focus of a major regeneration project, led by the 2012 Olympic Games. Westfield Stratford City forms the centre-piece of the project and is surrounded by new housing, student housing, office accommodation and the Olympic Park.  Prime rental values are approximately £300 - £325 per sq ft Zone A, which is relatively low in the context of other major regional UK shopping centres. We consider there are good prospects for rental growth; where retail space has been remerchandised within the internal malls, higher rents have been secured suggesting rental growth has already started to occur. Shopping centres that opened over a decade ago such as Bluewater, West Quay in Southampton and The Oracle in Reading experienced good rental growth from opening to first review (a period of five years) of 50%, 26% and 21% respectively, albeit in a stronger market.  The Property has a low vacancy rate with only 1.10% of the total floorspace currently vacant (1.46% based on rental value), the occupancy rate therefore is 98.90%. Including accommodation which is held for development or under offer, the vacancy rate is 2.10% by floor area and 2.40% by rental value.  Levels of tenant incentives have fallen from 12-18 months on first letting to around 3 – 6 months (within the centre), although The Street requires higher levels of incentives.  The UK commercial property market experienced a notable upturn in demand and transaction volumes over the last 12 months and there is currently no sign of this abating. There is a shortage of openly marketed stock, particularly prime assets, and we would envisage strong demand for the Property in the event of it being marketed.  A 30% interest in Bluewater (with management control) has been marketed and the outcome of a second round of bidding is awaited, we understand the three bidding parties are all UK listed property companies. This will be the best available comparable to the subject property and pricing is expected to achieve 4.75% equivalent yield or lower.

Valuation Methodology

Occupational Leases We have reflected in our valuation the rental income produced by virtue of the Property’s leases and had regard to the reversionary position in light of recent lettings evidence. Floor Areas Our analysis of passing rents and estimates of rental value for the unit shops within the scheme have been based on ITZAs derived from scale as built floor plans. The anchor stores, leisure units, fashion MSUs, kiosks and units within the Great Eastern Market are analysed and valued reference to overall gross internal areas. We scale measured ITZA areas for 40 unit shops. This exercise was carried out during November/December 2011. Our sample was chosen to be representative of the range of unit sizes, and different pitches for each level of the scheme. Our sample enabled us to derive ratios between Area ITZA and GIA for each category of unit within each pitch at each level of the scheme, thus enabling us to ascribe ITZAs for the remainder of the unit shops. Once the ITZA for each unit had been calculated, additional adjustments were made for unusual configuration and return frontages. Mezzanine areas have not been included within the ITZAs, but additional sales floors have been where appropriate (i.e if not a MSU); similarly storage areas have been included where they are within the unit demise. Rental values In relation to the retail accommodation, we have analysed lettings and adopted rental values on a net effective basis. This is because the next lease event in the vast majority of cases will be a rent review rather than new letting or lease renewal. There is more uncertainty regarding rental values along The Street, we have applied headline rental values here and made appropriate allowances for tenant incentives to fill vacant space or secure lease renewals. Unlet Units We have included in our valuation the rental value of any unlet accommodation after allowing for an appropriate marketing period together with the likely rent free period required to secure a tenant. We have deducted void costs comprising service charge, insurance and empty rates for the duration of the assumed void period. Permanent Void Allowance Large shopping centres inevitably contain an element of vacancy. Although the internal malls within the subject Property are virtually fully let, there are one or two vacant units; along The Street there are currently several vacant units although we anticipate the void rate reducing over the next year. We have made allowance within our valuation for 2.50% of the total rental value of the Property to be vacant; we have deducted this amount two years from the valuation date to avoid double-counting with units which are currently vacant.

Tenant Incentives In relation to any vacant retail units we have also allowed for tenant incentives. Units within the main centre, where tenant demand is strongest, we have allowed approximately 6 months void period and three to six months rent free, which is consistent with recent lettings. Units along the Street, where tenant demand is lower, we have allowed nine to 18 months void period followed by 12 to 24 months rent free periods. In some instances lettings have been agreed on the basis of capital tenant incentives rather than rent free. Where leases have been recently agreed on this basis, we have reflected the capital costs associated with each proposed letting and we detail our assumptions under “Capital Costs” below. Units where new leases are agreed There are eight retail units where terms are agreed with retailers and we have assumed in each case that the agreed leases will complete within one to three months from the valuation date on the basis of the terms agreed. In aggregate these leases will add £2,195,000 per annum rental income. Non recoverable costs We have deducted all non-recoverable costs from the gross income. We have deducted void costs (comprising service charge, insurance and rates) for the duration of the assumed void period. We have deducted service charge shortfalls for the duration of the lease. We have deducted landlord’s contribution towards marketing at its current level of £1.6 million per annum for the next two years; once the centre reaches five years of age (in two years’ time) we have assumed that less marketing will be required and have reduced the level of cost to £1.4 million from this time. £1.4 million per annum is a comparable level to other major regional centres. Turnover Rents We have reflected turnover rents as advised by Westfield. Where turnover rent is received in addition to the full Market Rent, we have capitalised the turnover rent in perpetuity. Where turnover rent is received in lieu of a full Market Rent, we have valued the turnover rent until the next rent review (for example a turnover top-up provision to compensate for the fact that a percentage of the full Market Rent is payable as base rent). Tenant Break Clauses and Lease Expiries Where lease expiries or tenant break options falls within three years of the valuation date, we have made allowance for a void and rent free period within our valuation. In relation to units inside the centre we have allowed three to nine months in total, and in relation to units along the Street we have allowed 18 to 24 months in total. We have assumed that kiosks and food court units will renew without a rent free requirement; the food and beverage units trade extremely well at the centre therefore we consider this a reasonable assumption. Management Fee We have not made any deductions or allowances for management fees within our valuation. Management fees are not normally taken into consideration when shopping centres are traded and we have analysed all of the comparable evidence on this basis. Yields Adopted We have adopted a range of equivalent yields according to income quality and growth potential,

having regard to the overall blended yield profile the resulting capital value presents. Main centre including restaurants and leisure: 4.60% The most relevant comparable will be the outcome of Bluewater, which we anticipate will reflect an equivalent yield of 4.75% or lower. Bluewater does not charge for car parking and has a lower proportion of media and commercialisation revenue. It does however have a large cinema and an extensive restaurant offer, all of which will be included in the reported yield. We consider Stratford offers better rental growth prospects therefore we have adopted a lower level of yield to account for this. The Street: 6.00% The Street has been a challenge but prospects are now better with the arrival of TK Maxx. We believe that a purchaser may apply a yield discount to reflect lower rental growth prospects and lease expiry risk on this element of the income stream, but having regard to the high levels of footfall and the fact it is part of one of the UK’s most successful shopping destinations. Media/Commercialisation/CCHP: 6.00% The Property contains a relatively high level of media and commercialisation income which is perceived as variable and may prove challenging to grow at the same rate as the retail income. We have therefore applied a yield discount. We have also capitalised CCHP income at the same rate as we consider the investment market would view this as non-core income with an element of uncertainty over future growth. Car Park: 6.00% It is generally considered market practice to capitalise car parking income at the same yield as its associated shopping centre income. Car parking income at the Property has not yet stabilised and therefore presents an element of uncertainty. We have therefore capitalised this income at a higher level of yield compared to the core retail income. We have capitalised our projection of net income at 6% (equivalent yield), which breaks back to an initial yield of 3.80% based on the current level of car park income. The car park income needs to grow by a further £1.1 million per annum (to £6.5 million) in order to reach the same yield as the core retail income (4.60%). Westfield’s projections suggest income will reach £7.8 million by the end of 2014 (rising further to £9 million by the end of 2016); we have taken a more conservative view and have assumed income will reach £6.5 million by the end of 2014, rising to £7.75 million by the end of 2015 and £9 million by the end of 2017. Capital Costs Where landlord works or capital incentives have been agreed in relation to future lettings, we have deducted them from our valuation. The total amount of capital expenditure involved in securing these lettings on the basis of the terms agreed, is £892,226, which we have deducted from our valuation as a one-off capital sum. Where mid-term rent free periods have been agreed with retailers, rather than deduct them in the cashflow, we have assumed that a guarantee to cover the income shortfall would be put in place in the event of an investment sale of the Property. We have therefore deducted a capital amount to cover the cost of providing such a guarantee. The total amount we have deducted from our valuation to account for this is £523,750, which we have deducted as a capital sum. Additionally, we have deducted letting and legal fees which will be payable when tenants are secured in relation to any vacant accommodation. We have deducted 15% of the rental value of

any vacant units as a capital cost within our valuation. Acquisition Costs We have deducted purchaser’s costs comprising stamp duty (4%), agent and legal fees (0.75%) based on the net capital value.

Market Value

We are of the opinion that the Market Value of the long leasehold interest in the Property as at the Valuation Date is: £1,955,000,000 (One billion nine hundred and fifty five million pounds) After allowing for purchaser’s costs of 4.90% (including stamp duty land tax at 4%), our opinion of Market Value reflects the following yield profile: Initial Yield: 4.52% Equivalent Yield: 4.91% Reversionary Yield: 4.92%

4 APPENDICES

A PLANS

Location Plan, Stratford, London E15.

(Under Construction) 8

1 1

5 a

6 1

1 4 1 2

SL 1 3 T SL H O R N H A M

G R O 1 V 1 E

4 7

L Twr 6 5

SL SL

Stratford International Station

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L S

Stratford Station

n o ti ta S rd o tf Clock Tower tra S

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1 Mast

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t S a G t a i ntr o y n

SL 4.2m

M P 1

SL L S 4.4

A 71 T I O

Th S

e Carpente T 9 rs' 8

and Docklan 8 d 9 Youth Centre

S Gantry

Olympic Aquatic Centre (Under Construction)

i 1

o t L 0

o Building Crafts College

S 0

P 1

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KENNAR

D ROAD

3 MP .75 1 Playground

SL D A

1 O 1

R 2

7 3.5m 1

S 2

N 8

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9 9 B

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B 6

I 7 1 to E 2 G 4 S Ad 1 ria O n Ho

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This plan is published for convenience of identification only and although believed to be correct its accuracy is not guaranteed and does not form any part of a contract. 1

B PHOTOGRAPHS

PHOTOGRAPHS

Photograph 1 Westfield Stratford – Ground Floor East

Photograph 2 Westfield Stratford – First Floor East

Photograph 3 Westfield Stratford – First Floor Middle

Photograph 4 Westfield Stratford – Mezzanine Restaurant

Photograph 5 Westfield Stratford – Aerial 1

Photograph 6 Westfield Stratford – Aerial 2

C VALUATION PRINTOUT

REPORT Valuation Summary CBRE Ltd.

Report Date 08 July 2014 Valuation Date 31 May 2014

Property

Address Westfield Stratford,Refinance May 2014,Stratford File/Ref No

Gross Valuation £2,053,257,064 Capital Costs -£3,269,416 Net Value Before Fees £2,049,987,648

Less Stamp Duty @4.00% of Net Value -£78,200,000 Agents Fee @0.50% of Net Value -£11,730,000 Legal Fee @0.25% of Net Value -£5,865,000

Fees include non recoverable VAT @ 20.00 % Net Valuation £1,954,192,648 Say £1,955,000,000

Equivalent Yield 4.9070% True Equivalent Yield 5.0608% Initial Yield (Deemed) 4.5199% Initial Yield (Contracted) 4.5199% Reversion Yield 4.9198%

Total Contracted Rent £96,720,660 Total Current Rent £96,720,660 Total Rental Value £105,868,605 No. Tenants 433 Capital value per ft² £1,472.36

Running Yields

Date Gross Rent Net Rent Annual Quarterly 31-May-2014 £96,720,660 £92,841,085 4.5199 % 4.6505 % 07-Jun-2014 £96,702,660 £92,823,085 4.5190 % 4.6496 % 11-Jun-2014 £96,752,660 £92,873,085 4.5214 % 4.6521 % 21-Jun-2014 £96,762,660 £92,883,085 4.5219 % 4.6527 % 25-Jun-2014 £96,762,660 £92,828,367 4.5193 % 4.6498 % 30-Jun-2014 £96,392,660 £92,458,367 4.5012 % 4.6308 % 01-Jul-2014 £97,117,720 £93,373,358 4.5458 % 4.6779 % 09-Jul-2014 £97,117,720 £93,372,658 4.5458 % 4.6779 % 10-Jul-2014 £97,109,161 £93,364,799 4.5454 % 4.6775 % 31-Jul-2014 £97,369,161 £93,679,400 4.5607 % 4.6937 % 01-Aug-2014 £97,477,661 £93,809,297 4.5670 % 4.7004 % 31-Aug-2014 £97,637,661 £94,031,400 4.5778 % 4.7119 % 01-Sep-2014 £97,258,360 £93,676,866 4.5606 % 4.6936 % 12-Sep-2014 £97,263,360 £93,681,866 4.5608 % 4.6938 % 13-Sep-2014 £97,774,579 £94,193,085 4.5857 % 4.7202 %

Portfolio: Retail - Westfield CIRCLE VISUAL INVESTOR 2.50.039 REPORT Valuation Summary CBRE Ltd.

Report Date 08 July 2014 Valuation Date 31 May 2014

14-Sep-2014 £97,696,579 £94,115,085 4.5819 % 4.7162 % 27-Sep-2014 £97,696,579 £93,975,757 4.5751 % 4.7090 % 30-Sep-2014 £98,006,579 £94,285,757 4.5902 % 4.7250 % 01-Oct-2014 £97,866,079 £94,145,257 4.5834 % 4.7177 % 03-Oct-2014 £97,830,079 £94,109,257 4.5816 % 4.7159 % 09-Oct-2014 £97,830,079 £94,069,486 4.5797 % 4.7138 % 15-Oct-2014 £97,831,079 £94,070,486 4.5797 % 4.7139 % 23-Oct-2014 £97,819,079 £94,058,486 4.5791 % 4.7133 % 01-Dec-2014 £98,404,079 £94,894,992 4.6199 % 4.7564 % 05-Dec-2014 £98,404,079 £94,823,132 4.6164 % 4.7527 % 30-Dec-2014 £98,479,079 £94,898,132 4.6200 % 4.7566 % 31-Dec-2014 £100,866,929 £97,285,982 4.7363 % 4.8799 % 01-Jan-2015 £100,789,929 £97,208,982 4.7325 % 4.8759 % 03-Jan-2015 £100,539,929 £96,958,982 4.7203 % 4.8630 % 30-Jan-2015 £100,479,930 £96,898,983 4.7174 % 4.8599 % 01-Mar-2015 £101,285,230 £97,704,283 4.7566 % 4.9015 % 03-Mar-2015 £101,285,230 £97,837,963 4.7631 % 4.9084 % 01-Apr-2015 £102,057,730 £98,610,463 4.8007 % 4.9483 % 31-May-2015 £102,057,730 £98,879,986 4.8139 % 4.9623 % 01-Jun-2015 £102,398,830 £99,221,086 4.8305 % 4.9799 % 07-Jun-2015 £102,451,330 £99,273,586 4.8330 % 4.9826 % 14-Jun-2015 £102,629,130 £99,451,386 4.8417 % 4.9918 % 28-Jun-2015 £102,654,130 £99,476,386 4.8429 % 4.9931 % 30-Jun-2015 £102,630,230 £99,452,486 4.8417 % 4.9919 % 01-Jul-2015 £103,032,230 £99,854,486 4.8613 % 5.0127 % 01-Aug-2015 £103,033,730 £99,855,986 4.8614 % 5.0128 % 23-Aug-2015 £103,034,730 £99,856,986 4.8614 % 5.0128 % 01-Sep-2015 £103,049,730 £99,871,986 4.8622 % 5.0136 % 12-Sep-2015 £103,054,730 £99,876,986 4.8624 % 5.0138 % 13-Sep-2015 £103,270,379 £100,092,635 4.8729 % 5.0250 % 27-Sep-2015 £103,270,379 £100,231,963 4.8797 % 5.0322 % 01-Oct-2015 £103,312,879 £100,274,463 4.8818 % 5.0344 % 03-Oct-2015 £103,348,879 £100,310,463 4.8835 % 5.0363 % 09-Oct-2015 £103,348,879 £100,350,234 4.8854 % 5.0383 % 16-Oct-2015 £103,358,879 £100,360,234 4.8859 % 5.0389 % 01-Dec-2015 £103,944,879 £101,342,873 4.9338 % 5.0897 % 05-Dec-2015 £103,944,879 £101,414,734 4.9373 % 5.0935 % 30-Dec-2015 £103,959,879 £101,429,734 4.9380 % 5.0942 % 31-Dec-2015 £105,226,004 £102,695,859 4.9996 % 5.1599 % 01-Jan-2016 £105,229,004 £102,698,859 4.9998 % 5.1600 % 01-Feb-2016 £105,433,914 £102,903,769 5.0098 % 5.1706 % 03-Mar-2016 £105,571,614 £103,041,469 5.0165 % 5.1778 % 31-Mar-2016 £105,723,559 £103,193,414 5.0239 % 5.1857 %

Portfolio: Retail - Westfield CIRCLE VISUAL INVESTOR 2.50.039 Page 2 REPORT Valuation Summary CBRE Ltd.

Report Date 08 July 2014 Valuation Date 31 May 2014

01-Apr-2016 £105,383,454 £102,890,305 5.0091 % 5.1699 % 02-Apr-2016 £104,302,184 £101,809,035 4.9565 % 5.1139 % 31-May-2016 £104,479,684 £99,586,789 4.8483 % 4.9988 % 02-Jun-2016 £104,594,084 £99,701,189 4.8538 % 5.0047 % 11-Jun-2016 £104,599,084 £99,706,189 4.8541 % 5.0050 % 01-Jul-2016 £102,495,281 £97,602,386 4.7517 % 4.8962 % 02-Jul-2016 £101,419,071 £96,526,176 4.6993 % 4.8406 % 10-Jul-2016 £101,503,871 £96,610,976 4.7034 % 4.8450 % 01-Aug-2016 £101,505,871 £96,612,976 4.7035 % 4.8451 % 23-Aug-2016 £101,503,871 £96,610,976 4.7034 % 4.8450 % 03-Sep-2016 £101,504,032 £96,611,137 4.7034 % 4.8450 % 12-Sep-2016 £101,510,732 £96,617,837 4.7037 % 4.8453 % 13-Sep-2016 £102,141,543 £97,248,648 4.7344 % 4.8779 % 19-Sep-2016 £102,066,543 £97,173,648 4.7308 % 4.8741 % 28-Sep-2016 £102,213,543 £97,320,648 4.7380 % 4.8817 % 29-Sep-2016 £102,439,401 £97,546,506 4.7490 % 4.8933 % 01-Oct-2016 £103,214,990 £98,322,095 4.7867 % 4.9334 % 02-Oct-2016 £103,323,890 £98,430,995 4.7920 % 4.9390 % 16-Oct-2016 £103,333,890 £98,440,995 4.7925 % 4.9396 % 23-Oct-2016 £103,449,690 £98,556,795 4.7981 % 4.9455 % 01-Dec-2016 £104,149,790 £99,256,895 4.8322 % 4.9818 % 31-Dec-2016 £104,029,990 £99,137,095 4.8264 % 4.9756 % 01-Jan-2017 £103,502,853 £98,609,958 4.8007 % 4.9483 % 02-Jan-2017 £103,895,453 £99,002,558 4.8198 % 4.9686 % 03-Jan-2017 £104,145,453 £99,252,558 4.8320 % 4.9815 % 05-Jan-2017 £103,845,453 £98,952,558 4.8174 % 4.9660 % 16-Jan-2017 £103,881,453 £98,988,558 4.8192 % 4.9679 % 30-Jan-2017 £103,990,153 £99,097,258 4.8244 % 4.9735 % 03-Mar-2017 £104,359,253 £99,466,358 4.8424 % 4.9926 % 31-Mar-2017 £103,419,253 £98,528,409 4.7968 % 4.9441 % 01-Apr-2017 £103,523,753 £98,632,909 4.8018 % 4.9495 % 02-Apr-2017 £103,787,753 £98,896,909 4.8147 % 4.9631 % 09-Apr-2017 £103,793,953 £98,903,109 4.8150 % 4.9635 % 01-Jun-2017 £103,880,753 £98,989,909 4.8192 % 4.9679 % 05-Jun-2017 £104,019,153 £99,128,309 4.8260 % 4.9751 % 30-Jun-2017 £103,928,528 £99,040,171 4.8217 % 4.9705 % 01-Jul-2017 £103,804,224 £98,915,867 4.8156 % 4.9641 % 02-Jul-2017 £103,889,024 £99,000,667 4.8197 % 4.9685 % 05-Jul-2017 £104,212,224 £99,323,867 4.8355 % 4.9852 % 01-Oct-2017 £104,138,824 £99,250,467 4.8319 % 4.9814 % 31-Dec-2017 £106,298,624 £101,410,267 4.9371 % 5.0932 % 01-Jan-2018 £106,599,424 £101,711,067 4.9517 % 5.1088 % 02-Jan-2018 £106,777,024 £101,888,667 4.9603 % 5.1180 %

Portfolio: Retail - Westfield CIRCLE VISUAL INVESTOR 2.50.039 Page 3 REPORT Valuation Summary CBRE Ltd.

Report Date 08 July 2014 Valuation Date 31 May 2014

30-Mar-2018 £106,787,424 £101,899,067 4.9609 % 5.1186 % 31-Mar-2018 £106,201,824 £101,313,467 4.9323 % 5.0882 % 01-Apr-2018 £106,131,164 £101,242,807 4.9289 % 5.0846 % 02-Apr-2018 £106,636,464 £101,748,107 4.9535 % 5.1107 % 28-Jun-2018 £106,607,464 £101,719,107 4.9521 % 5.1092 % 01-Jul-2018 £106,711,374 £101,823,017 4.9571 % 5.1146 % 01-Aug-2018 £106,707,374 £101,819,017 4.9570 % 5.1144 % 19-Sep-2018 £106,815,474 £101,927,117 4.9622 % 5.1200 % 30-Sep-2018 £106,810,574 £101,922,217 4.9620 % 5.1198 % 01-Oct-2018 £106,924,774 £102,036,417 4.9675 % 5.1257 % 02-Oct-2018 £106,919,874 £102,031,517 4.9673 % 5.1254 % 16-Oct-2018 £106,929,874 £102,041,517 4.9678 % 5.1259 % 01-Dec-2018 £106,925,874 £102,037,517 4.9676 % 5.1257 % 01-Jan-2019 £106,803,374 £101,915,017 4.9616 % 5.1194 % 21-Jan-2019 £106,780,674 £101,892,317 4.9605 % 5.1182 % 31-Jan-2019 £106,781,074 £101,892,717 4.9605 % 5.1182 % 01-Feb-2019 £106,791,374 £101,903,017 4.9610 % 5.1188 % 30-Jun-2019 £106,758,774 £101,870,417 4.9595 % 5.1171 % 01-Jul-2019 £106,907,974 £102,019,617 4.9667 % 5.1248 % 31-Jul-2019 £106,908,374 £102,020,017 4.9667 % 5.1248 % 01-Apr-2020 £106,872,016 £101,983,659 4.9650 % 5.1229 % 01-Jun-2020 £106,875,016 £101,986,659 4.9651 % 5.1231 % 01-Aug-2020 £106,865,616 £101,977,259 4.9647 % 5.1226 % 01-Dec-2020 £106,865,616 £102,031,977 4.9673 % 5.1255 % 31-Dec-2020 £106,884,116 £102,050,477 4.9682 % 5.1264 % 01-Apr-2021 £106,433,516 £101,599,877 4.9463 % 5.1031 % 01-Jul-2021 £105,922,076 £101,088,437 4.9214 % 5.0766 % 03-Sep-2021 £105,951,764 £101,118,125 4.9228 % 5.0781 % 13-Sep-2021 £105,922,864 £101,122,569 4.9230 % 5.0783 % 01-Oct-2021 £105,645,728 £100,845,433 4.9096 % 5.0640 % 01-Jan-2022 £105,499,723 £100,711,348 4.9030 % 5.0570 % 01-Apr-2022 £105,475,507 £100,687,132 4.9018 % 5.0558 % 01-Oct-2023 £105,458,107 £100,669,732 4.9010 % 5.0549 % 01-Jan-2024 £105,448,707 £100,660,332 4.9005 % 5.0544 % 30-Jun-2024 £105,448,607 £100,660,232 4.9005 % 5.0544 % 01-Jul-2024 £105,370,907 £100,582,532 4.8968 % 5.0504 % 01-Apr-2026 £106,192,961 £101,404,586 4.9368 % 5.0929 % 01-Jul-2026 £106,154,509 £101,366,134 4.9349 % 5.0910 % 13-Sep-2026 £106,154,509 £101,388,144 4.9360 % 5.0921 % 01-Oct-2028 £106,137,009 £101,370,644 4.9351 % 5.0912 % 01-Apr-2031 £106,150,982 £101,384,617 4.9358 % 5.0919 % 01-Jul-2035 £105,925,124 £101,158,759 4.9248 % 5.0802 % 24-Jun-2059 £105,823,215 £101,056,850 4.9198 % 5.0749 %

Portfolio: Retail - Westfield CIRCLE VISUAL INVESTOR 2.50.039 Page 4 REPORT Valuation Summary CBRE Ltd.

Report Date 08 July 2014 Valuation Date 31 May 2014

Yields based on £2,054,064,416

Portfolio: Retail - Westfield CIRCLE VISUAL INVESTOR 2.50.039 Page 5

5 TERMS OF ENGAGEMENT

CBRE Limited Henrietta House Henrietta Place London W1G 0NB

Switchboard 020 7182 2000 Fax No 020 7182 2000 Direct Line 020 7182 2897 [email protected] Our Ref Your Ref Stratford City Shopping Centre (No 1) Limited Partnership C/o Westfield 02 July 2014 Level 6, Mid City Place 71 High Holborn London WC1 V6EA

Dear Sirs

WESTFIELD STRATFORD CITY VALUATION AS AT MAY 2014

Appointment and Scope of Services

Following our recent discussions we are writing to confirm our appointment to provide a valuation of the above property as more specifically set out below.

The terms of our appointment confirming the scope of our instructions, the team who will be dealing with this matter, the basis of our fees and other applicable provisions are as set out in the attached document. I should be grateful if you would review these and confirm your agreement to them by signing the enclosed copy and returning it to me.

I look forward to working with you.

Yours faithfully

NICK KNIGHT EXECUTIVE DIRECTOR

Enc. PROJECT AGORA WESTFIELD STRATFORD CITY VALUATION AS AT MAY 2014

1. SCOPE OF THE INSTRUCTION

We have been appointed to undertake a valuation of Westfield Stratford City as part of a securitisation transaction. More particularly we understand that our advice is required to confirm the Market Value of the real estate asset as at the Valuation Date. Furthermore this Valuation Report will be included in a CMBS Valuation Report (the ‘Report’) to be used for the placement of the Securities with institutional investors pursuant to Regulation S. Investors will rely on the Valuation Report in making their decision to invest in the Securities.

You have asked us to value the freehold interest in the property. The property is held as an investment.

CBRE provide half yearly valuation advice to the Borrower for accounting purposes and are letting agents on the property. We do not consider that this represents any conflict of interest in advising you.

2. DETAILS OF INSTRUCTION

2.1. Terms of Reference

The valuation will be prepared on the basis of Market Value as defined in the current edition of the RICS Valuation – Professional Standards, published by the Royal Institution of Chartered Surveyors (RICS).

We would draw your attention to the fact that the valuation may be investigated by the RICS for the purposes of the administration of the Institution’s conduct and disciplinary regulations in order to ensure compliance with the Valuation Standards.

You have agreed to supply us with the following information:

• Tenancy schedule • A schedule of floor areas • Technical and legal due diligence • Details of planned capital expenditure • A schedule of non-recoverable costs • Details of on-going leasing negotiations

Our report will be addressed to:

Stratford City Shopping Centre (No 1) Limited Partnership C/o Westfield Level 6, Mid City Place 71 High Holborn London WC1 V6EA

The report will contain the following reliance wording: This report is for the use only of the party to whom it is addressed for the specific purpose set out herein and no responsibility is accepted to any third party for the whole or any part of its contents. We have agreed with you that this report may be relied upon by the Addressee and is intended for their benefit and that of their successors and assigns in connection with the

finance documents (howsoever such term shall be defined in the relevant Facility Agreement (the "Finance Documents")) and the transactions contemplated thereby including, without limitation, any Securitisation (the "Transactions"). The Facility Agreement is the credit agreement between Westfield Stratford City Finance Plc as the Issuer and Stratford City Shopping Centre (No. 1) Limited Partnership (acting by its General Partner) as Borrower (the “Facility Agreement”).

the Facility to be made available pursuant to the Facility Agreement; IV. any servicer or special servicer of a Facility; V. any actual or prospective investor (including its agent or advisers) in any securities issued in connection with any Securitisation; VI. any rating agencies (actually or prospectively) rating such securities issued in connection with any Securitisation and their respective advisers for the purposes of information only; or VII. where disclosure is required by law, court order, regulation, public authority, or in respect of legal proceedings in connection with the Report.

3. Performance of Terms of Reference

We will carry out the valuation as at 28 May 2014 and provide you with our report by 30 June 2014. A copy of our Draft Valuation Report containing the bases and assumptions on which our valuation will be based is attached to this letter. The wording of some of the bases and assumptions may be changed depending on the results of our investigations. If this occurs, then we will discuss the changes with you.

3.1. Liaising with Lawyers

Where it is appropriate to do so we will liaise direct with your lawyers. However they will be directly responsible to you for all legal work carried out by them. We will have no responsibility for their work. In particular we will not be liable for anything contained in the legal documentation prepared by the lawyers unless we specifically state in writing that the lawyers may rely on our advice in relation to any relevant issue.

4. PERSONNEL AND CONTACT DETAILS

This instruction will be led by Nick Knight together with those team members detailed below. Additional support will be drawn from other divisions of CBRE Ltd as appropriate.

The contact details for our team are as follows:

Name Position Phone No Email Direct Dial Nick Knight Executive Director 020 7182 2897 [email protected] Jonathan Adams Director 020 7182 2388 [email protected] Fiona Cohen Senior Surveyor 020 7182 2913 [email protected]

We will endeavour to maintain the team as detailed above for the duration of the appointment but we reserve the right to make changes. We will nevertheless advise you of any changes in the key personnel and the reasons for the changes at the earliest opportunity.

5. FEE Our fees will be payable on the following basis:

5.1. Amount and Calculation of Fees

Our total fee for undertaking this appointment will be £100,000 + VAT including disbursements.

5.2. VAT

All fees and expenses are exclusive of VAT which will be charged at the applicable rate.

5.3. Payment of fees and expenses

All fees and expenses are payable on completion of the appointment. This is the date on which the bank receives our signed Valuation Report.

We will send our invoice to:

Stratford City Shopping Centre (No 1) Limited Partnership C/o Westfield Level 6, Mid City Place 71 High Holborn London WC1 V6EA

If you would prefer invoices to be sent to a different address please let me know. If you have a query about an invoice please contact me within 10 days of the date of the invoice.

5.4. Calculation of fees if appointment not completed

If for any reason beyond our control the service to be provided cannot be completed or needs to be deferred, we reserve the right to be paid for all work already undertaken at our normal hourly rates and also to recover any outstanding expenses.

Stage Progress Percentage of full fee 1. Initial advice and review of documentation and 35% preparation of initial cash flow 2. Preparation of first draft report 75% 3. Final report ready, but transaction does not 90% proceed

6. GENERAL PROVISIONS

We attach our Draft Valuation Report which will be adopted when undertaking valuations, and will apply to the services to be provided.

We maintain professional indemnity insurance.

7. STANDARD TERMS OF BUSINESS

Our Standard Terms of Business, together with the Supplementary Terms for Valuation Appointments, are attached, which will apply to the services to be provided.

Please ensure that you review the attached Terms of Business carefully as these form part

of the contract between us. In particular, please note the exclusions and limitations of liability set out at clause 5, including a cap on liability of £100 million.

We would be grateful if you would acknowledge receipt and confirmation of your agreement to the contents of this letter, by signing and returning the enclosed copy.

For and on behalf of CBRE Limited:

Nick Knight Executive Director 02 July 2014

I acknowledge receipt and confirmation of my agreement to the contents of this letter:

Signed: Date:

Name:

Position:

For and on behalf of: Stratford City Shopping Centre (No 1) Limited Partnership

CBRE LIMITED - STANDARD TERMS OF BUSINESS

1. PRELIMINARY 5.6 Our maximum aggregate liability to you arising from, or in relation to, 1.1 In these Conditions CBRE Limited is referred to as "we", "us" or "our" and this appointment (in contract, tort, negligence or otherwise) howsoever the client with whom we contract to supply services is referred to as "you" arising shall not in any circumstances exceed £100 million. and "your”. 5.7 You agree that you will not bring any claim relating to this appointment 1.2 Our responsibility is solely to you and we will perform our services with (in contract, tort, negligence or otherwise) personally against any CBRE all reasonable care and skill and will act in good faith at all times. Limited officer, director, employee, member or consultant. 1.3 Your contract is with CBRE Limited. No CBRE Limited officer, director, employee, member or consultant contracts with you directly or assumes 6. DOCUMENTS legal responsibility to you personally in respect of work performed on 6.1 Unless expressly stated in our letter of appointment, all intellectual behalf of CBRE Limited. All correspondence and other outputs sent to property rights in all reports, drawings, accounts and other you in the course of our appointment with you shall for all purposes be documentation created, prepared or produced by us in relation to our treated as having been sent on behalf of CBRE Limited. appointment (including without limitation spreadsheets, databases, 1.4 Our services and fees are as stated in our Letter dated 02 July 2014. electronic mail or any other electronically produced or stored 1.5 The terms of our appointment are binding between you and us and may documents) belongs to us. only be varied if mutually agreed in writing with you and accepted in writing by your authorised signatory and one of our Directors or the 7. TERMINATION Associate Director who has signed our letter of appointment. 7.1 Our services under the terms of our appointment will terminate when any one of the following events occurs: 2. CHARGES AND EXPENSES 7.1.1 The job is finished; or 2.1 If there is a material change in the scope of our instructions, we will 7.1.2 If you and we consider that it is not in the mutual best interest of the two agree with you, in writing, an additional or alternative fee arrangement. parties for us to continue to act on your behalf; or 2.2 Unless expressly stated in our letter of appointment, in addition to our 7.1.3 If you do not pay our invoices as they fall due, or we reasonably fees, you will (subject to condition 2.3 below) be responsible for all anticipate that that will be the case; or reasonably incurred out-of-pocket expenses including, without limitation, 7.1.4 If either you or us becomes insolvent, or has a receiver, liquidator, advertising, photocopying, printing and reproduction costs, signboards, administrator or administrative receiver appointed; or mailshots, photography, receptions, plan printing charges, courier 7.1.5 If either you or us ceases or threatens to cease trading. charges, travelling costs, overnight accommodation etc., and marketing material of any kind. 8. SUPPLEMENTARY TERMS 2.3 If we are responsible for arranging marketing material then we will 8.1 Valuation appointments only - Where we are acting for you on the obtain estimates for the costs of marketing materials and agree them valuation of a property or a property portfolio, please refer to the with you before incurring the cost. attached Supplementary Terms for Valuation Appointments. 2.4 All fees quoted in our letter of appointment are exclusive of VAT, which will be charged at the applicable rate. VAT shall also be payable by you 9. MONEY LAUNDERING REGULATIONS on disbursements and other amounts due, where applicable. 9.1 Legislation has imposed on us obligations for mandatory reporting, 2.5 In the event of our appointment being terminated for whatever cause, record-keeping and client identification procedures. We will attempt to we reserve the right to charge for the work carried out (even if verify your details electronically which will include, where applicable, incomplete) in accordance with the fee basis agreed for the appointment identifying your parent companies, major shareholders, beneficial or any subsequent agreed variations to the terms of our appointment. owners and directors. On occasions we may need to ask you for certain identification documents to ensure we comply with the 3. PAYMENT Regulations. Where such information is requested, you will provide such 3.1 Our invoices are due for payment within 30 days of receipt by you. information promptly to enable us to proceed to provide our 3.2 We reserve the right to charge interest calculated on a daily basis from services. We shall not be liable to you or any other parties for any delay the 31st day following the date of the invoice at the statutory rate of in the performance or any failure to perform the services which may be interest determined in accordance with the Late Payment of Commercial caused by our duty to comply with such requirements. Debts (Interest) Act 1998 (as amended) and to charge any reasonable debt collection costs incurred by us in the recovery of any outstanding 10. GENERAL payments that are properly due by you to us. 10.1 We do not give legal advice. You should seek legal advice as appropriate from your lawyers. We have no responsibility for the content 4. QUALITY CONTROL AND COMPLAINTS PROCEDURE of any legal advice that is obtained. 4.1 We have documented Quality Management Systems (QMS) which have 10.2 We maintain professional indemnity insurance (details available on been developed to meet the requirements of ISO 9001:2008. request). Enhancing client satisfaction and continual improvement are key 10.3 We comply with the Data Protection Act 1998 (as amended) in relation requirements of our systems and we are dedicated to providing you with to your personal data. a first class personal service. 10.4 The parties to the appointment shall provide all necessary cooperation to 4.2 In the event that you feel that we are falling short of the high standards ensure that each party complies with the obligations of the Bribery Act that we set ourselves in the services we provide, please do let us know. 2010. Our Complaints Procedure involves a full investigation of any 10.5 All discussions we have with you, advice we give to you and complaints that we receive and has been designed to comply with the documentation provided by you to us will be kept confidential, unless we Royal Institution of Chartered Surveyors (“RICS”) Rules of Conduct. A agree with you otherwise or unless required by any competent court or written copy of our Complaints Procedure will be made available upon governmental, administrative or regulatory authority or the rules of any request. stock exchange.

10.6 We support the Code of Practice for Commercial Property Leases. 5. LIABILITY 10.7 For the purposes of the Contract (Rights of Third Parties) Act 1999, you 5.1 All information that has been or will be supplied to us by you or your and we agree that it is not intended for any term of the appointment to representatives has been or will be accepted as being correct unless be enforceable by any third party who, but for the Act, would not have otherwise stated. been entitled to enforce such terms. 5.2 Nothing in this appointment shall exclude or limit a party’s liability for 10.8 If at any time any part of the appointment is held to be or becomes void death or personal injury caused by that party’s negligence, or for or otherwise unenforceable for any reason, then that part will be deemed fraudulent misrepresentation. omitted from the appointment. The validity or enforceability of the 5.3 Neither party to the appointment shall be liable to the other party for any remaining parts of the appointment shall not in any way be affected or indirect, special or consequential loss or damage howsoever caused, impaired as a result of that omission. whether in contract, tort, negligence or otherwise. 10.9 The appointment, and any issues or disputes arising out of or in 5.4 A party shall not be liable to the other party for any failure or delay in connection with it (whether such disputes are contractual or non- performance of its obligations under this appointment where such failure contractual in nature, such as claims in tort, for breach of statute or or delay is due to reasons outside its reasonable control. regulation, or otherwise) shall be governed by and construed in 5.5 Subject to condition 5.6 below, our maximum liability (in contract, tort, accordance with English Law and the exclusive jurisdiction of the English negligence or otherwise) to you howsoever arising in relation to any Courts. property to which the appointment relates, shall in no circumstances exceed 25% of the value (on the basis identified in the appointment or if no basis is expressed Market Value as defined by the RICS) on the date of this instruction of that property.

CBRE Limited (registration number 3536032) trading as CBRE V.8 CBRE LIMITED - STANDARD TERMS OF BUSINESS

SUPPLEMENTARY TERMS FOR VALUATION APPOINTMENTS (Page 1 of 2)

GENERAL PRINCIPLES ADOPTED IN THE PREPARATION OF VALUATIONS AND REPORTS

We set out below the general principles upon which our valuations and reports are normally prepared, which will apply unless specifically mentioned otherwise in the body of the report. We will be pleased to discuss specific variations to suit your particular requirements.

These supplementary conditions should be read in conjunction with our Standard Terms of Business and Letter of Appointment.

1) RICS VALUATION STANDARDS We further assume that all documentation is satisfactorily drawn and that All valuations are carried out in accordance with the latest edition of the unless disclosed to us, there are no unusual or onerous restrictions, RICS Valuation – Professional Standards published by the Royal Institution easements, covenants or other outgoings which would adversely affect the of Chartered Surveyors, (“the Valuation Standards”) and are undertaken value of the relevant interest(s). by appropriately qualified valuers as defined therein. Where a valuation is undertaken or contributed to by more than one qualified valuer, a list of In respect of leasehold properties, we will assume that your landlord will those valuers will be retained within the working papers. give any necessary consents to an assignment.

2) VALUATION BASIS 6) TENANCIES Unless disclosed to us, it is assumed that all properties are subject to Unless stated otherwise within the report, we have adopted ‘Market Value’ normal outgoings and that tenants are responsible for all repairs, the cost and its interpretative commentary as the basis of valuation in accordance of insurance and payment of rates and other usual outgoings, either with the Valuation Standards, which is defined as: directly or by means of service charge provisions.

“The estimated amount for which an asset or liability should exchange on Unless we state otherwise, it is further assumed that rent reviews are on an the valuation date between a willing buyer and a willing seller in an arm’s- upward-only basis to the open market rent and that no questions of doubt length transaction after proper marketing and where the parties had each arise as to the interpretation of the rent review provisions in the lease. We acted knowledgeably, prudently and without compulsion.” assume that neither the landlord nor the tenant may terminate the lease prematurely. It should be noted that the interpretive commentary of the Valuation Standards makes it clear that, amongst other things, the valuation 7) TENANTS' COVENANT STRENGTH assumes that the appropriate marketing period had occurred prior to the valuation date and that simultaneous exchange and completion of the Unless specifically requested, we do not make detailed enquiries into the sale took place on the valuation date. Our valuations are, therefore, covenant strength of occupational tenants but rely on our judgement of based upon the facts and evidence available as at the valuation date. the market's perception of them. Any comments on covenant strength should therefore be read in this context. Furthermore, we assume, unless We would also draw your attention to the fact that we are required to otherwise advised, that the tenant is capable of meeting its financial assume that the buyer will purchase in accordance with the realities of the obligations under the lease and that there are no arrears of rent or other current market, and with current market expectations, and that the seller payments or undisclosed breaches of covenant. will sell the property at market terms for the best price attainable in the open market after proper marketing, whatever that price may be. 8) MEASUREMENTS All property measurement is carried out in accordance with the latest The valuation represents the figure that would appear in a hypothetical edition of the Code of Measuring Practice issued by the Royal Institution of contract of sale at the valuation date. No allowances are made in our Chartered Surveyors, unless stated otherwise. Unless specifically valuations for any expenses of realisation that would be incurred on a instructed, we do not undertake a measured site survey but calculate site sale, or to reflect the balance of any outstanding mortgages, either in areas by reference to the identified boundaries of the property and the respect of capital or interest accrued thereon. Costs of acquisition are appropriate Ordnance Survey Plan. also not included in our valuations. 9) TOWN PLANNING AND OTHER STATUTORY REGULATIONS 3) INFORMATION SUPPLIED Unless specifically instructed, we do not normally undertake enquiries to We have assumed that where any information relevant to our valuation is obtain town planning and highway information from the relevant Local supplied by you, or by any third party at your instigation, it is correct and Authority. comprehensive, and can be safely relied upon by us in preparing our valuation. Our valuations are prepared on the assumption that the premises comply with all relevant statutory enactments and Building Acts and Regulations, 4) INSPECTIONS that a valid and up-to-date Fire Certificate has been issued and that the We undertake such inspections and investigations as are, in our opinion, properties possess current Energy Performance Certificates (EPCs) as necessary to produce a valuation which is professionally adequate for its required under the Government’s Energy Performance of Buildings purpose. Directive. We also assume that all necessary consents, licences and authorisations for the use of the property and the process carried out 5) DOCUMENTATION AND TITLE therein have been obtained and will continue to subsist and are not subject to any onerous conditions. Unless specifically instructed, we do not read legal documentation. Where legal documentation is provided to us, we will have regard to the We further assume that there are no outstanding obligations or liabilities matters therein but recommend that reliance should not be placed on our arising out of the provisions of the Defective Premises Act 1972, and that interpretation thereof without prior verification by your legal advisors. only minor or inconsequential costs will be incurred if any modifications or alterations are necessary in order for occupiers of each Property to comply Unless notified to the contrary, we assume that each property has a good with the provisions of the Disability Discrimination Act 1995. and marketable title and is free from any pending litigation. Unless disclosed to us, we assume that there are no outstanding statutory breaches or impending litigation in respect of the property.

CBRE Limited (registration number 3536032) trading as CBRE V.8 Standard Terms of Business – Supplementary Terms for Valuation Appointments (Page 2 of 2)

10) BUILDING SURVEYS For the avoidance of doubt, we have taken account of Stamp Duty Land Tax payable by the hypothetical purchaser. Unless specifically instructed, we do not undertake building surveys, nor do we inspect those parts that are covered, unexposed or inaccessible, or 17) LANDLORD AND TENANT ACT 1987 test any of the electrical, heating, drainage or other services. Any readily apparent defects or items of disrepair noted during our inspection will, The Landlord and Tenant Act 1987 (the “Act”) gives certain rights to unless otherwise stated, be reflected in our valuation, but no assurance is defined residential tenants to acquire the freehold/head leasehold interest given that any property is free from defect. We assume that those parts in a building where more than 50% of the floor space is in residential use. which have not been inspected would not reveal material defects which Where this is applicable, we have assumed that necessary notices have would cause us to alter our valuation. been given to the residential tenants under the provisions of the Act, and that such tenants have elected not to acquire the freehold/head leasehold 11) HAZARDOUS AND DELETERIOUS MATERIALS interest, and therefore disposal into the open market is unrestricted.

Unless specifically instructed, we do not carry out investigations to 18) GOVERNMENT GRANTS ascertain whether any building has been constructed or altered using deleterious materials or methods. Unless specifically notified, our All valuations are given without any adjustment for capital based valuation assumes that no such materials or methods have been used. Government or European Community grants received or potentially Common examples include high alumina cement concrete, calcium receivable at the date of the valuation. chloride, asbestos and wood wool slabs used as permanent shuttering. 19) AGGREGATION 12) SITE CONDITIONS In the valuation of portfolios, each property is valued separately and not Unless specifically instructed, we do not carry out investigations on site in as part of the portfolio. Accordingly, no allowance, either positive or order to determine the suitability of ground conditions and services, nor negative, is made in the aggregate value reported to reflect the possibility do we undertake environmental, archaeological, or geotechnical surveys. of the whole or part of the portfolio being put on the market at any one Unless notified to the contrary, our valuation is on the basis that these time. aspects are satisfactory and also that the site is clear of underground mineral or other workings, methane gas, or other noxious substances. 20) OVERSEAS PROPERTIES

In the case of properties that may have redevelopment potential, we Our valuations of overseas properties will be reported in the appropriate assume that the site has load-bearing capacity suitable for the anticipated local currency and represent our opinion of the realisable value in the form of redevelopment without the need for additional and expensive country of origin, computed in accordance with local practices, with no foundations or drainage systems. Furthermore, we assume in such allowance made for the transfer of funds to the UK. circumstances that no unusual costs will be incurred in the demolition and removal of any existing structure on the property. 21) CONFIDENTIALITY/THIRD PARTY LIABILITY Our valuations and reports are strictly confidential to the party to whom 13) ENVIRONMENTAL CONTAMINATION they are addressed, or their other professional advisors, for the specific In preparing our valuation we assume that no contaminative or potentially purpose to which they refer. No third parties (save as defined in the report contaminative use is, or has been, carried out at the property. Unless addressees) may rely upon our valuations and reports and no specifically instructed, we do not undertake any investigation into the past responsibility whatsoever is accepted to any third parties for the whole or or present uses of either the property or any adjoining or nearby land, to part of their contents without our written approval. establish whether there is any potential for contamination from these uses and assume that none exists. Should it, however, be subsequently We would draw your attention to the fact that the valuations may be established that such contamination exists at the property or on any investigated by the Royal Institution of Chartered Surveyors (‘RICS’), on a adjoining land or that any premises have been or are being put to confidential basis, for the purposes of the RICS’s conduct and disciplinary contaminative use, this may have a detrimental effect on the value regulations, in order to ensure compliance with the Valuation Standards. reported. 22) PUBLICATION 14) HIGH VOLTAGE ELECTRICITY SUPPLY APPARATUS Neither the whole nor any part of our report, nor any reference thereto, Where there is high voltage electricity supply apparatus within close may be included in any published document, circular or statement, nor proximity to the property, unless otherwise stated we have not taken into published in any way nor disclosed orally to a third party, without our account any likely effect on future marketability and value due to any written approval of the form and context of such publication or disclosure change in public perception of the health implications. (save as set out in our report). Such approval is required whether or not CBRE is referred to by name and whether or not the report is combined 15) PLANT AND MACHINERY with others.

Our valuation includes those items usually regarded as forming part of the 23) COMPLAINTS PROCEDURE building and comprising landlord's fixtures, such as boilers, heating, lighting, sprinklers and ventilation systems and lifts but generally exclude In accordance with the RICS Rules of Conduct, we operate a Complaints process plant, machinery and equipment and those fixtures and fittings Procedure. Should you have any reason to complain, please contact our normally considered to be the property of the tenant. Head of Compliance & Best Practice at St Martin’s Court, 10 Paternoster Row, London EC4M 7HP. Where the property is valued as a fully equipped operational entity our valuation includes trade fixtures and fittings and equipment necessary to generate the turnover and profit and it is assumed that these are owned and not leased.

16) TAXATION In preparing our valuations, no allowances are made for any liability which may arise for payment of Corporation Tax or Capital Gains Tax, or any other property related tax, whether existing or which may arise on development or disposal, deemed or otherwise. We also specifically draw your attention to the fact that our valuation is exclusive of any VAT liability which may be incurred. Unless specifically instructed we have not taken into account the availability of capital allowances.

CBRE Limited (registration number 3536032) trading as CBRE V.5(Valuation) – V.8(STOB)