VALUATION REPORT Toucan & Peacock Portfolio's

Home , Albion Mills Retail Park, Alhambra Shopping Centre, Arndale Centre, Binns (department store), Broad Street Mall, Cooplands

VALUATION REPORT Toucan & Peacock Portfolio’s

Eurynome LLC 160 Greentree Drive Suite 101 City of Dover Kent County Delaware United States and

Credit Suisse Securities (Europe) Limited One Cabot Square London E14 4QJ

26 October 2015

TABLE OF CONTENTS

1. VALUATION SUMMARY

. Valuation Statement . Assumptions, Extent Of Due Diligence Enquiries And Sources Of Information . Executive Summary of Market Values

2. PROPERTY COMMENTARIES

a) 34/50 Cheapside & 6-14 Albert Street East, Barnsley S70 1RQ b) The Grand Buildings, 66-100 Jameson Street, Hull HU1 3JX c) 19/21 Albion Place, Leeds LS1 6JS d) 202 High Street, Lincoln LN5 7AU e) 32 Lister Gate, Nottingham NG1 7DD f) 24 Broad Street, Reading RG1 2BT g) 12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ h) 11 Broad Street, Reading RG1 2BH i) 28 High Street, Winchester SO23 9BL j) 37/39 Fore Street, Taunton TA1 1HR k) 28/30 King Street, Manchester M2 6AZ l) 74/76 English Street, Carlisle CA3 9HP m) 86/87/87a Broad Street, Reading RG1 2AP n) 20/22 Queen Street, Cardiff CF10 2BU

3. APPENDICES

a) Engagement Letter

Toucan & Peacock Portfolio’s 26 October 2015 1

1. VALUATION SUMMARY

Toucan & Peacock Portfolio’s 26 October 2015 2

Strutt & Parker LLP 13 Hill Street Berkeley Square London W1J 5LQ Telephone: 020 7629 7282 Fax: 020 7629 0387 E-Mail: [email protected]

VALUATION STATEMENT

REPORT DATE 26 October 2015

ADDRESSEES We confirm that our Report and Valuation can be disclosed to and relied upon by:

(a) Elavon Financial Services Limited as the loan facility agent, U.S. Bank Trustees Limited as the loan security trustee and the Original Lender (as defined in the Facility Agreement), under or in connection with the facility agreement with, among others, Leto Limited, Perses Limited and Helios Limited as the borrowers, to be entered into (such agreement as amended from time to time, the "Facility Agreement") and each of their respective transferees, successors, or assignees;

(b) each person and its transferees, successors, or assignees which becomes a party to the Facility Agreement as lender as part of the securitisation or primary syndication of any loan made under the Facility Agreement or related finance documents or in accordance with the terms thereof;

(c) Credit Suisse Securities (Europe) Limited as lead manager and, where applicable, liquidity facility provider or other support provider in connection with the securitisation of, or referable to, any loan made under the Facility Agreement; and

(d) any other manager, note trustee and/or security trustee in connection with any securitisation of, or referable to, any loan under the Facility Agreement,

(together the "Addressees").

The Addressees may disclose the report and any other advice, letters, certificates or other documents relating to such report (together, the "Report Documents") only to the following parties:

(a) where disclosure is requested or required by any applicable law or regulation, by any court of competent jurisdiction or any competent judicial, governmental, supervisory or regulatory body or in connection with legal proceedings relating to the report;

(b) to any affiliates of any Addressee;

Toucan & Peacock Portfolio’s 26 October 2015 3

(c) to their respective agents or advisers in connection with the loan and/or hedging transactions under or in respect of the Facility Agreement or any securitisation of, or referable to, any loan made under the Facility Agreement;

(d) to any financial institution or other entity in connection with the loan and/or hedging transactions under or in respect of the Facility Agreement, and their respective advisers;

(e) to future owners, or prospective purchasers, of any property financed under the Facility Agreement;

(f) to the rating agencies (and their respective legal advisors) in connection with any securitisation of, or referable to, any loan made under the Facility Agreement and to investors in such securitisation;

(g) where disclosure is required by the rules of any stock exchange, listing authority or similar body on which their shares or other securities are listed;

(h) to any potential transferee or assignee of any lender under the Facility Agreement; and

(i) the Addressees may also make reference to the Report Documents, and include all or part thereof, in any offering materials or ongoing investor reporting materials related to any securitisation of, or referable to, any loan made under the Facility Agreement,

(together, the "Permitted Recipients"), provided that each of the Addressees hereby warrants and represents that prior to (or no later than at the same time as) any disclosure of the Report Documents or any part thereof, any disclosing Addressee shall provide the Permitted Recipient in writing with the following (or a materially similar) disclaimer:

"This document is disclosed to you for information purposes only and may not be relied upon by you. Strutt & Parker LLP shall have no liability to you or any third party including, without limitation, for any damages, costs, tax, expenses and/or interest, howsoever arising from the disclosure of this document."

PROPERTIES The properties as shown on our attached Summary Schedule of Values known as the “Toucan & Peacock Portfolio”.

INSTRUCTION AND You have instructed us to assess the Market Value of the freehold and long VALUATION DATE leasehold interests as at 1 October 2015 and in accordance with our Terms of Engagement letter dated 11th September 2015.

PURPOSE OF VALUATION You have advised that the valuation will be required for loan securitisation purposes. You have further advised that Credit Suisse will be advising in the issuance in their capacity as an Arranger.

MARKET VALUE Market Value: £52,585,000 (Fifty Two Million, Five Hundred and Eighty Five Thousand pounds).

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Our Market Value assumes purchasers costs are deducted at 5.80%.

DEFINITION OF MARKET Market Value is defined in the RICS Valuation Professional Standards (January VALUE 2014) as:

‘the estimated amount for which an asset or liability should exchange on the valuation date 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’.

COMPLIANCE WITH This report has been prepared in accordance with Royal Institution of Chartered VALUATION STANDARDS Surveyors (“RICS”) Valuation – Professional Standards, incorporating the International Valuation Standards (the “RICS Red Book”) published in March 2012 and effective from 30 March 2012, in particular in accordance with the Valuation requirements of VS 6 entitled Valuation reports and Appendix 5 Valuations for commercial secured lending, as appropriate.

We confirm that we are qualified for the purpose of the valuation in accordance with the RICS Valuation Professional Standards (January 2014) and have the relevant experience and knowledge to carry out valuations of this nature

CAPACITY OF VALUER Strutt and Parker LLP is acting as an external valuer as defined by Professional Standard 2 of the RICS Valuation Professional Standards, January 2014.

VALUER DETAILS AND The due diligence enquiries referred to below and property inspections were INSPECTION undertaken by surveyors from our London and regional office valuation teams, who are qualified for the purpose of the valuation in accordance with the RICS Valuation Standards. We were able to inspect a combination of a part or the whole of the properties, both externally and internally, The valuation has been reviewed by Mark Whittingham MRICS.

OUR AGREEMENT Our Agreement with you is based upon our Engagement Letter with Exclusion Clauses and our Terms of Business, attached at Appendix 1.

TERMS OF ENGAGEMENT This Valuation Statement should be read in conjunction with all the information AND SCHEDULE OF set out in our Report. We would also point out that we have made various EXCLUSION CLAUSES assumptions including the tenure, letting, town planning, the condition and repair of the buildings and site and ground and groundwater contamination. These are as attached in our Agreement. Variations from our Agreement are referred to in the ‘Assumptions, Extent Of Due Diligence Enquiries And Sources Of Information’ section below. If any of the information or assumptions on which the valuation is based on are subsequently found to be incorrect then the valuation figure may also be incorrect and should be reconsidered.

EXTENT OF DUE The extent of the due diligence enquiries we have undertaken and the sources DILIGENCE ENQUIRIES of the information we have relied upon for the purpose of our valuation are AND INFORMATION stated in the ‘Assumptions, Extent Of Due Diligence Enquiries And Sources Of SOURCES Information’ section below.

VERIFICATION We recommend that before any financial transaction is entered into based upon this valuation, you obtain verification of the information contained within our Report and the validity of the assumptions we have adopted. Toucan & Peacock Portfolio’s 26 October 2015 5

We would advise you that whilst we have valued the Properties 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 risks that may be involved should an uninsured loss occur.

INDEPENDENCE The total fees, including the fee for this assignment, earned by Strutt & Parker LLP from the Addressee is less than 5.0% of Strutt and Parker LLP’s total annual UK revenues.

CONFLICT OF INTEREST We confirm that Strutt & Parker do not have any conflict of interest, either with the Properties or with any other parties, preventing us from providing an independent valuation in accordance with the RICS Red Book.

LIABILITY Strutt and Parker holds Professional Indemnity Insurance in respect of the service provided, on a per claim basis. The indemnity is for the use of the “Addressees” and is confidential to them. We accept no responsibility to any other party.

PUBLICATION Neither the whole nor any part of our valuation Report or any reference thereto will be allowed to be included in any published document, circular or statement, or published in any way, without our prior written approval of the form and context in which it may appear.

Yours Faithfully

Mark Whittingham MRICS Head of Commercial Valuation For an on behalf of Strutt & Parker LLP

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ASSUMPTIONS, EXTENT OF DUE DILIGENCE ENQUIRIES AND SOURCES OF INFORMATION

INFORMATION The extent of the due diligence enquiries we have undertaken and the sources of the information we have relied upon for the purpose of our valuation are stated in the relevant sections of our report below and in the individual property reports. Where information has been provided, we summarise the relevant details in this report. We do not accept any responsibility for any errors or omissions in the information provided to us, nor for any consequences that may flow from such errors and omissions. Where noted we have assumed technical due diligence is being assigned to the Addressees. This should be confirmed. INSPECTIONS Whilst we have inspected each property, in some instances, we were unable to gain access to some of the areas at namely the banks at Barnsley, 24 Broad Street and Hull. On the whole however, we are satisfied that the access provided was sufficient for the purpose of completing our exercise. FLOOR AREAS We have valued the properties on the basis of measured surveys undertaken by ourselves and Gooch Cunliffe Whale. We have undertaken check measurements on the properties that we have been provided with measured surveys. We confirm that we are satisfied that the areas we have been provided with are compete and correct for the purpose of completing our exercise, and are measured in accordance with the RICS Code of Measuring Practice, published in August 2007 (6th Edition) as updated. CONDITION AND REPAIR We have been provided with building survey report for the properties. We & ENVIRONMENTAL comment on these within the individual property reports, together with any specific points noted during our inspections. Additionally we have obtained some Environmental Reports and comment upon these within the individual property reports. Our valuations are on the basis that each property is connected, or capable of being connected without undue expense, to the public services of electricity, water, telephones and sewerage. STATUTORY ENQUIRIES & We have made informal enquiries of the relevant statutory authorities. Unless PLANNING otherwise stated in the individual property reports, we have assumed that each building has been constructed and is used in accordance with all statutory and bye-law requirements, and that there are no breaches of planning control. Likewise, we have assumed that any future construction or use will be lawful and that the properties are not adversely affected, nor are they likely to become adversely affected, by any highway, town planning or other schemes or proposals, and that there are no matters adversely affecting value that might be revealed by a local search, replies to usual enquiries, or by any statutory notice. TAXATION AND COSTS We have obtained the business rates for each commercial property from our informal enquiries of the Valuation Office website as detailed in the individual property reports.

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We have calculated the rates payable by multiplying the rateable value by the Uniform Business Rates for 2013/2014, which is 47.1 pence in the pound for properties with a rateable value of £35,000 and above, exclusive of any transitional or other relief (apart from small business relief). COVENANT STATUS OF We are not qualified to undertake a detailed investigation into the financial TENANTS status of the tenants. Unless otherwise advised we have made the Assumption that there are no material arrears of rent or service charges, breaches of covenant, current or anticipated tenant disputes. We have, however, reviewed where possible third party commentary, and in particular Dun & Bradstreet (D&B) reports, on the principal tenants. Our valuations reflect the type of tenants actually in occupation or responsible for meeting lease commitments, or likely to be in occupation, and the markets general perception of their creditworthiness. We comment upon the individual tenants in greater detail in the individual property commentaries.

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Executive Summary of Market Values

Key Tenancies / Unexpired Term Address Tenure / Location / Description Current Income Market Rent (Basis) Market Value Yields Comments Certain

PEACOCK PORTFOLIO

BARNSLEY 34/50 Cheapside & Freehold Boots - £235,000 - 53.86 years IY: 7.00% 61.5% income secured on Boots and 6-14 Albert Street Prime pitch Lloyds Bank - £115,000 - 9.39 years £595,405 £530,358 (£80 ZA) £7,985,000 EY: 6.23% Lloyds covenants. First expiry Body Shop East, Parade of six retail units Others - 1 to 15 years RY: 6.23% July 2016, likely to renew. S70 1RQ

HULL Halifax - £165,000 - 5.2 years 60% of income secured by banking The Grand Buildings, Freehold HSBC - £132,000 - 6.2 years IY: 8.25% covenants. Main city centre flagship 66-100 Jameson Prime pitch adjacent to House of Fraser Waterstones - £120,000 - 6.5 years £779,250 £665,232 (£55 ZA) £8,511,000 EY: 7.38% stores for Lloyds, Halifax and HSBC. Street, Parade of eight retail units Lloyds - £105,000 - 9.5 years RY: 7.03% Recently refurbished. HU1 3JX Others - 1 to 9.5 years LEEDS Freehold STA Travel - £75,000 - 4.22 years IY: 6.00% Established national multiples. Short 19/21 Albion Place Strong City centre pedestrianised pitch Café Nero - £61,500 - 4.92 years £186,500 £191,560 (£140 ZA) £2,938,000 EY:6.00% income but lettable units. LS1 6JS Parade of three retail units EE - £50,000 - 1.91 years RY:6.16% LINCOLN Freehold IY: 4.65% High quality retail bank investment - rent 202 High Street, Prime pitch Lloyds Bank - £151,000 - 10.8 years £151,000 £162,169 (£135 ZA) £3,050,000 EY: 5.00% review in December 2015. Reversionary. LN5 7AU Prominent corner Grade II listed property RY: 5.02% Freehold NOTTINGHAM IY: 7.50% Income secured against 5A 1 covenant. Good pedestrianised pitch 32 Lister Gate, Shoe Zone - £120,000 - 2.7 years £120,000 £154,691 (£125 ZA) £1,512,000 EY: 8.24% Rental rebase to low level, strong Single retail unit arranged over three NG1 7DD RY: 9.67% reversionary prospects. floors Freehold Prime pedestrianised pitch READING IY: 4.75% Imposing corner location opposite John One of the best units in Reading. Primark 24 Broad Street, Lloyds Bank - £220,000 - 11 years £220,000 £240,000 (£200 ZA) £4,378,000 EY: 5.17% Lewis with extensive return frontage. taking unit opposite. RG1 2BT RY: 5.18% Traditional Period building to include ground floor banking hall SUBTOTAL £28,374,000

Project Shaw Property Portfolio 26 October 2015 8

TOUCAN PORTFOLIO COLCHESTER Freehold 12 Culver Street Prime pedestrianised pitch opposite Superdrug - £290,475 - 10.2 years IY: 6.00% 73% income from Superdrug for 10 years. West, Culver Square Shopping Centre Office Holdings - £105,000 - 4.9 years £395,975 £387,198 (£125 ZA) £6,180,000 EY: 5.95% Rebased office rent. & 22/24 High Street Dual aspect property comprising two retail to break RY: 5.88% CO1 1XJ units Freehold READING IY: 6.25% Unit adjoins M&S. Highly Lettable. Prime pedestrianised pitch 11 Broad Street, Monsoon - £150,000 - 3.2 years £150,000 £138,000 (£190 ZA) £2,268,000 EY: 5.34% Secured by Monsoon for over 3 years. Single period retail unit with ancillary RG1 2BH RY: 5.75% Marginally overrented. uppers Freehold Opportunity to enhance value through WINCHESTER IY: 4.30% Prime pedestrianised pitch reconfiguring uppers for residential use 28 High Street, Fat Face - £164,500 - 2.6 years £164,500 £216,280 (£200 ZA) £3,450,000 EY: 5.30% Period building arranged over basement, (subject to planning). Highly marketable SO23 9BL RY: 5.65% ground and two uppers investment. Ann Summers - £125,000 - 4.2 IY: 6.03%EY: Income secured by Ann SummersLow TAUNTON37/39 FreeholdPrime pitchTwo adjoining retail yearsOptika Holdings - £49,000 - 4.2 £115,000 £122,600 (£90 ZA) £1,709,000 6.77%RY: vacancy rate in Taunton. Optika in Fore Street,TA1 1HR units years 6.43% liquidation. Freehold 88% of income secured by Charles Prime location on Manchester's primary MANCHESTER Charles Trywhitt - £100,000 - 5.2 years IY:6.40% Trywhitt and Mint Velvet. High fashion and aspirational retailing street. 28/30 King Street, Mint Velvet - £92,500 - 5.8 years £243,810 £230,050 (£125 ZA) £3,362,000 EY: 6.09% improving location. Zone A's Two Grade II listed period buildings M2 6AZ Others - 1 to 2.9 years RY: 6.04% approximately £200 at market peak. Good arranged over basement, ground and rental growth prospects. three uppers Freehold CARLISLE Good secondary pitch IY: 8.00% Adjoining unit recently let at £62 psf ZA 74/76 English Street, Period building arranged over basement, Cotswold - £115,000 - 4.1 years £115,000 £107,000 (£67 ZA) £1,311,000 EY: 7.59% but poorly configured. CA3 9HP ground and two uppers (retail ground and RY: 7.44% first) 87 Broad Street sublet to Maronmarch READING Freehold IY: 8.75% Limited until October 2017. Zone A's at 86/87/87a Broad EE - £231,500 - circa 2.2 years Strong pedestrianised pitch £387,500 £287,200 (£135 ZA) £4,186,000 EY:6.15% £135 psf show significant discount from Street, Other - 5.5 years Parade of three adjoining retail units RY: 6.48% prime Broad Street around £200 therefore RG1 2AP offering strong rental growth prospects. Freehold CARDIFF IY: 6.50% Edge of prime pedestrianised pitch Minimum uplift in June 2016 to £165,000 20/22 Queen Street, Chopstix - £120,000 - 10.8 years £120,000 £163,483 (£125 ZA) £1,745,000 EY: 8.85% Purpose build retail unit, retail on ground pax but weak covenant strength. CF10 2BU RY: 8.75% with capability on first, ancillary on second SUBTOTAL £24,211,000

TOTAL MARKET VALUE £52,585,000

Project Shaw Property Portfolio 26 October 2015 8

2. PROPERTY COMMENTARIES

a) 34/50 Cheapside & 6-14 Albert Street East, Barnsley S70 1RQ

34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Good Secondary. Barnsley is a major Market Value: £7,985,000 commercial and administrative centre within South Yorkshire.

Micro Location: Strong. Located in central Barnsley, in Key Inputs a 100% prime retail pitch, adjacent to the Alhambra Shopping Centre and a Initial Yield site which is planned for the town 7.00% Council’s redevelopment programme. Equivalent Yield 6.23% Property Type: Retail High Street Reversionary Yield 6.23% Total Property Area: 36,832 sq ft (3,421.8 sq m) Capital Value per sq ft £218 per sq ft Tenure: Freehold Market Rent £530,358 per annum Number of Tenants: 7 (not including the substation) Market Value assuming Vacant £5,200,000 Percentage Vacant: 0% Possession Total Rent Reserved: £595,405 per annum Reinstatement Value £4,666,889

Covenant Strength: The units are let to 7 well-established retailers and perceived to be reasonably strong attractive tenant covenants. Sale Timescale: 6 months by private treaty Suitability for Loan Security Strong Purposes:

SWOT ANALYSIS

Strengths Opportunities

 The property is located in a 100% prime pitch close to an area where  Extend leases with O2 and Body shop who both trade well. The numerous significant town centre re-generation and improvement opticians have indicated they want to stay in this location. schemes ongoing and planned.  Dispose of Boots interest in isolation to a charity or family trust with its  Freehold interest. attractive long lease. This will achieve an optimum yield.  Unusually strong WAULT of 25.25 years.  Take advantage of the town redevelopment and growth on Cheapside  61.5% of the income attributable to Lloyds and Boots. rents before a disposal.  Boots lease has 33 years remaining. Boots have a tangible net worth  Barnsley has had no inward investment recently and the of £1.2bn. redevelopments will completely change the catchments shopper habit. This could see rental growth return to the peak rents and sharper  Overall strong covenants. investment yields. 34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

Weaknesses Threats

 Secondary retail town.  Future voids should the tenant not renew leases.  Over rented by 11.00%.  Increased risk due to the over rented nature of the asset. However the  Body Shop and Warren James have lease expiries effective 2016 and level of over rent is potentially mitigated by the favourable rental 2017 respectively accounting for 17.50% of income. growth prospects over the next three years.

LOCATION

Overview The property is located on Cheapside and abuts Albert Street East. Cheapside is a fully pedestrianised prime pitch in Barnsley. The Alhambra Shopping Centre is situated directly to the south of the subject property. Opposite is the site for the Council’s town redevelopment which is scheduled to be completed by late 2018.

Barnsley is situated adjacent to the Peak District National Park and is a major commercial and administrative centre within South Yorkshire located some 16 miles north of Sheffield, 22 miles south of Leeds and circa 36 miles east of Manchester. The town is strategically located adjacent to the M1 with junctions 36 and 37 serving the town and providing access to both the nearby M62 and M18 motorways. Junction 37 of the A1 (M) is a short distance to the east via the A635.

Communication Rail & Bus services operate from Barnsley Interchange which provides regular train services to Sheffield, Huddersfield and Wakefield with London Kings Cross/St Pancras (via Sheffield) approximately 2 hours 45 minutes distance. A comprehensive bus service operates throughout the City centre and Metropolitan Borough. In terms of air travel Robin Hood Airport (Doncaster/Sheffield) is some 25 miles (41km) to the east and Leeds Bradford airport 35 miles (56km) to the north.

Situation The building is situated centrally on Cheapside and also abuts Albert Street East. Prime pitch in Barnsley is focused on Cheapside where the subject property is situated and Queen Street where Marks & Spencer is located. The Alhambra Shopping Centre directly to the south of the subject property houses a large Primark, one of the UK’s key retail anchors. Opposite the subject property is the site for the Council’s City redevelopment which is scheduled to be completed by late 2018. This will vastly improve the City and reduce leakage to Meadowhall Shopping Centre. The property is best placed to benefit from this improvement.

SITE

The site extends to approximately 0.28 ha (0.69 acres).

Access The property is accessed directly off Cheapside and Albert Street which is one of the most prominent retail streets in Barnsley.

DESCRIPTION

The property comprises an ‘unbroken’ parade of 6 retail units, developed in the 1960’s. The units are arranged predominately over ground floor (retail) and first floors with both Boots and Lloyds having additional accommodation on the second floor.

The property is understood to have been constructed in the 1960’s and is showing some signs of age although generally the property appears to be in a reasonable condition. The former Ladbrookes unit (above Lloyds bank) has been vacant for some time and internally is in need of complete refurbishment.

The front elevation comprises retail façades at ground floor level set between the exposed structural concrete columns and located beneath a concrete canopy. Elevations to first floor comprise precast rough render concrete panels fixed back to the structural frame. Side and rear elevations comprise full height cavity brick and blockwork walls. Windows to first floor level comprise single glazed sections of galvanised steel crittall type construction with top hung open encasements.

The roof is of cold deck construction with the asphalt roof covering being laid directly onto the concrete deck. Asphalt upstands are formed to the parapets and flashings are provided. A new felt overlay system has been provided to the Boots unit (we understand provided by Boots) whereas the remainder comprise the original covering. There is a large plant area to the Boots roof.

Internally each of the units provides for retail at ground floor with staff amenity and storage above. Each of the units has been fitted out to the tenants' own specification.

Externally the property fronts directly on to the pedestrian High Street to the front of the unit and to the right hand elevation. To the rear of the block there is a loading/storage area which is utilised by all of the tenants.

34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft Sq M (ITZA) (1,160) (n/a) Ground (Sales) 2,912 270.63 Unit 1, 50 Cheapside Lloyds Bank Plc 1st (Sales) 2,090 194.24 1st (Anc.) 119 11.06 2nd (Anc.) 1,778 165.24 (ITZA) (438) (n/a) Unit 2, 48 Cheapside Telefonica 02 UK Ltd Ground (Sales) 670 62.27 1st (Anc.) 359 33.36 (ITZA) (518) (n/a) Unit 3, 46 Cheapside CA Raison Optica Ltd Ground (Sales) 818 76.02 1st (Anc.) 418 38.84 (ITZA) (480) (n/a) Unit 4, 44 Cheapside Warren James (Jewellers) Ground (Sales) 763 70.92 1st (Anc.) 392 36.43 (ITZA) (483) (n/a) Unit 5, 42 Cheapside The Body Shop Intl Plc Ground (Sales) 762 70.82 1st (Anc.) 263 24.44 (ITZA) (n/a) (n/a) Ground (Sales) 11,036 105.65 Unit 6, 40 Cheapside Boots Properties Ltd 1st (Anc.) 10,892 1012.27 2nd (Anc.) 1,964 182.53 (ITZA) (n/a) (n/a) Land fronting Albion Street East, Boots Properties Ltd Ground (Sales) 1,725 160.32 10-12 Albert Street East 1st (Anc.) 1,727 160.50 TOTAL 38,688 2,675.54

TENURE

The property is held Freehold.

TENANCIES

Number of Tenants and Lease Type The property is let to 7 tenants, as follows:

Unit 1- 50 Cheapside is let to Lloyds Bank Plc from the 25/12/1991 until 24/12/2024 at a current rent of £115,000 per annum. There is a reversionary lease of 8 years from 25/12/2016, to include 6 months’ rent free on commencement. The rent was reduced from £168,000 to £115,000 per annum on the 24/06/2015. The next rent review is the 25/12/2021. Part of the 1st floor is sublet to Ladbrokes until 24/12/2016 (now vacant).

Unit 2- 48 Cheapside is let to Telefonica 02 UK Ltd from the 04/08/1993 until 03/08/2018 at a current rent of £61,000 per annum.

Unit 3- 46 Cheapside is let to CA Raison Optica Ltd from the 26/08/2008 until the 25/08/2023 at a current rent of £62,400 per annum. There is a mutual break option on the 26/08/2019, which can be operated with no less than 9 months notice. The next rent review is 28/08/2018, where time is of the essence.

Unit 4- 44 Cheapside is let to Warren James (Jewellers) from the 24/06/2012 until the 23/06/2017 at a current rent of £42,200 per annum.

Unit 5- 42 Cheapside is let to The Body Shop International plc from the 20/07/2001 until 19/07/2016 at a current rent of £63,300 per annum.

Unit 6- 40 Cheapside is let to Boots Properties Ltd from the 01/06/1970 until 31/05/2069 at a current rent of £235,000 per annum. The rent review provisions are for reviews every 21 years with the 2012 rent review being outstanding and the next rent review provision being 01/06/2033.

10-12 Albert Street East is let to Boots Properties Ltd from the 01/06/1970 until the 31/05/2069 at a current rent of £16,500 per annum. This lease has provisions for 7 yearly rent reviews to 75% of market rental value. The 2012 rent review is outstanding.

Land (Hayes Croft) is let to Northern Powergrid from the 29/09/1970 until 28/09/2030 at a current rent of £5.

34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review There is a reversionary lease of 8 years from 25/12/2016 to include 6 Lloyds Bank Plc Unit 1 £115,000 £16.66 25/12/1991 24/12/2024 33 years 25/12/2021 months’ rent free on commencement.

Telefonica 02 UK Ltd Unit 2 £61,000 £59.28 04/08/1993 03/08/2018 25 years

There is a mutual break option on CA Raison Optica Ltd Unit 3 £62,400 £50.48 26/08/2008 25/08/2023 15 years 28/08/2018 26/08/2019, which can be operated with no less than 9 months’ notice. Warren James Unit 4 £42,200 £36.53 24/06/2012 23/06/2017 5 years (Jewellers)

The Body Shop Intl plc Unit 5 £63,300 £61.75 20/07/2001 19/07/2016 15 years

The rent review provisions are for reviews every 21 years with the Boots Properties Ltd Unit 6 £235,000 £9.83 01/06/1970 31/05/2069 99 years 01/06/2033 2012 rent review being outstanding. This lease has provisions for 7 yearly rent reviews to 75% of Boots Properties Ltd 10-12 £16,500 £4.77 01/06/1970 31/05/2069 99 years market rental value. The 2012 rent review is outstanding.

Land (Hayes Croft) £5 29/09/1970 28/09/2030

Covenant Strength

The unit is let to Lloyds Bank Plc which is a British bank founded in 1765 and whose activities include retail and commercial banking. The tenant has a dun&bradstreet rating of 5A1, which represents a minimum risk of business failure. Year Ending Year Ending Year Ending Lloyds Bank Plc 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s) Sales Turnover £40,761,000 £53,977,000 £55,410,000 Profit (Loss) Before Taxes £2,289,000 £894,000 (£474,000) Tangible Net Worth £44,691,000 £39,444,000 £44,593,000 Net Current Assets (Liabilities) £3,346,000 £61,444,000 (£309,770,000)

Telephonica UK Limited is a global telecommunications provider based in the UK. The company was founded in 1985 and is the second largest provider in the UK. The tenant has a dun&bradstreet rating of 5A 1, which represents a minimum risk of business failure. Year Ending Year Ending Year Ending Telefonica UK Ltd 31 Dec 2013 (000s) 31 Dec 2012 (000s) 31 Dec 2011 (000s) Sales Turnover £5,535,000 £5,609,000 £5,968,000 Profit (Loss) Before Taxes £609,000 £489,000 £794,000 Tangible Net Worth £9,949,000 £9,931,000 £9,908,000 Net Current Assets (Liabilities) £4,377,000 £3,759,000 £3,359,000

CA Raison Optica Limited is a family run opticians based in Barnsley which has been in operation for over 17 years. The tenant has a dun&bradstreet rating of H2, which represents a lower than average risk of business failure. Year Ending Year Ending Year Ending CA Raison Optica Ltd 31 Dec 2014 31 Dec 2013 31 Dec 2012 Sales Turnover - - - Profit (Loss) Before Taxes - - - Tangible Net Worth £3,375 £7,717 £6,290 Net Current Assets (Liabilities) (£1,758) £869 (£3,299)

Warren James is a British jeweller established in 1979. It operates over 165 stores and is one of the largest independent jewellers in the United Kingdom. The tenant has a dun&bradstreet rating of 5A 1, which represents a lower than average risk of business failure. Year Ending Year Ending Year Ending Warren James (Jewellers) 31 Mar 2014 (000s) 31 Mar 2013 (000s) 31 Mar 2012 (000s) Sales Turnover £73,630 £58,606 £59,039 Profit (Loss) Before Taxes £26,239 £17,109 £15,887 Tangible Net Worth £119,883 £100,000 £87,071 Net Current Assets (Liabilities) £101,222 £81,853 £72,345

34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

The Body Shop International PLC is a British retailer founded in Brighton in 1976 which specialises in the sale of high quality, naturally inspires skincare, haircare and make up products sourced and produced ethically and sustainably. It now operated from over 2,500 franchised stores in 61 countries. The tenant has a dun&bradstreet rating of 5A 1, which represents a lower than average risk of business failure. Year Ending Year Ending Year Ending The Body Shop Intl plc 02 Jan 2015 (000s) 28 Dec 2013 (000s) 29 Dec 2012 (000s) Sales Turnover £428,100 £435,700 £431,700 Profit (Loss) Before Taxes £39,300 £57,000 £51,100 Tangible Net Worth £296,700 £281,300 £274,300 Net Current Assets (Liabilities) £70,200 £57,900 £85,100

Boots Properties Limited (t/a Boots) is a British pharmacy chain founded in 1849 with outlets in most high streets, shopping centres and airport terminals. The tenant has a dun&bradstreet rating of 5A 1, which represents a lower than average risk of business failure. Year Ending Year Ending Year Ending Boots Properties Ltd 31 Mar 2014 (000s) 31 Mar 2013 (000s) 31 Mar 2012 (000s) Sales Turnover £16,600 £16,600 £18,400 Profit (Loss) Before Taxes £13,600 £52,900 £43,100 Tangible Net Worth £1,224,100 £1,241,100 £1,243,000 Net Current Assets (Liabilities) £6,400 £29,000 £32,200

INCOME ANALYSIS

Rental Income £595,405 per annum.

Market Rent £530,353 per annum.

Service Charge/Rates Shortfall Not applicable

CONDITION

We have been provided with a copy of the Pre-Acquisition Survey Report dated 14 August 2015, prepared by Paragon Building Consultancy Limited on behalf of APAM, which we assume will be assigned to the Bank prior to completion of the purchase. The principal conclusions of the report are summarised as follows:

 “The exposed concrete frame is suffering from carbonation, with corrosion of the rebar causing spalling of the concrete surface. Repairs are required to make good the damaged areas and the frame should subsequently be coated with a protective elastomeric paint. As agreed with you we are arranging for a concrete investigation to be carried out.  Asphalt roofs are in very poor condition with defects evident and historic patch repairs evident. Ongoing spot leaks are noted in several units. Ongoing repairs will be required in the short term and medium term consideration should be given to replacing the roof coverings.  The precast concrete panels to the elevations are starting to fail due to the effects of moisture penetration and corrosion of the rebar. This is in particular evident to the base of the panels and proprietary repairs are required (especially as these overhand the pedestrian footpath). Similar issues are apparent with the projecting canopy.  Windows to the property are in varying degrees of disrepair, and range from requiring replacement to just overhaul and decoration. External joinery is also in need of repair and redecoration. General repairs to the elevations and brickwork are also required.  Fire escapes are in poor condition and in need of repair and redecoration”

The Report concluded that:

 “Our building inspection did not reveal any evidence of significant defects to the structure of the property. Provided you take into consideration the issues raised within this report along with the cost of repairs and satisfactorily address any legal issues raised, then from a technical perspective, there is nothing to prevent you from proceeding with your freehold acquisition.”

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £197,000, exclusive of professional fees and VAT. Each of the units are held on FRI occupational leases, covering both internal and external repair (there are no restrictions). This could be slightly problematic with regard to some of the defects listed below, which would be to easier deal with on a Service Charge recovery basis. However, in our opinion the costs of the repairs and maintenance, together with ongoing repair and maintenance costs will be fully recoverable from the tenants either through their full repairing provisions in the leases, or via the service charge.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

MARKET OVERVIEW

Retailing in Barnsley Prime retailing is concentrated on the pedestrianised Cheapside, Queen Street and May Day Green which is supported by the Alhambra and Metropolitan Shopping Centres, the latter incorporating the renowned Barnsley Markets.

Barnsley Council are promoting a major transformation of the City centre proactively seeking new investors as well as co-funding improvements which will ultimately include a new range of retail and leisure users as well as new civic amenities. Projects thus far have included a new transport interchange, a digital media centre and new office developments. A re-vamped Metropolitan Centre and Market Hall incorporating a new shopping boulevard and central library are projected for early 2017. F&C REIT are also looking to improve and re-generate their Alhambra Centre having recently re-glazed the frontage/entrance onto Cheapside as well as receiving planning consent for a multi-million pound leisure extension on the upper levels to include a nine screen cinema and six new restaurants.

Competition The subject retail pitch appeals to fashion retailers practically lower middle and middle quality fashion retailers, and general high street retailers.

Availability of Vacant Space in Locality There is limited vacancy in the area.

Rental Levels We understand that at mid-2015 prime rents in Barnsley were estimated to be at £75 psf Zone A. This represents no change on the end 2014 level of prime rents remaining 37.5% below the pre-recession peak of £120 psf ZA. The subject property is located within the prime pitch in Barnsley.

MARKETABILITY

Typical Void Letting Period In the event of the current tenants vacating, a marketing period of 6-12 months would be required.

Typical Tenant Profile Given the existing tenant profile and the surrounding retail environment we consider that units within the subject property would be of interest to a variety of national and local retailers.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 6-12 months.

Letting Strategy Should units within the property become vacant we would expect a marketing period of 6-12 months. Given the recent renewal and reversionary lease to Lloyds, rent free periods of 6-12 months, possibly in combination with rent reductions, should be expected.

RENTAL EVIDENCE

There have been a number of rentals agreed within the vicinity, the following being of particular note:

 50 Cheapside (subject property) – The lease was extended for a term of 8 years from spring 2015. The rent agreed was £115,000 per annum, reflecting approximately £86 per sq ft Zone A. This was subject to 6 month’s rent free. The net effective rent equates £80 per sq ft Zone A.

 44 Cheapside (subject property) - The lease was renewed to Warren James in June 2012 for a period of 5 years, at a rent of £42,200 per annum equating to £82 per sq ft Zone A.

 9 Market Street – This unit was let in November 2013 to Pennywise, at a rent of £35,000 (£40.50 Zone A). The term agreed was for 10 years. This is a weaker retail location within Barnsley with fewer national retailers.

 Unit 2 Alhambra was let to 3 Store, on the open market in September 2013, at a rent of £58.500 (£68 Zone A) per annum. This unit is located within the town’s popular shopping centre and benefits from the attraction of the other retail outlets.

The best comparable evidence is provided by the subject property itself and we have applied a benchmark Zone A rate of £80 per sq ft. From this benchmark level we have made adjustments for rent review terms, position, and configuration. We have adopted rates of A/15 on the first floor ancillary accommodation, and rates of A/25 on the second floor ancillary accommodation. We have adopted an overall level of £10,00 per sq ft for the Boots unit. We have assumed the land fronting Albert Street East unit is currently rack rented at £16,500 per annum. This provides an aggregated rental value of £531,114 per annum, apportioned as follows:

50 Cheapside £115,686 per annum. 48 Cheapside £36,476 per annum. 34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

46 Cheapside £43,112 per annum. 44 Cheapside £39,968 per annum. 42 Cheapside £39,692 per annum. 40 Cheapside £238,920 per annum. 10-12 Albert Street East £17,260 per annum.

Adopting these rental values we are of the opinion that the property is over rented by approximately 11.00%.

Rents remain nearly 40% lower than pre-recession peak levels. These units are already in a prime retail pitch and well positioned to benefit from the Councils City Centre improvement proposals. We believe there are reasonable medium term rental growth prospects from prevailing levels based on a comparatively low level of £80 per sq ft in terms of Zone A.

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as detailed below:

 9-13 Market Place, Chesterfield – This parade was sold in June 2015 for £8.2 million, reflecting a net initial yield of 6.20%. The property was let to Primark and Card Factory with an unexpired term of 9.5 years. Chesterfield is also located in South Yorkshire, but is a smaller town compared to Barnsley with stronger retail demand. The property is also situated in the towns prime retailing location, similar to the subject property. The income security offered at the subject property is stronger however we would consider Chesterfield to be a slightly more desirable retailing location.

 12-13 Market Street, Pickering – This property is currently under offer at a price reflecting a net initial yield of 5.50%. The property is let to the Yorkshire Trading Company with an unexpired term of 55 years. The property is situated in a good retailing location in Pickering. The asset has a similar unexpired term to the Boots lease at the subject property.

 60-62 George Street, Richmond – This property was sold to a private investor in November 2014 at a price reflecting a net initial yield of 3.7%. The property was let to Boots for a further 54 years. Richmond is a much stronger town, however the property had a similar unexpired term. We would therefore expect the Boots asset at the subject property to transact at a discount to the yield achieved in this transaction.

 17 Market Hill, Barnsley – This High Street Bank investment was sold in May 2015 for £241,000, reflecting a net initial yield of 7.47%. This property was let to TSB (Bank) with an unexpired term of 6 years. The property is situated in a much weaker retailing location in Barnsley, and the remaining term was shorter than the subject property. However this is a single small lot size.

 64-66 Sepulchre Gate, Doncaster - This High Street Bank investment sold in May 2015 for £1.19 million, reflecting a net initial yield of 7.50%. This property is let to the Bank of Scotland, with an unexpired term of 11 years. This property was poorly configured and was located in a 90% prime location, at the end of the prime pitch. However, this does offer a useful comparable in relation to the subject property which we would expect to transact at a lower yield.

 26 Northbrook, Newbury – This property was sold in July 2015 to a private investor for £1.06M, reflecting a net initial yield of 7.08%. The property was let to Lloyds Banking Group with an unexpired term of 5 years. Although the term certain on this property is shorter than the subject property, Newbury is a stronger town. We would expect the subject property to transact at a similar yield.

 88-92 High Street, Bromsgrove - This parade of retail units was sold in June 2015 for £1.125 million, reflecting a net initial yield of 7.50%. The property was let to Clintons and Thomas Cook with an unexpired term of 5.5 years. Bromsgrove is a comparable location and this property is situated within a similar prime pitch to the subject property. We consider that this comparable provides good evidence but we would expect the subject property to transact at a lower yield to reflect the stronger income profile.

 42/60 High Street, Harborne - The retail parade was sold in April 2015 for £3.42 million, reflecting a net initial yield of 7.81%. The sale was subject to multiple tenancies with a WAULT of 4.9 years. Harborne is a smaller town but with well configured modern units, located in the prime pitch. The subject property offers a considerably longer WAULT. However this is a reversionary asset in a strong town and we would therefore expect the subject property to transact at a discount to the yield achieved in this transaction.

 14-19 Queens Street, Crawley – This property was sold to a small Fund in April 2014 for £4.25 million, which equated to a net initial yield of 7.78%. This property was sold subject to a tenancy to Poundland, with an unknown unexpired term. This is a stronger retail town but the property was situated in a secondary location compared to the subject property. The subject property also offers a considerably longer WAULT. We would therefore expect the subject property to transact at a lower yield.

 2/4 Kirkgate, Wakefield sold in September 2014 for £1.77 million. This equated to a yield of 8.4%. The sale was subject to a tenancy to Waterstones & Santander, with an unexpired term of 5.5 years. We understand that the unit was overrented.

VALUATION METHODOLOGY

We have valued the property using the traditional “all risks” yield method of valuation, having regard to the (historic) evidence of comparable retail investment transactions and current investment market sentiment.

In using the traditional all-risks yield method of valuation, we have adopted different yields for the different uses/units in the property to reflect differences in 34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

the unexpired terms certain of the leases, rental growth prospects, tenant’s covenant strength, and overall quality of income. We have also had regard to the overall “blended” yield of the property as a whole. Some of the units are over rented, however a number of the leases have already been re-based and therefore the over rent has been reduced. The current level of over rent could potentially be mitigated further by favourable rental growth prospects over the next three years.

In our opinion, a prospective purchaser of the property would be prepared to accept an initial yield of approximately 7.00% due to the strong income profile and good location. Our valuation of £7.985M reflects a blended initial yield of 7.00% and an equivalent yield of 6.23% on the basis of the following initial yields for each part of the property:

Boots 6.25% Lloyds 7.00% High St 8.00%

In arriving at our valuations, we have allowed for the outstanding rent free period on Unit 1 (Lloyds).

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

The security offers high quality income with 67.50% of total income secured against Boots and Lloyds Bank. In addition the investment offers an attractive WAULT in excess of 25 years while the residual value is underpinned by the prime retail location.

The subject retailing pitch that the property falls within appears to be in good demand with the majority of the units occupied by High street retailers.

We believe that rents will remain stable in the short term especially based on the planned town redevelopments close to the subject property.

Should the tenant not wish to renew their lease, we consider that value of the property would attract reasonable interest from high street retailers as well as developers who may look to convert the upper floors should the tenant not require the additional space.

Should the property be marketed we consider that the asset would attract interest from a wide range of investors, including owner occupiers, developers and property companies.

PHOTOGRAPHS

Street Scene External 34/50 Cheapside & 6/14 Albert Street East, Barnsley, S70 1RQ October 2015

1st Floor 50 Cheapside - unoccupied 1st Floor 50 Cheapside - unoccupied

b) The Grand Buildings, 66-100 Jameson Street, Hull HU1 3JX

Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

Grand Buildings, Jameson Street, Hull HU1 3JX

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Reasonable. The total population Market Value: £8,511,000 within the Hull primary catchment area is 554,000 of which the estimated shopping population is circa 337,000 suggesting little Key Inputs leakage to competing centres. Initial Yield Micro Location: Good secondary. The property is 8.25% situated on the northern side of Equivalent Yield 7.38% Jameson Street (pedestrianised) in the centre of Hull Reversionary Yield 7.03% Property Type: Retail High Street Capital Value per sq ft £147 psf Total Property Area: 5126.86 sq m (55,185 sq ft) Market Rent £665,232 per annum Tenure: Freehold Market Value assuming Vacant £5,700,000 Possession Number of Tenants: 7 Reinstatement Value £7,196,381 Percentage Vacant: 12.5% (subject to a rental

guarantee) Total Rent Reserved: £779,250 per annum Covenant Strength: 60% of income secured on banking covenants. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 A modern purpose built unbroken parade arranged over three floors  Rents c20% below pre-recession peak suggesting rental growth in good condition. opportunities.  Key location on pedestrianised street linking St Stephens Shopping  Strong yield compression expectations following Hull’s exposure to Centre & public transport terminus into the city centre and Princes 2017’s European City of Culture. Quay.  Let vacant unit.  60% of total income to High Street Banks.  Some leases re-geared already but further opportunities exist.  Lloyds, Blacks, HSBC and Waterstones have all recently extended Slaters have indicated they would like to extend their lease. or renewed their leases.  The property will attract interest property companies and funds who Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

seek a secure high yielding holding.

Weaknesses Threats

 12 month rent free periods agreed under reversionary leases.  Lengthy void on vacant unit and in the event that 2015 renewals  One vacant unit. do not complete.  Over rented by 17.00%.  Continued pressure on tenants and the high street in general due to the lack of spending by consumers.  Lack of upper middle/quality retail offer in Hull as a whole due to catchment limiting appeal of vacant units.

LOCATION

Overview The property is located on Jameson Street, a pedestrianised shopping street in the centre of Kingston upon Hull (commonly known as Hull). The city is the principal centre for Humberside and parts of the East Riding of Yorkshire and has a strong retail offering in the city centre, with little competition from out of town outlets.

Communication Road and rail links to Hull are not as strong as they could be. The M62 motorway is some 18 miles distant, meaning traffic must approach on slower routes, though from the west the access is by dual carriageway. There are direct trains to London Kings Cross, but these are few and the service limited compared to that in York or Doncaster, the nearest stations on the East Coast Mainline proper. That said, Hull is a sea port, with both passenger and freight services operating out of Port of Hull.

Situation The property is situated in a good secondary retail pitch within the core city centre shopping area. The building is situated on the northern side of Jameson Street, close to the House of Fraser department store and the Prospect Centre Shopping Centre. The street provides a key pedestrian link within the city centre retail areas.

The development of St Stephens Shopping Centre in 2007 has shifted retailing away from the historic prime pitch of Whitefriargate and towards Jameson Street, Prospect Centre and King Edward Street. Jameson Street is the pedestrianised link into Hull from St Stephens and the new public transport terminus.

SITE

The site extends to approximately 0.3176 ha (0.785 acres).

Access The property fronts onto Jameson Street, which is pedestrianised with limited vehicular access during trading hours. Pedestrian access into the units is level access at the ground floor. Those Units with trading areas on the first floor (1a and 6) have customer lifts.

Unrestricted vehicular access for deliveries is to the rear, on West Street.

DESCRIPTION

The subject comprises a modern unbroken retail parade with accommodation over three floors. The building appears to have been constructed in the early 1990s and is a combination of steel and concrete framed construction supporting suspended concrete floors with cavity brick and block elevations and weathered beneath a pitched roof to the front section and larger flat roof to the rear.

The parade fronts onto Jameson Street and provides level access to all of the 8 units. To the west is pedestrian access to the Prospect Centre, though the corner unit does not have return frontage. To the north, at the rear, is a small service yard giving access for deliveries and a very limited amount of staff parking. To the east is the adjoining parade, assumed to adjoin on a party wall.

Each of the eight units has access at street level, with all save Unit 1a having ground floor retail space. Unit 1a is entirely first floor retail save for a ground floor access lobby and is understood to have originally been part of Unit 1. Otherwise only Unit 6 (occupied by Waterstones) has first floor retail space. In all other cases the first and second floor space (if included within the individual demise) is used as ancillary space.

The building is essentially constructed based on identical rectangular spaces. Some of the shop units are ‘double’ and the two end units, 1 and 8, are irregular in shape due to the shape of the site. Internally metal staircases independent of the building’s structure provide service access at the back of each unit, with individual tenants having sub-divided the space to suit their particular requirements. The extent of subdivision as part of the shopfit is greater in some of the units depending on individual need. In particular the banking tenants have created smaller spaces within the units, which we assume to be demountable partitioning removable on lease termination if required.

Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

In each case landlord’s provision appears to be limited to the basic services, with tenants fitting and maintaining their own security systems and heating/airconditioning.

ACCOMMODATION

AREAS UNIT TENANT Description Sq.Ft. M² ITZA (Units) (1,729) n/a Lloyds Bank Plc G (Sales) 5,670 526.8 Unit 1 G (Anc.) 410 38.1 1st (Anc.) 1,514 140.7 G (Lobby) 70 6.5 Slater Menswear Unit 1A 1st (Sales) 8,135 755.8

2nd (Anc) 2,977 276.6 ITZA (Units) (882) n/a Unit 2 Blacks Outdoor Retail Limited G (Sales) 2,158 200.56 Mezz 208 19.33 ITZA (Units) (1,735) n/a HSBC Bank Plc G (Sales) 4,196 389.96 Unit 3/4 1st (Anc.) 1,985 184.48 2nd (Anc.) 688 63.94 ITZA (Units) (796) n/a Barclays Bank Plc G (Sales) 2,105 195.63 Unit 5 Occupied by Tony’s Textiles 1st (Anc.) 1,930 179.37 2nd Anc.) 370 34.4 ITZA (Units) (1,726) n/a G (Sales) 4,094 380.3 Waterstones Booksellers Ltd Unit 6 1st (Sales) 3,855 358.1

1st (Anc.) 1,927 179.0 2nd (Anc.) 1,141 106.0 Vacant (Rental Guarantee) ITZA (Units) (873) n/a Unit 7 G (Sales) 2,241 208.27 ITZA (Units) (1,762) n/a Halifax Plc G (Sales) 5,119 475.6 Unit 8 1st (Anc.) 4,060 377.2 2nd (Anc.) 702 65.2 Total 55,555 5,161.23

TENURE

The property is held freehold.

TENANCIES

Lease Start Lease Expiry Option To UNIT TENANT Current Rent Comments Date Date Break 2015 Lease renewal. Unit 1 Lloyds Bank Plc 07/01/2015 06/01/2025 £105,000 Next RR 07/01/2020 Demised area extends at first floor level over Unit 1A Slater Menswear 30/08/2002 29/08/2017 £87,500 adjoining units 1, 2 and 3/4 RR 14/05/19 Unit 2 Blacks Outdoor Retail Limited 14/05/2014 13/05/2024 13/05/2019 £55,000

5 year reversionary lease from 02/11/2016. 12 Unit 3/4 HSBC Bank Plc 02/11/2001 01/11/2021* £132,000 mths R/F allowance spread over 24 mths Under-let to Tony's Textiles who are holding Unit 5 Barclays Bank Plc 25/03/1994 24/03/2019 £67,000 over. Outstanding application to renew. 5 year reversionary lease from 13/02/2017. 13 Unit 6 Waterstones Booksellers Ltd 13/02/2012 12/02/2022* £120,000 Mths R/F expiring 31/05/2016. Costa Coffee trade as a concession from FF. Unit 7 Vacant (Rental Guarantee) £47,750 Vendor to provide rent, rates and service Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

charge guarantee for 12 months from 14/09/2015 to 13/09/2016 Understood that tenant is planning to refurbish Unit 8 Halifax Plc 13/10/2000 12/10/2020 £165,000 the banking hall RR 13/10/2015 Substation Yorks Electricity 05/04/1994 04/04/2019 £0

Covenant Strength Circa 60% of the income derives from banking covenants, though Barclays Bank are not in occupation. We understand that D&B ratings for the key tenants were as follows (as at June 2015).

The unit is let to Lloyds Bank Plc which is a British bank founded in 1765 and whose activities include retail and commercial banking. The tenant has a dun&bradstreet rating of 5A 1, which represents a minimum risk of business failure. Year Ending Year Ending Year Ending Lloyds Bank Plc 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s) Sales Turnover £40,761,000 £53,977,000 £55,410,000 Profit (Loss) Before Taxes £2,289,000 £894,000 (£474,000) Tangible Net Worth £44,691,000 £39,444,000 £44,593,000 Net Current Assets (Liabilities) £3,346,000 £61,444,000 (£309,770,000)

The unit is let to Slater Menswear which is a Scottish retail menswear chain store founded in June 1973. They have 23 stores located across the UK and specialise in mens fashion for all sizes. The tenant has a dun&bradstreet rating of O2, which represents a lower than average risk of business failure despite having an undetermined financial worth. Year Ending Year Ending Year Ending Slater Menswear 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s) Sales Turnover - - - Profit (Loss) Before Taxes - - - Tangible Net Worth - - - Net Current Assets (Liabilities) - - -

The unit is let to Blacks Outdoor Retail Limited which is the largest outdoor retailer in the UK. They offer an extensive range of outdoor clothing and equipment and trade from 69 stores across the UK. The tenant has a dun&bradstreet rating of N3, meaning they have a higher than average risk of business failure and a negative net worth. Year Ending Year Ending Blacks Outdoor Retail Limited 01 Feb 2014 (000s) 01 Feb 2013 (000s) - Sales Turnover £99,218 £126,882 - Profit (Loss) Before Taxes (£10,696) (£21,214) - Tangible Net Worth (£37,295) (£29,669) - Net Current Assets (Liabilities) £25,151 (£16,228) -

The unit is let to HSBC Bank Plc which is one of the largest financial services organisations in the world and was founded in 1836, its activities include retail and commercial banking. The tenant has a dun&bradstreet rating of 5A 1, which represents a minimum risk of business failure. Year Ending Year Ending Year Ending HSBC Bank Plc 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s) Sales Turnover £18,313,000 £20,302,000 £20,415,000 Profit (Loss) Before Taxes £1,953,000 £3,294,000 £1,004,000 Tangible Net Worth £28,784,000 £24,436,000 £23,849,000 Net Current Assets (Liabilities) £38,543,000 (£40,738,000) (£30,903,000)

The unit is let to Barclays Bank Plc which is one of the largest financial services organisations in the world and was founded in 1690, its activities include retail and commercial banking. The tenant has a dun&bradstreet rating of 5A 1, which represents a minimum risk of business failure. Year Ending Year Ending Year Ending Barclays Bank Plc 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s) Sales Turnover £32,708,000 £36,873,000 £34,337,000 Profit (Loss) Before Taxes £2,309,000 £2,885,000 £99,000 Tangible Net Worth £55,614,000 £53,324,000 £52,123,000 Net Current Assets (Liabilities) £76,831,000 £54,717,000 £47,078,000

The unit is let to Waterstones Booksellers Limited which is a British book retailer operating 275 stores and employs around 3,500 staff in the UK and Europe. The tenant has a dun&bradstreet rating of N2, meaning they have a lower than average risk of business failure and a negative net worth. Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

Year Ending Year Ending Year Ending Waterstones Booksellers Limited 26 Apr 2014 (000s) 27 Apr 2013 (000s) 28 Apr 2012 (000s) Sales Turnover £374,546 £398,464 £410,345 Profit (Loss) Before Taxes (£18,799) (£23,046) (£37,314) Tangible Net Worth (£32,657) (£14,179) £8,864 Net Current Assets (Liabilities) (£126,262) (£101,415) (£64,685)

INCOME ANALYSIS

Rental Income £779,250 per annum.

Market Rent £665,232 per annum.

Service Charge/Rates Shortfall We are informed that the service charge is 100% recoverable when fully let. The vacant unit, Unit 7, is allocated 4% of service charge expenditure, equating to c£3,000 for the 2015/2016 year, based on the total budget of £75,875.84. In addition there will be empty property business rates to pay on the vacant unit, albeit this is subject to a rental guarantee.

CONDITION

 “The roof has suffered a significant number of historic leaks (evidenced by patch repairs) and ongoing spot leaks are also evident. You should consider that ongoing annual repair of isolated leaks is likely to be required until the roof is replaced.”

The Report concluded that:

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £30,000, exclusive of professional fees and VAT. In our opinion the responsibility of roofs and elevations are service charge recoverable, and accordingly the cost of any outstanding repairs and maintenance, together with ongoing repair and maintenance costs will be fully recoverable from the tenants via the service charge provisions in the lease.

From a postcode search to assess the asset’s environmental agency flood risk rating it would appear that in common with almost the entirety of Hull city centre the property is located within Flood Zone 3 on the floodmap for planning, with flood defences being noted.

MARKET OVERVIEW

Retailing in Hull Hull’s core shopping area is centred on Queen Victoria Street. Radiating from the square are the main shopping streets of Whitefriargate in the Old Town and King Edward Street, leading to Prospect Street and Jameson Street in the New Town. The town has three shopping centres, Princes Quay, Prospect Place and the more recently constructed St. Stephens Shopping Centre which opened in 2007. St Stephens provides the main concentration of fashion operators within the city with tenants such as Next, H&M, River Island, New Look, Zara, TK Maxx, Top Shop and more recently Cult Clothing (Superdry) represented.

Hull's prime pitch has shifted westwards over the last decade. The traditional prime pitch used to be pedestrianized Whitefriargate, until it was supplanted by the Main Deck (street level) of Princes Quay shopping centre. However, we now consider the main ground floor mall of St Stephens shopping centre to constitute the strongest retail pitch in the city centre.

Hull's secondary retail areas include Whitefriargate, Prospect Street, King Edward Street, Jameson Street and Paragon Street in the New Town, the latter three being partly pedestrianised. Secondary retail also includes Carr Lane and Savile Street (off Queen Victoria Square).

While several banks and A3/service operators occupy units on Jameson Street and Paragon Street, only a limited number of national multiples and a few fashion retailers are located here, although House of Fraser trades from the western end of Jameson Street, at the junction with Ferensway.

Whitefriargate used to be Hull's prime pitch, but has seen a decline in the number of multiple retailers trading here since the opening of St Stephens Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

shopping centre. While Marks & Spencer and New Look continue to occupy large stores here, the shopping environment has deteriorated and there are many vacancies.

Competition Hull's nearest main competitors are Scunthorpe and Grimsby, both of which are located south of the Humber, 35 minutes drive away.

The fishing port of Grimsby is a considerably smaller centre than Hull, but is popular within its local area. It has a sizeable modern shopping centre, Freshney Place anchored by House of Fraser, Bhs and Marks & Spencer alongside a good range of standard multiples including Topshop, Monsoon, Next, New Look, Primark and TK Maxx. Planning permission has been granted for a minor refurbishment of the centre.

Scunthorpe is also a smaller centre than Hull and has a reasonable range of multiples in The Parishes including Wilko, H&M, Bhs and Clarks, alongside a Vue multiplex.

To the north of Hull there are even fewer competing centres. The largest within Humberside is Bridlington, which has The Promenades, a small 75,000 sq ft shopping centre; retailers include New Look, Argos, Sports Direct and Select. Bridlington caters for the everyday shopping needs of the local population and tourists, rather than competing with Hull for comparison shopping expenditure.

Construction has started on a new shopping centre on the edge of Beverley, about 30 minutes to the north of Hull. The new scheme will provide 160,000 sq ft of retail space to be anchored by a Debenhams and Parkway Cinema.

Further afield are the major centres of York and Leeds. While both these centres are around one hour's drive from Hull, they may attract infrequent but high-spending visits from the Hull catchment, particularly from the more rural western and northwestern parts of the area and the more affluent western suburbs of the city itself.

York has a high quality retail offer, including up-market and speciality shops. It is an important historic centre and may attract shoppers from the Hull area, possibly for day trips and outings.

Leeds' retail offer has improved in recent years and the city has become a major destination for fashion shopping; Hugo Boss, Vivienne Westwood, TM Lewin, Mulberry, Kurt Geiger and Reiss are just a few of the up-market/high fashion retailers represented in the city centre and particularly within the fashionable Victoria Quarter. Department store operators House of Fraser, Harvey Nichols and Debenhams are also represented in Leeds.

Vacancies, in-movers and closures Hull has remained relatively stable, experiencing only a slight fall in vacancy status. The city ranked 37 of the 200 national centres in 2015. Unlike many other centres, Hull's Retail Score increased between 2007-2010, when other centres were experiencing the effects of the credit crunch and economic recession. Hull's improved offer during this period can be attributed to the opening of St Stephens, which attracted a number of retailers new to the city, thereby bolstering the city's Retail Score.

Much of Hull's immediate catchment population is of lowly socio economic status. Indeed, both levels of unemployment and the proportion of workless households across the catchment are some of the highest amongst the national Centres. Not surprisingly, the city ranks as one of the least affluent of the national centres.

In June 2015 the vacancy rate in Hull city centre stands at 18.0% of units, above the Retail national average and a marked increase on the level recorded in November 2013. The level of take-up between the November 2013 and June 2015 was 2.6% of units, below the national average.

Whilst the development of St Stephens may have initially helped improve the city's retail offer, it also meant that the city centre was faced with absorbing an additional 300,000 sq ft of retail floorspace. This increase and the resulting polarisation between the new centre and the older parts of the central area, has contributed towards a persistently high level of vacancies. While vacancies are scattered throughout the whole of the city centre, there are particular concentrations towards the end of the former prime pitch, Whitefriargate, and in Princes Quay shopping centre.

There were no vacant units recorded on the prime pitch within St Stephens at the time of reporting, although there was one longstanding vacancy on the second floor. Card Factory and Vodafone replaced Hawkins Bazaar and Jane Norman on prime and Vision Express took a vacant unit.

Princes Quay shopping centre has again seen an increase in vacancies from seventeen to twenty seven units today. Retailers leaving the centre include Bank, Bolo and Vision Express from Upper Deck; EE, O2 and Red 5 all left Main Deck, whilst Roman Originals opened here. Phones 4 U also ceased trading in the centre, while Quasar and Superbowl UK moved onto Harbour Deck.

We are aware of five vacancies at the Prospect Centre; Perfect Home and That's Entertainment had ceased trading. There had been no notable in- movers.

There had been limited movement amongst multiple retailers on Whitefriargate recently, although there was still a high level of vacancies on this pitch. William Hill vacated a vacant unit here to relocate elsewhere within the city.

Tresspass replaced Pizza Hut and Textiles Direct had ceased trading on Jameson Street. Jessops, Sainsbury's Local and William Hill had all taken vacant units here recently.

Herbert Brown, Ladbrokes, Starbucks, Thorntons and Vodafone had all vacated units on King Edward Street and Sharps and Tesco Express moved onto the southern part of the street.

Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

Elsewhere, Costa had taken space on Ferensway and British Red Cross Society opened a branch on Brook Street. While on Paragon Street, Nisa Local moved into a vacant unit and an independent retailer replaced Flight Centre.

Rents and Deals The performance of prime rents in Hull has been above the average for Sub Regional Centres over the period 1987-2015. There was strong growth in prime Zone A rents in the city between 1998 and 2000 when rents rose to £135 psf, followed by a further uplift to £175 psf in 2004. Rents remained around this level for several years but fell sharply in the aftermath of the 2008 credit crunch, before regaining some lost ground in 2012/13 and then stabilising.

We currently estimate prime rents in Hull at £140 psf Zone A. This represents no change on the end 2014 level of prime rents in the city with rents remaining 20% below the pre-recession peak of £175 psf ZA.

As discussed, the main ground floor mall of St Stephens shopping centre is considered to be the prime retail pitch in Hull. Vision Express took a new lease in February 2015, paying £141 psf Zone A, while a later letting with Vodafone in May 2015 was agreed at £166 psf Zone A. A February 2015 rent review with Select was settled at a small increase, the rent rising to £141 psf Zone A.

Agents for Princes Quay maintain that rents for the Main Deck (ground floor) were in the region of £100 psf Zone A, although there was little available evidence from recent deals as the majority had been agreed on flexible terms such as temporary lettings, or on the basis of turnover related rents. The most recent evidence, therefore, comes from a letting to Quiz in 2010, which reflected £100 psf Zone A.

While there had been limited market activity in the Prospect Centre at the time of reporting, we understand that the tone of rents is around £45-£55 psf Zone A. Clinton Cards renewed its lease in August 2014 at £50,000 pa, although this was not analysed on a zonal basis. Two lettings in 2013 to Eskimoo and an independent charity shop reportedly reflected £55 psf Zone A.

We are informed that rents for shops on Jameson Street can vary between £55-£70 psf Zone A, with those shops closest to King Edward Street achieving the higher values. In late 2013, TSB Bank renewed its lease on a large unit close to Ferensway at £42 psf Zone A.

A letting to Heron Foods in August 2013 on Whitefriargate achieved £50 psf Zone A. While this area once used to be prime, retailers have been migrating towards the western part of the central area in recent years, with rents falling significantly in this location.

In March 2015, Subway renewed its lease on King Edward Street at £84 psf Zone A, however, local agents report that a letting to an independent café in January 2015 achieved a Zone A value of £55 psf, which is considered a more realistic tone for this pitch. A letting to Costa in 2012 achieved £80 psf and a more recent letting to 3 Store in 2013 equated to £75 psf.

Zone A rents for units on Paragon Street vary between £20-30 psf according to the position of the unit. In March 2014, an independent retailer took a unit close to Queen Victoria Square at £23 psf Zone A. A letting to Heron Foods in 2012 at the far western end, achieved £22 psf Zone A, whilst 2013 lettings to an independent optician and a payday loans provider achieved £24 psf and £36.50 psf Zone A respectively.

To the north, along Brook Street, Cooplands Bakery renewed its lease at £20 psf Zone A in April 2015; an earlier letting with British Red Cross in May 2014, achieved a rent of £22.50 psf Zone A.

Development Pipeline To our knowledge, there are few schemes for Hull which seek to increase the retail floorspace in the city centre.

Henderson Global Investors and Insight Investment had gained outline consent for a large extension to Princes Quay shopping centre which was to include two department stores, 60 unit shops and a hotel, along with the refurbishment of the existing centre. However, the scheme was sold to CIT in 2010 and it was reported later that year that the new owners were not intending to proceed with these plans. Although an extension of the consent was granted until 2018, there has been no progress on the scheme and it is not clear whether this project will still proceed.

More recently, it has been announced that CIT wish to reposition the shopping centre as a retail and leisure hub, as well as including an outlet centre within the scheme. As part of this project, a bowling alley and laser tag opened in May 2015 and will be joined by more restaurants by the end of the year.

Summary The subject retail parade appeals to banking covenants traditionally based in the Jameson Street area, together with a number of national and local covenants. That said, the city as a whole lacks a mid-range/quality fashion retail offer and Jameson Street does not have a tradition of fashion retailers, so interest is more likely to stem from non-fashion clothing retailers and those targeting the value end of the market.

Overall vacancy rates for Hull city centre stand in the region of 18% according to Promis, which includes Unit 7 within the subject and five units in the neighbouring Prospect Centre; Perfect Home and That’s Entertainment having ceased to trade in the last 12 months. It is considered that supply outstrips demand in the immediate locality.

We understand that prime rents across Hull city centre to be in the region of £140 psf Zone A, with pre-recession rents peaking at £175 psf Zone A. In contrast to the newer prime shopping centres, the tone in the Prospect Centre, which is near to the subject property, is in the region of £40-£55 psf Zone A. Jameson Street itself sits at £55-£70 psf Zone A, with shops closest to King Edward Street achieving the higher values.

Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

MARKETABILITY

Typical Void Letting Period In the event of the current tenants vacating, a marketing period of 12 months would be required.

Typical Tenant Profile This is likely to be either a national covenant in respect of a discount or value brand, or a local covenant of a similar nature. Some interest may arise from banking covenants seeking to relocate within the immediate locality given the substantial banking presence on Jameson Street.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 12 months for 10 year leases.

Letting Strategy We note that Unit 7 has already been vacant for approximately 6 months and we would expect a marketing period of 12 months to be required to let this or other units becoming available in the subject Parade. We would expect units to let either on a 10 year lease with a break at year 5, or on a 5 year lease with a 12 month rent free period expected.

RENTAL EVIDENCE

There has been limited market activity in the Prospect Centre and Jameson Street as at the date of valuation. We have had regard to the following in arriving at our opinion of Market Rent:

 Unit 1, Grand Buildings, Jameson Street (subject property) - Lloyds Bank agreed a new lease in January 2015 for a term of 10 years at a rent of £105,000 per annum, equating to £57.00 psf Zone A allowing for appropriate rates on the ground and first floors. The tenant was given a 24 month rent free period and no break options were given. This provides the most salient evidence of rental value.

 Unit 2, Grand Buildings, Jameson Street (subject property) – Blacks Outdoor Leisure agreed a new lease in May 2014 for a term of 10 years at a rent of £55,000 per annum, equating to £63.00 psf Zone A. There is a tenant break option at the end of year 5 and a 6 month rent free period was given as an incentive.

 43 Jameson Street – In June 2014 Jessops agreed a new lease of the property for a term of 5 years at a rent of £46,000 per annum, equating to £78.50 psf Zone A. There was a tenant only break option at the end of year 3 and a 9 month rent free period was given.

 47 Jameson Street – In March 2014 William Hill agreed a new lease of the property for a term of 20 years at a rent of £50,000 per annum, equating to £78.00 psf Zone A. 5 yearly mutual break options were agreed.

 Unit 12, The Prospect Centre - In the nearby Prospect Centre, we understand that Clinton Cards renewed its lease in August 2015 at £50,000 per annum, though we do not have zonal details available to confirm the rent in terms of Zone A.

 Unit 28A in the St Stephen Centre - In terms of wider comparables reflecting the prevailing tone of prime Hull city centre rents, we understand that Vodafone agreed a new lease of Unit 28A in the St Stephen Centre at a rent of £166 psf Zone A in May 2015, with Vision Express reported to have taken a unit in February 2015 at £141 psf in terms of Zone A.

On the basis of the recent evidence from the subject property we have applied a benchmark Zone A rate of £55 per sq ft. From this benchmark level we have made adjustments for rent review terms, position, configuration etc. We have adopted rates of A/10 on the mezzanine levels, A/15 on the first floor ancillary accommodation, and rates of either A/20 and A/25 on the second floor ancillary accommodation, depending on access. This provides an aggregated rental value of £665,232 per annum, apportioned as follows:

Unit 1 £105,156 per annum. Unit 1A £67,092 per annum. Unit 2 £49,654 per annum. Unit 3/4 £104,595 per annum. Unit 5 £51,671 per annum. Unit 6 £125,708 per annum. Unit 7 £48,015 per annum. Unit 8 £113,341 per annum.

Adopting these rental values we are of the opinion that the property is over rented by approximately 17.00%.

Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as outlined below:

 Units 1-3, 34-45 King Street, South Shields – This property comprises a modern retail parade let to national retailers (Poundworld, EE and Carphone Warehouse). The property was sold at auction May 2015 reflecting a net initial yield of 9.5%. The property is located in a challenging retail pitch with an unexpired term of less than 3 years on each unit. This property therefore offers an inferior income profile with weaker re-letability prospects. We would therefore expect the subject property to transact at a premium to the yield achieved in this transaction.  47-61 King Street, South Shields – This property is currently under offer to Addington Capital at £5.5m reflecting an 8.00% net initial yield. This is a similar modern retail parade occupied by national retailers, with a longer WAULT to the subject property. This parade is however located in an inferior location although there are active management opportunities to drive revenues. There is currently one vacant unit, which is subject to a vendors rental guarantee. Overall, the income is considered to be superior and we would therefore expect the subject property to transact at a discount to the yield achieved in this transaction.  56-60 Jameson Street, Hull – This property is under offer to a private investor at 9.00% net initial yield. The property is let to two retail operators, namely O2 and Trepsass, with a WAULT of 3.2 years. This property provides a shorter WAULT and overall weaker covenant strength. We would expect the subject property to transact at a better yield achieved in this transaction.  10-21 Kirkgate, Leeds – This property is under offer at £7.2M reflecting a 7.75% net initial yield. The property is let to multiple tenants, with a WAULT of 4.1 years. Although this property proves a shorter income profile, and is situated in a weaker secondary retailing pitch, Leeds is a superior and stronger town. The property is also 20% over rented, similar to the subject property. Overall we would expect the subject property to transact at a slight discount to the yield achieved in this transaction, to reflect the strength of Leeds as a retailing location.  119/121 Ferensway, Hull – New River Retail recently acquired the former T J Hughes store on 119/121 Ferensway at a price of £1.9m, reflecting a net initial yield of 6.3%. The unit is now occupied by Poundland by way of an assignment. Unit comprises 49,000 sq ft department store and is located in a key position on the junction of Ferensway and West Street being on the main retail route from St Stephens towards Princes Quay and also located close to the Prospect Centre. The unexpired term is 7 years, albeit we understand that the property offers good asset management opportunities.

VALUATION METHODOLOGY

We have valued the property using the traditional “all risks” yield method of valuation, having regard to the (historic) evidence of comparable High Street retail investment transactions and current investment market sentiment.

In using the traditional all-risks yield method of valuation, we have adopted different yields for the different uses/units in the property to reflect differences in the unexpired term certain of the leases, rental growth prospects, tenant’s covenant strength, and overall quality of income. We have also had regard to the overall “blended” yield of the property as a whole.

In our opinion, a prospective purchaser of the property would be prepared to accept an initial yield of approximately 8.00% due to the strong rental income (60% of total income is secure to high street banks), notwithstanding the limited growth prospects at the next rent reviews. Initial yields of around 6.0% are currently commonplace within the core retail areas of Hull. Our valuation of £8.511M reflects an initial yield of 8.25% and a “blended” equivalent yield of 7.38% on the basis of the following equivalent yields for each part of the property:

National 5.25% Lloyds 6.25% Slater 8.50% Rental Guarantee 12.00%

In arriving at our valuations, we have deducted the 12 month rental guarantee on unit 7, and allowed for the outstanding rent free periods on Unit 1 (Lloyds), Units 3&4 (HSBC) and Unit 6 (Waterstones). We have allowed for a total capital deduction in the sum of £441,000.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

We consider the tenant covenant strength would be perceived by the market as offering ‘lower than average risk’.

Grand Buildings, Jameson Street, Hull HU1 3JX October 2015

PHOTOGRAPHS

Frontage – Jameson Street Rear Service Access

Internal – Tony’s Textiles, Ground Floor Retail, Unit 5 Internal – Slater’s Menswear, First Floor Retail, Unit 1a

c) 9/21 Albion Place, Leeds LS1 6JS

19/21 Albion Place, Leeds LS1 6JS October 2015

19/21 Albion Place, Leeds LS1 6JS

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Good. Leeds has no real Market Value: £2,938,000 competition within Yorkshire and a catchment of over 1.4 million Key Inputs people. Micro Location: Strong. Located in central Leeds Initial Yield 6.00% and is a key link between the traditional prime retailing streets Equivalent Yield 6.00% (Briggate) and new shopping Reversionary Yield 6.16% flagship shopping centres. Capital Value per sq ft Property Type: Retail High Street £474 per sq ft Total Property Area: 6,197 sq ft Market Rent £191,560 per annum Tenure: Freehold Market Value assuming Vacant £2,000,000 Possession Number of Tenants: 3 Tenants (2 lead tenancies, 1 sub Reinstatement Value £1,130,315 tenancy)

Percentage Vacant: 0% Total Rent Reserved: £186,500 per annum Covenant Strength: The units are let to three well- established retailers and perceived to be reasonably strong tenant covenants. Sale Timescale: 6 months by private treaty. Suitability for Loan Good Security Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Located in a strong retailing location on the western edge of the  Re-gearing or extension of the two leases which have not recently prime retail pitch in Leeds City Centre. renewed.  Freehold interest.  The new Victoria Centre which is due to open in late 2016 should  Fully let to strong and improving covenants on full repairing see increased footfall as Albion Place becomes the link route leases and is broadly rack rented. between Victoria Centre and Trinity Centre.  Cafe Nero have recently renewed their lease.  Some of the unused upper parts may form a residential conversion opportunity.  The City has been boosted by the opening of the new Trinity Shopping Centre offering in excess of 1 million square feet of new  The individual units can be broken up and disposed of separately. 19/21 Albion Place, Leeds LS1 6JS October 2015

retail, food and leisure space, further enhancing the attractiveness of the City Centre.  Relatively small lot size, which would be readily financeable by a wide pool of lenders.

Weaknesses Threats

 Lease to EE Ltd (underlet to Hotel Chocolat) expiring July 2017.  Potential for future voids and associated void costs following expiry  Upper floors under-utilised and in poor condition. of the existing leases. However any voids and associated will be offset by the strong letting prospects.  Capital value is however potentially volatile, and dependent on whether the tenants vacate.  Competition due to new developments.

LOCATION

Overview The property is located on Albion Place, which is on the western edge of the prime retailing area in Leeds City Centre. Leeds’ prime pitch used to include the central section of Briggate, extending along Commercial Street as far as the junction with Albion Street. However, since the completion of Trinity Leeds, the city’s prime pitch has shifted to encompass a large section of the new development. Two key occupiers Next and Urban Outfitters relocated from Albion Place (the subject street) to Trinity Leeds. Over the years Albion Place has become synonymous with coffee and food operators, with this latest development of Trinity Leeds and the exit of further fashion retailers underlining the trend.

The property comprises 3 adjoining retail units. 19 Albion Place and 20a and 21 Albion Place are arranged over ground, basement and 3 uppers floors whilst, 20 Albion Place is arranged over ground and basement floors. Servicing is to the rear via Pack House Yard.

Communication Albion Place is situated in the centre of Leeds City. Public transport communications are very good, with regular intercity bus services running to The Headrow, approximately 0.2miles to the north and to Vicar Lane, 0.3 miles to the east of the subject property. Leeds City Train station is located approximately 0.4 miles to the south of the subject property.

Albion Place is predominately pedestrianised.

Situation The building is situated centrally on Albion Place in a well-established retail area which has become popular for food and restaurant outlets. Frontage is onto a broad pedestrianized area, which allows the units to benefit from pavement seating areas (in the case of Café Nero). The location has become synonymous with coffee and food operators and a number of the units provide outside seating. The footfall is strong, due to the street being one of the key pedestrian links between Briggate (traditional prime shopping area) and the modern Trinity Leeds shopping centre. This is soon to be further improved by the construction of the flagship John Lewis store in the Victoria quarter.

The City has been boosted by the opening of the new Trinity Shopping Centre offering in excess of 1 million square feet of new retail, food and leisure space, further enhancing the attractiveness of the City Centre.

SITE

The site extends to approximately 0.016 ha (0.40 acres).

Access The property is accessed directly off Albion Street, Commercial Street and Briggate. The property is a traditional building on a sloping site, meaning that level ground floor access is not available, though a ramp can be used to overcome the small step up.

DESCRIPTION

The subject is Grade II listed and described in the listing entry as ‘1904, altered late C20. Brick and terracotta, slate roof. Free Edwardian style with Classical details’. The ground floor is understood to be the original shop configuration externally, with two full storeys above plus an attic storey to a smaller plan.

The units provide retail space at ground and first floor level, and staff amenity and ancillary space at second floor level. Unit 20 occupied by Hotel Chocolat only provides accommodation over ground and basement. The ground floor areas in each unit are fitted out per the individual tenant’s trading requirements. Unit 19, occupied by Café Nero has retail space on ground, mezzanine and first floors, with food storage areas in the basement and unused upper floors. Units 20a & 21, occupied by STA travel has ground and first floor retail, with second floor staff accommodation. 19/21 Albion Place, Leeds LS1 6JS October 2015

The attic storey is unused in each case, and is assumed to be in poor condition, as inspection was not possible. There is a disused 3rd floor. Each unit also has a basement which is utilised as storage and back of house offices (except 21a where it isn’t utilised).

The units are of traditional loadbearing brickwork construction with architectural stone bands and columns to the front elevation. Retail facades are provided at ground floor level, comprising timber frames with single glazed shop window and single leaf pedestrian doors. Windows to the upper floors comprise original timber framed single glazed sliding sash windows and large arched timber framed single glazed units to first floor level. Decorative brick and stone projecting gables and a stone parapet form the upper levels.

The roofs to the units are of pitched timber construction, with slate roof coverings underlain with timber boarding. These are inset with glazed roof lights. The inspection of the roof areas was limited viewable from street level only.

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Ground Floor 500 46.50 Ground Floor - ITZA 409 38.00 Mezz (including walkway area) 189 17.54 Basement 338 31.43 19 Albion Place Nero Holdings Ltd 1st (Sal) 398 36.98 2nd (off) 356 33.07 3rd (Anc) *no access, 326 30.30 measurement from particulars Ground Floor 403 37.42 20 Albion Place EE Ltd ITZA 283 26.32 Basement 452 42.00 Ground Floor 414 38.50 Ground Floor - ITZA 396 36.82 Basement 426 39.55 20a and 21 Albion Place STA Travel Ltd 1st (Sal) 739 68.66 2nd (off) 813 75.56 3rd (Anc) *no access, 764 71.03 measurement from particulars TOTAL 6,118 568.54

TENURE

The property is held Freehold.

TENANCIES

Number of Tenants and Lease Type The property is fully let to 3 tenants per the tenancy schedule below. The leases are on a full repairing and insuring basis. The total current rent passing is £186,500 per annum.

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Nero Holdings The tenant is not required to address 19 £61,500 £29.19 06/07/15 05/07/20 5 N/A Limited the damp issue in the basement. The property is sublet to Mango Hill EE Limited 20 £50,000 £58.48 03/07/92 02/07/17 25 N/A Properties Limited (t/a Hotel Chocolat). STA Travel 20a / 21 £75,000 £23.76 23/10/09 22/10/19 10 N/A Limited Total £186,500

Covenant Strength Nero Holdings Limited - Nero Holdings Limited was incorporated in 1996 and owns and operates Italian Style coffee bars. The financial accounts for Nero Holdings Limited for the last three years are summarised in the table below and based on the information available, the company has been ascribed a D&B rating of 5A1, representing a minimum risk of business failure.

19/21 Albion Place, Leeds LS1 6JS October 2015

Year Ending Year Ending Year Ending Nero Holdings Limited 31 May 2014 (000s) 31 May 2013 (000s) 31 May 2012 (000s)

Sales Turnover £215,496 £197,539 £177,404 Profit (Loss) Before Taxes £22,538 £20,011 £19,639 Tangible Net Worth £144,676 £122,364 £102,398 Net Current Assets (Liabilities) £80,290 £61,087 £43,488

EE Limited - EE Limited was incorporated in 2010 and is a British Mobile Network Operator and internet service provider. The financial accounts for EE Limited for the last three years are summarised in the table below and based on the information available, the company has been ascribed a D&B rating of N1, representing a minimum risk of business failure.

Year Ending Year Ending Year Ending EE Limited 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s)

Sales Turnover £6,327,000 £6,482,000 £6,657,000 Profit (Loss) Before Taxes (£255,000) (£101,000) (£249,000) Tangible Net Worth (£868,000) (£661,000) (£179,000) Net Current Assets (Liabilities) (£962,000) (£713,000) (£141,000)

STA Travel Limited – STA Travel Limited was incorporated in 1971 and operates as a travel services provider. The financial accounts for STA Travel Limited for the last three years are summarised in the table below and based on the information available, the company has been ascribed a D&B rating of 3A1, representing a minimum risk of business failure.

Year Ending Year Ending Year Ending STA Travel Limited 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000s)

Sales Turnover £27,060 £25,231 £23,394 Profit (Loss) Before Taxes £280 £35 £26 Tangible Net Worth £10,960 £10,714 £10,993 Net Current Assets (Liabilities) £9,333 £9,117 £9,575

INCOME ANALYSIS

Rental Income £186,500 per annum.

Market Rent £191,560 per annum.

Service Charge/Rates Shortfall We understand that no service charge is applicable. As the buildings are Grade II listed an exemption from empty property rates would be allowed.

CONDITION

We have been provided with a Pre-Acquisition Survey Report prepared by Paragon Building Consultancy Limited dated 14 August 2015. The principal conclusions of the Report are summarised as follows:

 “Whilst the roofs were difficult to observe, there was evidence of minor leaks and historic moisture ingress. Given their relative inaccessibility, repairs should be considered likely.”  “Various internal repairs including compartmentation, damp repairs and staircase strengthening are required.”  “The asbestos survey provided cover Unit 21 only and is limited in its scope. Asbestos is identified within the building and we are of the opinion that given the age and type of construction there is potential for additional concealed ACMs to be contained within the concealed building fabric. Reports for Units 19 & 20 should be requested from the seller.”

During inspection we noted that the condition of the upper floors of 19 Albion Place is poor, with the rear staircase being in poor condition and the second floor essentially unused and left a shell. We noted damp problems in the basement area, but understand from the occupational details provided that this is known to landlord and tenant and is the subject of a side letter. The condition of 20a &21 above ground is good, but the basement is unused and in poor condition.

Paragon identified a number of defects, including: roof repairs, front elevation repairs, rear elevation and rainwater goods repairs and various internal repairs and improved tanking to basements areas. The total cost of repair works identified is £105,000 exclusive of professional fees and VAT. The building surveyors have estimated that £55,000 will be the responsibility of the tenant, as well as a sum of £50,000 relating to the 19/21 Albion Place, Leeds LS1 6JS October 2015

Landlord. We have allowed for this future cost in our valuation. As each unit is occupied and on FRI lease terms there is currently no requirements for refurbishment.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

MARKET OVERVIEW

Retailing in Leeds Retail floorspace within Leeds is currently estimated at 2,290,000 sq. ft. ranking the city 8th of all national centres, suggesting there is scope for future growth. Prime retailing within Leeds is centred on Briggate and the city’s two principal shopping centres Trinity Leeds and the Victoria Quarter.

Trinity Leeds, a 1,000,000 sq ft scheme recently developed by Land Securities, opened in March 2013 and comprises 120 stores including retailers such as Primark, Marks & Spencer, H&M, Topshop, Hollister and Apple. In addition, The Hammerson owned Victoria Quarter provides a ‘high end’ retail offer with Vivienne Westwood, Louis Vuitton, Ted Baker, Hugo Boss, Reiss and Harvey Nichols represented.

Construction work has commenced on the extension to the Victoria Quarter, known as Victoria Gate. The scheme will deliver a 260,000 sq ft John Lewis department store, together with a two street arcade which will accommodate up to 30 retail units, restaurants, cafes, a casino and a multi storey car park (800 spaces). The scheme is scheduled to open in Autumn 2016.

The main part of Leeds' prime pitch used to be the central section of Briggate, also extending along Commercial Street as far as the junction with Albion Street. However, with the completion of Trinity Leeds, the city's prime pitch has shifted to encompass a large section of the lower ground floor of the new centre, stretching from the entrance on Bank Street (off Commercial Street) through to Briggate. Key retailers here include Victoria's Secret, Apple, Hollister, Mango, Topshop/Topman, River Island and Superdry.

Commercial Street, too, once used to form part of the prime pitch, although the quality of shopping here has deteriorated somewhat in recent years, partly on account of the small size of most of the units which do not satisfy the requirements of many multiple fashion retailers. As a result, mobile 'phone shops and jewellers are the principal occupants, with WH Smith and Paperchase having sizeable units. The street is, nevertheless, well connected to Trinity Leeds with two entrances leading directly into the new scheme.

Leeds city centre has always been well-known for its shopping arcades. Whilst three of these were combined to create Victoria Quarter, another two - Thorntons and Queens Arcade - run between Lands Lane and Briggate. The small units here accommodate a range of mainly independent retailers, which help to broaden the city's retail offer.

Other key shopping streets within the city centre include Albion Street and Lands Lane.

Albion Street is on the western edge of the shopping area and has an entrance to Trinity Leeds at its southernmost end. Albion Street has, however, lost two key occupiers - Next and Urban Outfitters - who both relocated to Trinity Leeds; Next's former store is under the company's 'Clearance' fascia. Other remaining retailers here include Waterstones and Joy, as well as upmarket hair salon, Vidal Sassoon.

Lands Lane is a busy pitch, being the principal route for shoppers from The Headrow into the central shopping area. Whilst several fashion multiples, such as Miss Selfridge, Levi's and Evans continue to trade from Lands Lane, both River Island and La Senza vacated their premises here to relocate into Trinity Leeds. The west side of Lands Lane is dominated by a frontage to The Core shopping centre with Little Waitrose, Cotswold Outdoors and 99p Stores. Snow & Rock has opened in a prominent store at the junction with Albion Place.

Vicar Lane, to the east of Briggate, has attracted a number of upmarket fashion retailers close to the eastern entrance of Victoria Quarter. Hugo Boss, Diesel and French Connection are located on the western side of the street whilst, on the east side (just outside our survey area), Flannels, High & Mighty and White Stuff all have stores. The

The Headrow forms the northern boundary of Leeds’ shopping core, but unlike much of the central area, it is not pedestrianised. A redevelopment of the former Allders' store to house Sainsbury's Central, TK Maxx, Clas Ohlson and Argos has improved the central section of The Headrow, whilst The Light, with its fashionable restaurants, brought about a significant improvement to the western end.

Vacancies, in-movers and closures Apart from the refurbishment of Victoria Quarter with its reputation as the city's premier shopping destination for high end fashion and luxury goods, much of Leeds' central area had become neglected and its overall retail offer declined markedly prior to the completion of Trinity Leeds in 2013. Indeed, Leeds ranked 5th of the 200 national centres on the basis of its overall PMA Retail Score of 480 in mid 2007, but had dropped to a position of 10 by the end of 2012. Although the city's score rose to 493 and a rank of 4 by 2014, a year after the opening of Trinity Leeds, it still, nevertheless, lags behind PMA's top Major Cities of Manchester - its northern rival - and Glasgow, which had scores of 561 and 551 respectively.

The vacancy rate in Leeds city centre currently stands at 11.2% of units, comparable with the national average and a slight decrease on the level recorded in August 2014. However, the level of take-up between 2014 and 2015 is 8.5% of units, significantly above the national average.

Historically, much of Leeds city centre was in a state of transition following the opening of Trinity Leeds in 2013. However, the significant increase in vacancies noted at that time as a result of both new, unlet units in Trinity Leeds and relocations from other parts of the city to the new centre, appears to have subsided, with the new shopping centre being almost fully let today. Indeed, we estimate that there were only six vacancies 19/21 Albion Place, Leeds LS1 6JS October 2015

throughout the whole of the centre in 2014 with just two of these located on the prime lower ground mall.

The key anchor stores for Trinity Leeds - Marks & Spencer, Bhs, Next, Topshop/Topman, Boots and Primark - were either already existing tenants or represented elsewhere in the city centre. Other fashion retailers such as River Island, Urban Outfitters, Oasis and Superdry were also already represented in the city centre at Albion Place, Albion Street, Lands Lane and The Light respectively.

Overall, the centre attracted a relatively limited number of new fashion retailers to the city such as Charles Tyrwhitt, Victoria's Secret, Mango, Armani Exchange, DKNY Menswear, Hollister and Jack & Jones, which may help to explain why the 1 million sq ft development did not have a more dramatic impact on Leeds' Retail Score. The impact on the café / restaurant score was more pronounced, reflecting the broad range of catering outlets in the centre.

Vacancies elsewhere are scattered across the central area with a grouping around the eastern end of Commercial Street and Briggate, as well as several within Leeds' many arcades. The main concentration, however, is within The Core where most of the second floor remains unoccupied as well as a large part of the internal mall on the first floor. Although the landlord intended to convert units on the first floor into a food court, only three had been taken up at the time of reporting.

Indeed, one of the main changes in the city centre since 2014 is the influx of popular catering brands: Meat Liquor and Cabana have opened within Trinity Leeds; Pieminister and Five Guys have taken units on Duncan Street; a prominent unit on Commercial Street is being refurbished for Itsu; Turtle Bay plans to open in The Light; Byron Burger has opened at Lands Lane, and Bill's plans to take The Law Society's offices at Albion Place.

Although Primark continued to trade from its Headrow store after opening within Trinity Leeds, the company has since vacated its original home. At the time of reporting, the store was being fitted out for occupation by Sportsdirect.com, USC, Field & Trek and Pulp; whilst USC has already closed its operation on Briggate leaving a noticeable vacancy, it seems likely that Field & Trek and Sportsdirect.com may leave The Core on relocating to this very prominent position on The Headrow.

Commercial Street, Lands Lane, Albion Street and Albion Place have experienced a fair amount of change recently. Lush had relocated into a larger unit at the junction of Commercial Street and Lands Lane, Byron Burger and Snow & Rock had both opened on Albion Place and Sharps and Bedeck had taken small units on Commercial Street. A large unit at the junction of Albion Street and Albion Place was being fitted out for Itsu at the time of reporting.

Rents and deals Prime rental growth in Leeds has been slightly below average for Major Cities over the period of record. Prime Zone A rents rose steadily during the mid-1990s reaching £260 psf Zone A in early 2001 and stayed at that level until end 2003/early 2004, before rising to £300-£305 psf where they remained until the end of 2008. Rents then fell back to £255 at end 2009 and reportedly fell as far as £210 psf ZA during 2011/12, partly as a result of the wider impact of the recession but also the hiatus surrounding the development of Trinity Leeds. Indeed, while the fall in prime rents in Leeds since the credit crunch and recession of 2008/2009 has been more severe than for Major Cities generally, prime rents in the city did reportedly recover to £250 psf ZA with the opening of Trinity Leeds in 2013.

We estimate prime rents in Leeds at £250 psf Zone A. This represents no change on the end 2014 level of prime rents in the city with rents remaining 18% below the pre-recession peak of £305 psf ZA.

Whilst details of lettings within Trinity Leeds remain confidential, agents for the scheme indicate that headline rents for the prime lower mall are around £250 psf Zone A; they also claim that rents for units on the ground floor are at a similar level. Rents for cafés/restaurants within the scheme are in excess of £40 psf.

The main stretch of Briggate has for some time achieved higher rents than Commercial Street, especially at the northern end outside Victoria Quarter, although this stronger pitch has also seen a significant decline in rents since 2008/2009. A letting to Vodafone, for example, in April 2009 was settled at £270 psf Zone A, a good deal higher than a letting to Costa in August 2011, at just £200 psf Zone A. We are not aware of any more recent lettings on this main pitch.

Zone A rents for Commercial Street used to stand as high as £275-£300 psf in 2007-2008 but had fallen below £200 psf by 2010. Lettings in 2009 and 2010 to Paperchase and Scribbler achieved Zone A rents at just £170-£180 psf, although at the end of 2011, Prestons of Bolton took a new lease on a small unit at 43 Commercial Street at a Zone A rent of £211.50 psf.

More recent lettings on Commercial Street have been below £200 psf Zone A. Clinton Cards took a new lease at 26 Commercial Street, opposite the Albion Street entrance to Trinity Leeds, in autumn 2013, on a rising rent that reflects a Zone A of £180-£200 psf. The company's former unit at 12-13 Commercial Street was then let to Lush Spa in May 2014 at £178 psf Zone A. After Lush relocated from its former unit at 31 Commercial Street, this was then let to Sharps at the end of 2014 at just over £176 psf Zone A.

Details of recent lettings in Victoria Quarter remain confidential, although we understand that the highest rents are achieved for the few units that front Briggate where passing rents are around £260-£270 psf Zone A. Queen Victoria Street is the strongest pitch within the centre where Zone A rents stand just below £220 psf, whilst those for County Arcade are a good deal lower at £170 psf. Passing rents for the units fronting King Edward Street were just below £200 psf Zone A at the time of reporting.

The agent for The Core claimed that Zone A rents for units fronting The Headrow and Lands Lane were £100-£140 psf Zone A.

A letting to Betfred on Lands Lane in 2013, opposite The Core frontage and near to The Headrow, achieved £85 psf Zone A, whilst a letting to Cath Kidston on the same pitch in spring 2010, achieved a headline rent of £185 psf Zone A. More recently, Snow & Rock took a large store at the corner 19/21 Albion Place, Leeds LS1 6JS October 2015

of Lands Lane and Albion Place in autumn 2014 at nearly £136 psf Zone A; Byron Burger took a new lease at 9A Lands Lane - opposite Snow & Rock - in early 2014, in a deal that reflected a Zone A rent of around £155 psf.

Following the completion of Trinity Leeds, agents suggested that achievable rents in St John's had fallen significantly to around £50 psf for units on the ground floor, compared with £120 psf ZA in 2008/9. The centre has recently been sold to Valad Europe.

Competition While Leeds dominates its wider catchment, it is surrounded by a number of major towns and centres.

York, approximately 40 minutes drive away, is Leeds' strongest competitor; the city has a good retail offer including quality/specialist shopping within an historic environment. York is, however, the most distant of all Leeds' competitors and is therefore unlikely to attract regular shopping trips from the Leeds catchment. As such, it may provide an occasional shopping destination for Leeds residents, particularly those living in the rural area to the north of the city.

Although Harrogate's offer is much narrower than that of Leeds, it is an attractive town with a relatively strong fashion offer and may attract some visits from residents living in the north of Leeds’ catchment area.

Unlike Harrogate and York, Bradford does not provide a quality offer or an attractive environment. A new development - Bradford Broadway - finally started on site in early 2014 with completion scheduled for autumn 2015. Debenhams, Marks & Spencer, Next and H&M Hennes have agreed to take space in the new centre, along with a host of other mainstream retailers. When complete, it is likely that the new centre will help Bradford retain a good deal of local spend that is currently diverted to Leeds and other centres such as White Rose Centre.

Wakefield is the closest competing centre to Leeds but is significantly smaller with only a standard offer. A new 500,000 sq ft shopping centre, Trinity Walk, completed in spring 2011; key tenants include Debenhams, Sainsbury, Asda Living, Argos and H&M.

Halifax and Huddersfield are both located immediately to the south west of the Leeds catchment area. It is unlikely that either of these centres will attract many shoppers from the Leeds area, although planning permission has been granted for a sizeable extension to the Kingsgate Centre in Huddersfield.

Several small towns fall into the Leeds catchment area including, Castleford, Dewsbury and Pontefract. A scheme to extend Carlton Lanes Shopping Centre in Castleford has full planning permission.

MARKETABILITY

Typical Void Letting Period The subject retail pitch appeals to food operators and high street retailers, with a high number of food outlets including Pizza Express, Salvo’s, Pasta Romagna. Retailers include Waterstones and Joy. In the event of the current tenants vacating, a marketing period of 6 months would be required to re-let the units.

Typical Tenant Profile This is likely to be of a national covenant of a food outlet or retail chain. We consider there would be a reasonable number of retailers who would seek to acquire these units.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 6 months for 10 year leases.

Letting Strategy There are currently no voids on Albion Place. Should the units become vacant we would expect a marketing period of 6 months. We would anticipate 10 year leases would be achievable, potentially with a break on expiry of year 5. A three or six month rent free period would be expected, depending on the length of the term certain. Going forward, the new Victoria Centre which is due to open in late 2016 should see increased footfall as Albion Place becomes the link route between Victoria Centre and Trinity Centre.

RENTAL EVIDENCE

Due to the absence of vacancies on Albion Place, truly comparable rental evidence is scarce. However we would cite the following rental comparables:

 22 Albion Place was let in May 2015, on the open market, at a rent of £53,500 per annum equating to £137 per sq ft Zone A. The unit is let to Barber Barber for a term of 10 years. This included a rent free period of 6 months. The building is arranged over 4 floors, from the ground floor to the third floor ancillary. We consider this to provide the best comparable in terms of location, layout and date of transaction.

 8/12 Land Lane – This property, which fronts Albion Place, was let to Snow & Rock in September 2014. The lease was agreed for 10 19/21 Albion Place, Leeds LS1 6JS October 2015

years, with a break clause at year 6 at a rent of £275,000 per annum (£138 per sq ft Zone A). This lease included 6 months’ rent free. The break has a 6 month penalty. There was also a large capital contribution, resulting in a net effective rent of £109 per sq ft Zone A.

 26 Commercial Street - Clinton Cards took a new lease opposite Albion Place in autumn 2013 on a rising rent that reflects a ZA of £180-£200 psf. The company’s former unit at 12-13 Commercial Street has been let to Lush Spa in May 2014 at £178 psf Zone A. Commercial Street is traditionally a stronger retail pitch than Albion Place, reflected in the higher ZA rent.

 19 Albion Place (subject property) - The lease was renewed to Café Nero in Spring 2015, for a period of 5 years at a rent of £61,500 per annum, reflecting £125 per sq ft Zone A. No rent free was provided at the time, and therefore this is a net effective rent.

As noted above, the rental tone for well configured units on Albion Place has improved recently and there are a number of operators seeking representation here. The most relevant evidence is the transaction at 22 Albion Place, which suggests that rents are in the region of £137 per sq ft Zone A. However there are no available units along Albion place and the subject properties provide smaller well apportioned space. We consider a rental value slightly in excess of this level would be achieved in the event of a unit was available given the current buoyant demand. The Commercial Street transaction is located in a superior retailing pitch and accordingly, we have placed less weight upon this. As to Land Lane, this location is inferior to the subject properties and there does not appear to be any real reason why this transaction is markedly above the general tone , albeit we note that there was a large capital contribution involved and we have therefore again placed less relevance upon it.

On the basis of the new letting at 22 Albion Place and the fact that the subject unit is located in a desirable location we have applied a Zone A rate of £140 per sq ft, which shows an improvement from the said comparable. We have adopted rates of A/20 on the basement, A/10 on the mezzanine floor (19 Albion Place), A/15 on the first floor (sales), A/25 on the second floor and £4.50 per sq ft on the third floor ancillary areas. This provides an aggregated rental value of £191,560 pa, apportioned as follows

19 Albion Place £70,000 pa 20 Albion Place £48,250 pa 20a & 21 Albion Place £73,310 pa.

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as below:

 4 Commercial Street, Leeds – This property was acquired by L&G in June 2015 for £2.77 million. This retail unit is let to EE, with an unexpired term of 6 years. This price reflects an initial yield of 6.65%.The unit is overrented and the reversionary yield was approximately 4.75%. This unit is located on the street across from the subject property, but is considered to be an inferior location. We have adjusted the initial yield on the subject property to reflect the rack rented income profile.

 48 Albion Street, Leeds – This property was sold in March 2015 at 4.75% yield. The property is a traditional stone building of 3,565 sq ft, arranged over three floors, including basement, first floor and two upper floors. The unit has a central location and was let to Starbucks until February 2025. The passing rent is £200,000 pa. This property is a relevant transaction given the strong coffee operator covenant, date of transaction and location, however is let for a considerably longer term. We would therefore expect the subject property to transact at a discount to the yield achieved in this transaction.

 32 Lands Lane and 13, 25-27, Leeds – This retail parade was sold in January 2015 for £2.69 million. The property is let to Charles Clinkard with an unexpired term of 3 years. This price equates to an initial yield of 8.5%. This unit is 30% overrented with a sub 6% reversionary yield. 32 Lands Lane is a brick built building and comprises a full height glazed retail frontage at ground floor level and is arranged over 4 levels to include a basement to second floor storage. The return of the property makes up units 13, 25-27. This property is located close to the subject property, however in an inferior retail location. Further, some of the units here are situated within an arcade, and have weak letability.

 117 Kirkgate, Leeds – This property was sold in December 2014 for £740,000. This unit is let to Noodle King, with an unexpired term of 8 years. This equates to an initial yield of 7%. The property was subject to a new lease, and was considered rack rented. This is a less favourable location and tenant profile.

 Albion Court – In February 2015, Cordea Savills purchased Albion Court from Catalyst Capital for £9.7 million. The property comprises a 30,762 sq ft multi-let retail scheme with tenants including Byron Burger, Pizza Express and Card Factory. The property had an overall WAULT of 6.2 years and a combined income of £651,691 per annum. The scheme is situated at the junction of Albion Place and Lands Lane, close to the subject property. The purchase price reflects a net initial yield of 6.34%.

 25-26 Commercial Street –Refurbished and extended prominent corner unit let to AG Retail Cards Limited trading as Clinton Cards for a term of 10 years from 8th October 2013. This property was sold in sold in August 2014 for £4 million, equating to an initial yield of 5.45%. Clinton Cards are considered to be a strong covenant, occupies a stronger retailing location and was let for a longer unexpired term. We would therefore expect the subject property to transact at a discount to the yield achieved in this transaction.

 10-21 Kirkgate, Leeds – This property is understood to be under offer at c7.75% NIY at a price of £5.5m. The property comprises a number of value retail units in a secondary city centre location popular with food/convenience retailers and ‘value’ stores. This asset is not wholly comparable to the subject property, given the inferior location and income profile, however does provide a useful guide as to where secondary yields are for multi let retail investments in secondary locations in Leeds centre. 19/21 Albion Place, Leeds LS1 6JS October 2015

 115-126 Briggate (Debenhams) – This 111,800 sq ft department store, let to Debenhams Retail plc with an unexpired term of 25 years, was recently acquired off-market by Orchard Street for £38,000,000 reflecting a net initial yield of 5.58%. This is not a directly comparable transaction, being a large department store with a long unexpired term, but the transaction is a good indication of the strength of the market for well-located secure retail properties in Leeds.

VALUATION METHODOLOGY

The property is a relatively small lot size and provides very good retail accommodation in a strong location in Leeds and let to attractive retail operators. Given the rack rented nature of the units, and the strong relatability prospects, we have adopted an initial yield approach in our valuation. In light of the length of time until lease expiry, we have adopted 6 month letting voids and 12 month rent frees in our appraisal.

Based on our opinion of market sentiment and the above comparable information we have targeted an initial yield of 6.00%. Our opinion of the Market Value of the property is therefore £2,940,000 which reflects an equivalent yield of 6.00%, a reversionary yield of 6.16% and a capital value of £474 per sq ft based on the retail accommodation on an overall basis.

SUITABILITY FOR LOAN PURPOSES

On the basis of the information provided and subject to the comments contained within this report, we consider that the property should form suitable security for a mortgage advance, assuming it is maintained to a reasonable state of repair for the duration of the loan.

In accordance with normal commercial practice, however, we would anticipate any advance being for only a proportion of our opinion of Market Value.

Should the property be put to the market we consider that the asset would attract interest from a wide range of investors, including institutional funds, property companies and high net worth individuals.

PHOTOGRAPHS

Front Elevation Caffé Nero – Internal from mezzanine

STA Travel Ancillary areas – Caffé Nero

d) 202 High Street, Lincoln LN5 7AU

202 High Street, Lincoln LN5 7AU October 2015

202 High Street, Lincoln LN5 7AU

KEY PROPERTY FACTS VALUATION AS AT 1 OCTOBER 2015

Macro Location: Lincoln Market Value: £3,050,000 Micro Location: Strong. Prime and prominent retail location within Lincoln, between Waterside Shopping Centre and Key Inputs Cornhill Square. Property Type: Retail High Street Bank Initial Yield 4.65% Total Property Area: 558 sq m (6,001 sq ft) Equivalent Yield 5.00% Tenure: Freehold Reversionary Yield 5.02% Number of Tenants: 1 tenant Capital Value per sq ft £508 Percentage Vacant: 0% Market Rent £162,169 per annum Total Rent Reserved: £151,000 per annum Market Value assuming Vacant £2,250,000 Covenant Strength: Established national bank Possession registered in 1865 providing an Reinstatement Value £ 1,167,300 undoubted and attractive tenant

covenant. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 The property is located within Lincolns prime retail pitch, where  Drive revenue through rent reviews. there are currently no vacancies.  Possible lease extension or re gear opportunity as the property  Let to a strong covenant in Lloyds Bank Plc. is approximately 6.580 % under rented and rental growth is  Good unexpired lease term of 10.8 years. anticipated over the next 2/3 years.  The income is well secured, being let to a large national bank (Lloyds Bank Plc) that offer an undoubted covenant.  Reversionary by 6.50%.  Strong occupational and investment demand for this asset.

202 High Street, Lincoln LN5 7AU October 2015

Weaknesses Threats

 The hard frontage and slightly compromised internal layout may  We do not consider there are any material threats. limit the number of retailers interested in the property for occupation, however, this will be mitigated by the prime location and significant return frontage.

LOCATION

Overview The property is located in Lincoln, which is located approximately 120 miles north of London, 32 miles north east of Nottingham and 48 miles to the north of Peterborough.

Lincoln benefits from a lack of competing retail destination and is therefore by far the most dominant retail centre for its’ catchment population. The estimated shopping population of Lincoln is 259,000, ranking the city 39th of the PROMIS centres. The population is projected to see above average growth between 2014-2019. The city also benefits from circa 13,000 students enrolled at the University of Lincoln.

Communication Lincoln has good transport links, being located close to the A1(M) and the M1 motorways. Lincoln has its Central Railway Station close to the subject Property. East Midlands trains and Northern Rail are the service providers, offering routes to London (Kings Cross, 1 Hour 50 minutes) and Leicester, Sheffield and Nottingham.

Situation  The property is situated in the prime retail pitch within Lincoln, in a prominent location, being on the corner of the High Street overlooking St Benedict’s Square. The property joins onto River Island, and is opposite national retailers such as Boots, Primark, Marks and Spencer and Starbucks.

SITE

The site extends to approximately 0.004 ha (0.010 acres).

Access The property is accessed directly off of the corner of High Street and St Benedict’s Square.

DESCRIPTION

The property forms a substantial and prominent corner Grade II listed building benefiting from a return frontage onto St. Benedict’s Square.

The building which is arranged over basement, ground, first, second and third floors, was comprehensively refitted by Lloyds Bank in 2014.

The main construction is of traditional load bearing masonry. The elevations include solid stone and brickwork with aluminium frame windows to ground and first floors and timber to upper floors. The main roof is pitched with central mansard roof; they are covered in slate and lead lining. The lower flat roofs are covered in asphalt. The floors to the basement and ground floor are concrete and timber floors to the upper floors.

Internally, the bank areas are arranged at ground and first floor, with ancillary staff and storage areas to upper floors and basement. Finishes to the bank areas include both mineral fibre tile and plasterboard suspended ceilings, painted plaster walls and either laminate or carpet floor coverings. The back of house finishes are basic, including painted plaster wall and ceilings and exposed timber floors or carpet tile floor coverings.

The building is provided with mains water and three phase electricity and is understood to be connected to Local Authority sewer for foul and surface water drainage. The heating and hot water is provided via electric immersion heaters and above sink water heaters. The previous lift have been de-commissioned by the tenant, but is understood to remain in-situ. The tenant has also installed mechanical ventilation and cooling, which are sited on the lower flat roofs.

Lloyds occupy the first floor of the adjoining building, 1-2 Benedict’s Square which comprises 1,200 sq ft. We understand Lloyds pay £10,000 pax and the lease is co-terminus with the subject property.

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² 202 High Street Lloyds Bank Plc Basement 886 82.31 202 High Street, Lincoln LN5 7AU October 2015

Ground Floor 1,693 157.28 (Ground Floor – ITZA) (1,099) (102.09) First Floor 1,624 150.87 Second Floor 1,124 104.42 Third Floor 674 62.61 TOTAL 6,001 557.49

TENURE

The property is held freehold.

TENANCIES

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review th Lloyds Bank Plc 202 £151,000 £25.16 24/06/95 23/06/26 31 N/A Rent review on 25 December 2015.

Total £151,000

Number of Tenants and Lease Type The property is single let to Lloyds Bank Plc on a 15 year lease from 24 June 2011 at a rent of £151,000 per annum. There is a rent review on 25th December 2015, and there are no break clauses. The unexpired term is approximately 10.8 years.

Covenant Strength The property is let in its entirety to Lloyds Bank Plc whose principal activities are banking. They are perceived as a strong and attractive covenant who for the year ending June 2014 reported turnover of £40.761 billion, pre-tax profits of £2.289 billion and a net worth of £44.691 billion. They have a D&B credit score rating of 5A1, which is considered to be very low risk.

Year Ending Year Ending Year Ending Lloyds Bank Plc 28 Mar 2015 (000s) 29 Mar 2014 (000s) 31 Dec 2013 (000’s) Sales Turnover £40,761,000 £53,977,000 £55,410,000 Profit (Loss) Before Taxes £2,289,000 £894,000 (£474,000) Tangible Net Worth £44,691,000 £39,444,000 £43,593,000 Net Current Assets (Liabilities) £3,346,000 £61,444,000 (£309,770,000)

INCOME ANALYSIS

Rental Income £151,000 per annum.

Market Rent £162,169 per annum.

Service Charge/Rates Shortfall Not applicable.

CONDITION

We have been provided with a Pre-Acquisition Survey Report prepared by Paragon Building Consultancy Limited dated 14 August 2015. The principal conclusions of the Report are summarised as follows:  “Our building inspection did not reveal any evidence of significant defects to the structure of the property. Provided you take into consideration the issues raised within this report along with the cost of repairs and satisfactorily address any legal issues raised, then from a technical perspective, there is nothing to prevent you from proceeding with your freehold acquisition.”

The total cost of repair works identified in the Schedule of Repairs in our report is £99,000 exclusive of professional fees and VAT. This is over the ‘medium’ term period. In our opinion, the cost of all outstanding repairs and maintenance, together with ongoing repair and maintenance costs, is fully recoverable from the tenant via the full repairing and insuring terms of the lease.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low. 202 High Street, Lincoln LN5 7AU October 2015

MARKET OVERVIEW

Retailing in Lincoln Retail floorspace within Lincoln is currently estimated at 1,510,000 sq ft in line with the regional centre average and ranking the city 32nd of the national Centres. Prime retailing within Lincoln is centred on the High Street where the subject property is located. Many of the city's key multiples - including Marks & Spencer, Boots, Bhs and Primark - are located along this stretch. Fashion retailers Fat Face, River Island and Laura Ashley are also located on this pitch.

The stretch of High Street immediately south of prime benefits from the proximity of St Marks Centre and St Marks Retail Park. Key retailers on the stretch of High Street south of St Mary's Street include Jack Wills, Peacocks, Poundland and Iceland.

The principal occupier north of the prime pitch is the House of Fraser department store. Moving northwards beyond House of Fraser, retail provision on High Street becomes increasingly secondary; occupiers along this stretch predominantly comprise independent retailers, some of whom focus on young fashion, as well as services, especially pubs and restaurants.

Cornhill/Cornhill Pavement, which links High Street to Sincil Street, is a good secondary pitch; retailers here include WH Smith, Waterstone's and Bon Marche. Sincil Street, which runs parallel to High Street, primarily accommodates local retailers and services. A busy market trades from a site at the junction of Cornhill and Sincil Street.

City Square Centre, is a small, covered centre situated on the corner of Waterside South and Sincil Street; tenants here include Boyes and a Co-op supermarket, alongside a range of independent retailers.

A number of restaurant multiples can be found at Brayford Wharf, a small leisure development situated on the edge of the town centre area. The wharf is a short walk from the towns main shopping areas, St Marks and High Street, and offers shoppers a pleasant dining environment overlooking the river. Prezzo, Nandos, ASK Italian, Wagamama and Zizzi all have a presence here.

Competition Although the regional centre of Nottingham is around an hour's drive from Lincoln, it is one of the largest national centres. The city centre provides a varied shopping environment with a fair range of up-market fashion and speciality retailers, as well as several department stores, including John Lewis and House of Fraser. Nottingham is likely to attract shoppers from a wide area and probably attracts some occasional, major comparison trips from residents within Lincoln's catchment.

The redevelopment of the now dated Intu Broadmarsh has dominated the pipeline for Nottingham city centre for some time. Initiated by the former owners, Westfield, and now pursued by Intu Properties, full consent has been granted for the development which includes a new cinema, increased restaurant provision and improvements to the city’s Southern Gateway. Plans also include the redevelopment of Drury Walk, an enclosed part of the centre, to create an open street, effectively extending Bridlesmith Gate and providing a new focus for upmarket retail.

Meanwhile, Intu are progressing with the refurbishment of Intu Victoria, Intu’s second centre within the city; work includes reconfiguration and improvements to all of the entrances and shop frontages, along with cosmetic changes to the ceiling, floors and lighting. A new dining quarter including twelve new restaurants is being built, with pre lets already reported to Tortilla, Ed’s Easy Diner, Coast to Coast and Handmade Burger Co.

Intu Properties also has consent for a major retail and leisure extension to Intu Victoria Centre to accommodate a new department store, additional unit shops, restaurants, a multiplex and a new bus station. We understand that these more extensive works on Intu Victoria Centre will proceed after those carried out at Intu Broadmarsh; an estimated completion date of 2020-2022 is reported.

Doncaster is also around an hour's drive from Lincoln. The town's retail provision was substantially enhanced in 2006 by a 260,000 sq ft extension to Frenchgate shopping centre. A Debenhams' department store anchors the scheme, alongside Bhs, Argos, Boots and Wilkinsons. Mainstream fashion occupiers in the scheme include Monsoon, New Look, Next, Top Shop and H&M. There is also a dated Binns (House of Fraser) department store within Doncaster. An application has been submitted for a leisure extension to the centre, including a cinema.

There is also outline consent to redevelop a former college site to provide over 150,000 sq ft of additional retail floorspace in Doncaster City Centre alongside other leisure and culture-orientated facilities.

Given Lincoln's distance from these major centres and other, smaller centres, diversion of spend from the city's primary catchment to other towns is likely to be limited. However, the scope for Lincoln to increase its own pool of spending may also be marginal.

Lincoln's closest competitor is Newark, some 25 minutes drive to the south-west. While Newark is a much smaller centre than Lincoln and has a limited retail offer, it may draw some trade from the south-western edge of Lincoln's primary catchment area.

Similarly, Grantham and Scunthorpe have considerably fewer multiples than Lincoln and, at between 40-50 minutes drive away, are unlikely to draw much trade from the Lincoln area.

Vacancies, in-movers and closures Lincoln's PMA Retail Score fell from a peak of 200 in 2005, ranking the city 61 of the 200 PROMIS Centres at that time, to a position of 71. The 2008 financial crisis and difficult trading conditions of recent years means that Lincoln has felt the impact of retailer administrations and store rationalisation programmes. That said, vacancy rates in the city have generally remained below the national average and a number of upper-middle retailers have opened stores in recent years - notably Jack Wills and Joules. This, perhaps, reflects the relative importance of tourists and visitors to the city centre. 202 High Street, Lincoln LN5 7AU October 2015

A large rural catchment coupled with poor transport connections, protects Lincoln from nearby competition. The next largest retail centres, Doncaster and Nottingham, are located almost an hour's drive away, and are therefore unlikely to divert too much spending from Lincoln.

However, poor accessibility to larger cities restricts employment opportunities for residents living in the Lincoln catchment. Within this catchment, the population ranks poorly across a number of socio economic indicators, notably a below average representation of people in the highest AB social group, and an above average percentage in the least affluent DE group. Lincoln's claimant count - one measure of unemployment - is double that of the PMA Centre Type Average.

The vacancy rate in Lincoln city centre currently stands at 12.5% of units, comparable with the national average and a slight increase on the level recorded in October 2013. The level of take-up between the October 2013 and July 2015 was 8.0% of units, above the national average.

Vacancies are scattered throughout city centre, although there is a particularly high concentration at the junction of Sincil Street and Cornhill Pavement.

There are however no vacant units on the prime pitch or in the vicinity of the subject property. The only newcomer to prime was River Island, who had relocated to a newly developed unit from a store just off prime. Jack Wills had occupied the former River Island store on the stretch of High Street south of prime, whilst EE had been replaced by an independent mobile phone repair shop.

Optique opticians had moved into a small unit located within the arches of The Guildhall, replacing Moshulu Shoes. Slightly north of The Guildhall arch, at the intersection of High Street and Silver Street, Joules had opened a new store, occupying the former Co op Travel Agent. Additionally, further north still, Regatta had replaced Hawkshead.

The tenant line up at the Waterside Centre had been significantly altered at the time of reporting, following a period of reconfiguration within the centre in 2013 - many of the smaller retail units were amalgamated in order to accommodate fewer larger units. New retailers in the centre include Next and H&M, who had both occupied large two storey units, Jones Bootmaker and Roman Clothing. The Body Shop had relocated within the scheme.

The Gift Company, Primark, The Calendar Club, Discount Bookstore, Optical Express, Raffles, Internacionale, La Senza and Vodafone had all ceased trading within the scheme in order to accommodate the reconfiguration- a number units remain unlet.

There were three vacant units at the St Marks Centre. Recent vacancies can be attributed to the departure of Phones 4 U, Super Cuts and Yeomans Outdoors. Sports Direct had relocated from their first floor store, which has since been occupied by Pure Gym, to larger premises within St Marks. New retailers to the centre include; Tresspass, who had occupied a vacant unit, and Caffé Nero who had replaced Café M.

There were a number of new vacancies on Cornhill/Cornhill Pavement, due to Evans, Santander, The Cheque Centre and West Cornwall Pasty Company all having closed their stores on this pitch. Additionally, Timpson and Cooplands had both vacated stores on Sincil Street.

Rents and deals Although prime rental growth in Lincoln has significantly under-performed the Regional Centres average over the period of record, prime rents in the city have remained relatively stable. Prime Zone A rents rose only gradually to £140 psf by 2003 where they remained until 2008, falling back only marginally to £135 psf in the immediate aftermath of the financial crisis, but then slipping further to £130 psf and then to £120 psf in 2013. Most recently, however, agents place prime rents in the region of £140 to £145 psf Zone A, with lettings achieving as much as £151 psf Zone A in some cases. This represents a significant increase on the end 2014 level of prime rents in the city with rents now equal to the pre-recession peak. On average, prime rents across the national 200 Towns remain 28.7% below the pre-recession peak.

River Island have recently occupied a newly developed unit on the prime section of High Street, at a headline rent of £151 psf Zone A - although this is considered exceptional. The most recent deal on prime prior to this, was a 2013 letting to Office Shoes, who leased a unit at £132 psf Zone A. Paperchase took a new lease in 2010 at £130 psf Zone A.

The stretch of High Street between Cornhill and the level crossing has traditionally housed a number of well know multiples and commands rents close to prime rates. The latest arrival was Jack Wills, however we understand that this was an assignment of the River Island lease, which has two years remaining. Prior to this, in April 2013, Costa Coffee took a new lease on a vacant unit at £127 psf Zone A

Rents fall sharply on the section of High Street south of St Mary's Street and over the level crossing. Ladbrokes took a unit here in November 2012 at £51 psf Zone A, whilst further south, an independent Asian supermarket took a unit at just £35 psf Zone A. It is considered that rents for units on this pitch typically range from £40-45 psf Zone A.

Zone A rents for shops on the northern stretch of High Street - running from prime to Corporation Street and Clasketgate – are considered to be slightly higher due to the units' proximity to the historical core of the city. We are not aware of any recent deals analysed on a zonal basis, although Joules took a large corner unit on this pitch in February 2014 for £105,000 pa – we understand that this was an assignment of the former Co-op lease. Previously, in April 2013, Hawkshead took a double unit on this stretch of High Street for £60,000 pa.

Following the reconfiguration of Waterside shopping Centre, we understand that rents for the ground floor of the scheme range between £90-£95 psf Zone A. This represents a small uplift on the £70 psf Zone A achieved in a 2011 letting to Stormfront. It is understood that the larger stores of more than 10,000 sq ft are let on an overall basis, however details of these lettings remain confidential.

Rents for stores at St Marks Centre vary considerably with large stores being valued on an overall, rather than a Zone A basis. In July 2015, Sports 202 High Street, Lincoln LN5 7AU October 2015

Direct occupied a 14,000 sq ft unit at £14.94 psf. Prior to this, two large units were let to Gap Outlet and The Entertainer in August 2012, in deals which both reflected £20 psf. Whilst there had not been any recent evidence for unit shops in the scheme, the owners estimate that the tone of rent remains in the region of £70 psf Zone A.

Zone A rents for Cornhill/Cornhill Pavement at one time used to stand at around £90 psf Zone A for those units on the stretch closest to High Street. At the time of reporting, agents considered rents on this pitch to be in the region of £55 psf ZA, as reflected in a late 2013 letting to an independent retailer. Deals dating from 2012 to Oxfam and The Cheque Centre reflected £28 and £46 psf Zone A respectively.

Development Pipeline Outline consent has been granted to Lincolnshire Co-operative Ltd for Lindongate, a mixed use development to be located between Waterside South, Sincil Street and Melville Street, which would replace City Square Centre and the neighbouring bus station. The scheme includes around 300,000 sq ft of retail floorspace, including a department store and restaurants, as well as a new bus station and riverside apartments. After a number of set backs, including the liquidation of developer Modus in 2009, we understand that Lincolnshire Co-operative are still looking to progress with the scheme.

An application has been submitted surrounding the redevelopment of the Corn Exchange and Sincil Street. The scheme, known as Cornhill Quarter, is seeking to modernise and extend unit shops on Sincil Street, whilst redeveloping the Corn Exchange to create an area of upmarket retail and restaurant provision.

The site of a small unit shop development at the top of High Street, known as The Mall and which had been in decline for a number of years, is to be redeveloped for a Wildwood restaurant. We understand the restaurant hopes to begin trading by Christmas 2015.

The subject retail pitch appeals to national retailers.

Availability of Vacant Space in Locality At the time of inspection, there were limited voids within the close proximity of the subject property.

Rental Levels We understand that on the prime retailing area of High Street, rental levels have reached £150 per sq ft Zone A, an increase from the current ZA rentals of £131 and the ERV rentals of £140, which suggests growth is possible. There is limited rental evidence on the High Street given that occupiers have been trading well and therefore a limited number of new lettings has taken place with occupiers remaining in occupation.

MARKETABILITY

Typical Void Letting Period In the event of the current tenants vacating, a marketing period of 6 months would be required.

Typical Tenant Profile This is likely to be of a national covenant, and given the property’s configuration demand may be principally from the banking or restaurant sector. However, we consider the unit would also appeal to a wide range of mainstream retailers.

Typical Lease Length Leases are likely to be between 5 and 10 years, and 15 for banks.

Typical Rent Free Period 6 months for 10 year leases.

Letting Strategy Should the property become vacant we would expect the unit to be marketed for a period of 6 months and let on a 10 year lease with a break at year 5. A three month rent free period would be expected.

RENTAL EVIDENCE

There have been a limited number of transactions on the High Street within Lincoln in recent times, with the Vodafone lease renewal in August 2015 providing the best evidence available:

 211 High Street is let to Vodafone for a term of 10 years, subject a tenants option to break in year 5. The lease was renewed in August 2015 at a rent of £76,000 pa, increasing from £73,500 pa, equating to £133 per sq ft Zone A. The property is located within a weaker location to that of the subject property, and it is understood that the agreement was not an arm’s length transaction.

 200-201 High Street was let to River Island in December 2013 for 15 years at a rent of £275,000 pa, reflecting £159 per sq ft Zone A. The agreement included a £150,000 capital contribution from the Landlord and a 3 month rent free period and was an open market letting.

On the basis of the above and following discussions with our retail agency teams, we have applied a Zone A rate of £135 per sq ft. We have adopted rates of A/20 on the basement, A/15 on the first floor, A/20 on the second floor (ancillary) and A/25 on the third floor (ancillary). We have 202 High Street, Lincoln LN5 7AU October 2015

made a 10% discount to the rental value to reflect the hard frontage. This provides a net rental value of £162,169 pa.

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as below:

 200-201 High Street, Lincoln – This property is adjacent to the subject property and was sold in January 2014 for £5.2m, reflecting a net initial yield of 4.5%. The property was let to River Island with 15 years unexpired on the lease. The investment was purchased by the Teeside Pension Fund. We consider that the purchaser would also be a likely purchaser of the subject property to increase their holding, should the asset be marketed. This property occupies a comparable location to the subject property. The covenant strength is weaker however the property is let for a longer term. Overall we would expect the subject property to transact at a similar yield achieved in this transaction.

 304 High Street, Lincoln – This property was purchased for £3.6m in May 2011 by CBRE GI, reflecting a net initial yield of 5.15%. The unit is occupied by Paperchase on a lease expiring in June 2020. The transaction is dated; however it provides a useful guide to prime yields in 2011. Since this transaction, the investment and occupational markets have improved significantly. This property occupies a similar pitch, but offers a shorter and weaker covenant to the subject property.

 49 High Street, Godalming, Surrey – This retail investment was sold in January 2015 for £1,510,000 reflecting a net initial yield of 5.32%. The property was let to Lloyds Bank Plc for a term expiring in June 2021. The unit had a hard frontage, similar to the subject property. This property occupies a similar location to the subject property, although has a shorter unexpired lease term. We would therefore expect the subject property to transact at a premium to the yield achieved in this transaction.

 17-19 Market Square, St Neots, Cambridgeshire – This property was sold in December 2014 for £900,000 reflecting a net initial yield of 4.78%. The property was let to Lloyds Bank Plc for a term expiring June 2022. The unit had a hard frontage, similar to the subject property, and was also well located in the city. The property is let for a considerably shorter term and we would therefore expect the subject property to achieve a keener yield.

VALUATION METHODOLOGY

The property is an affordable lot size and provides good retail accommodation in the prime retailing pitch of Lincoln. Given the relatively long let nature of this retail unit (10.8 years unexpired), the single income stream that is generated and the slight reversionary nature of the property, we have adopted an initial yield approach in our valuation. In light of the length of time until lease expiry, we have not adopted any voids or costs in our appraisal.

Based on our opinion of market sentiment and the above comparable information we have targeted an initial yield of 4.65%. Our opinion of the Market Value of the above property is therefore £3,050,000 which reflects an equivalent yield of 5.00%, a reversionary yield of 5.02% and a capital value of £508 per sq ft based on an overall basis.

We would comment that in this location, there is an acute shortage of assets on the market. We consider that given the location, the property would be of significant interest to investors. In addition, the Teeside Pension Fund own a large amount of real estate adjacent to the subject property, and in the surrounding area and would be seen as a special purchaser should this asset come to the market. On this basis, we believe that a price in excess of what we have reported may be achievable if acquired by them.

SUITABILITY FOR LOAN PURPOSES

This is a high quality asset in a strong location and very well let with an unexpired term in excess of 10 years. We confirm that the property is suitable for loan security purposes.

The undoubted covenant strength of Lloyds Bank plc would be a key driver behind investor demand, and with the prospects of rental growth the asset would be seen as an attractive investment.

With little to no vacant units within the close proximity of the subject property, this represents a strong market within Lincoln, and with confidence up, this would only increase the appetite for this asset.

We believe that rents will show marginal growth in the short term. Based on recent letting history we consider the rent is marginally reversionary.

Should the tenant not wish to renew their lease at expiry, we consider that the position of the property would attract a lot of interest from high end fashion retailers, restaurants and of course, banks.

202 High Street, Lincoln LN5 7AU October 2015

Should the property be put to the market we consider that the asset would attract interest from a wide range of investors, including institutions, funds, and high net worth individuals.

PHOTOGRAPHS

External Eastern Elevation

Eastern Elevation Northern Elevation

e) 32 Lister Gate, Nottingham NG1 7DD

32 Lister Gate, Nottingham NG1 7DD October 2015

32 Lister Gate, Nottingham NG1 7DD

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Good. Nottingham is a renowned Market Value: £1,512,000 busy, commercial and administrative centre as well as a University City, widely recognised as the most influential location in Key Inputs the East Midlands. Initial Yield Micro Location: Strong. 90% prime and situated 7.50% between the Broadmarsh Equivalent Yield 8.24% Shopping Centre and the Victoria Shopping Centre. Reversionary Yield 9.67% Property Type: Retail High Street Capital Value per sq ft £282 psf Total Property Area: 498 sq m (5,368 sq ft) Market Rent £154,691 per annum Tenure: Freehold Market Value assuming Vacant £1,150,000 Possession Number of Tenants: 1 Reinstatement Value £573,985 Percentage Vacant: 0%

Total Rent Reserved: £120,000 per annum Covenant Strength: Let to Shoe Zone Retail Ltd, a good covenant with a D&B rating of 5A1. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Strong. 2.75 years remaining but Purposes: strong underlying location.

SWOT ANALYSIS

Strengths Opportunities

 Situated in a high footfall location at the entrance to the  Redevelopment of the Broadmarsh Centre will help to drive rental Broadmarsh Shopping Centre which should improve further once growth. the redevelopment is complete (2018).  Renewal of the Shoe Zone lease will compare favourably with the  Freehold interest. proposed timing of the Broadmarsh Centre redevelopment and will  Well configured unit. provide an optimum level of rent.  Let to a national retailer with good covenant strength.  Tenant trades well from the unit.  Reversionary by 22.5%. Rental levels have historically reached £195 per sq ft Zone A in this location, a substantial increase from 32 Lister Gate, Nottingham NG1 7DD October 2015

the current Zone A rentals of £100 and the Market Rent of £125 per sq ft Zone A, which suggests significant rental growth.

Weaknesses Threats

 Short unexpired lease term of 2.7 years.  Lease expiry circa 2.7 years away. However any voids and  Shoe Zone will not currently commit to a longer lease. associated costs will be offset by the strong letting prospects, and reversionary potential.  Limited amount of directly comparable recent rental evidence in which to base our opinions of Market Rent.

LOCATION

Overview The property is located in Nottingham, widely recognised at the key centre within the East Midlands. Nottingham is located circa 50 miles north east of Birmingham, 16 miles east of Derby and 120 miles north of London.

Nottingham has an estimated local authority population of circa 305,680 people as well as boasting a student population of circa 66,000 people. The city’s affluence is broadly in line with the UK average and has a diverse economy reflected in the growth of the service sector alongside traditional engineering, tobacco and textiles. A number of major occupiers are represented in the area including Alliance Boots, Rolls Royce, Northern Foods and Imperial Tobacco. Service sector occupiers include Experian, Capital One, KPMG, Deloitte, and Ernst & Young whilst the public sector is also a major employer with The Land Registry, Inland Revenue, City & County Councils as well as the University based in the city.

Communication Nottingham benefits from good transport links, including good communications through the A60 and A52, which provide direct access to the M1 motorway. As well as road links, the city benefits from a recently upgraded rail station, situated within a short distance of the subject property, which provides direct access to London St Pancras, with a fastest journey time of 1 hour 40 minutes.

Situation The Property is situated within close proximity of the Broadmarsh Shopping Centre, the main city bus depot and train station, thus providing a high degree of footfall. The Property is surrounded by national retailers such as Marks and Spencer, Poundland and River Island.

In June 2015, Intu gained planning permission for its £160m redevelopment of Broadmarsh Shopping Centre. The redevelopment will be leisure led anchored by a cinema and restaurants as well as creating new retail units and reconfiguring the entrances. Work is expected to be completed in 2018. The subject property is best placed located just outside of the Broadmarsh to benefit from the improvements.

SITE

The site extends to approximately 0.004 ha (0.010 acres).

Access The property is accessed directly off Lister Gate and serviced from Stanford Street to the rear

DESCRIPTION

The property comprises a well configured High Street retail unit, arranged over ground (retail) and two upper floors (ancillary). The original façade was constructed in the 1950’s, but a façade retention scheme looks to have been undertaken in the 1990’s. The property faces on to Lister Gate a pedestrianised retail street. The building is arranged on ground and two upper floors.

The main construction includes main steel frame surround by stone and cavity brick and blockwork. The elevations comprise cavity construction to the rear and retained stone façade, with decorative terracotta cladding below east end windows to the front. The main flat roofs are over two levels above covered in felt with solar chippings, above metal roof deck. The ground floor is a ground bearing slab, with the upper floors being pre-cast concrete floors supported on the steel frame. The elevations also include aluminium frame shop front at ground level and painted metal windows to the upper floors.

Internally, the sales areas are arranged at ground floor level, with ancillary staff and storage areas to the rear of the sales area and upper floors. Finishes to the sales areas include plasterboard suspended ceilings, painted plaster wall linings and laminate floor coverings. The back of house finishes are basic, including painted blockwork, exposed steel frame and floor/roof soffits to the ceilings and unfinished concrete floors.

The building is provided with mains water and three phase electricity and is understood to be connected to Local Authority sewer for foul and surface water drainage. The heating and hot water is provided via electric wall mounted heaters and above sink water heaters. The tenant has also installed mechanical ventilation and cooling plant which is sited on the lower flat roof.

32 Lister Gate, Nottingham NG1 7DD October 2015

The property is fitted out in accordance with the occupant’s retail specification requirements (Shoe Zone).

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Ground Floor 2,164 201 Ground Floor - ITZA 1,055 998 32 Lister Gate Shoe Zone Retail Ltd First Floor 2,039 189 Second Floor 1,165 108 TOTAL 5,368 498

TENURE

The property is held freehold.

TENANCIES

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review

Shoe Zone 32 £120,000 £22.35 26/04/2013 25/04/2018 5 n/a Retail Ltd

Total

Number of Tenants and Lease Type The property is single let to Shoe Zone Retail Ltd on a 5 year lease from 26 April 2013 at a rent of £120,000 per annum. There are no rent reviews or break clauses. The unexpired term is approximately 2.7 years.

Covenant Strength The property is let in its entirety to Shoe Zone Retail Ltd whose principal activities are the sale in footwear. They are perceived as a strong and attractive covenant who for the year ending October 2014 reported turnover of £172 million, pre-tax profits of £11.677 million and a net worth of £29.6 million. They have a D&B credit score rating of 5A 1, which is considered to be very low risk. Year Ending Year Ending Year Ending Shoe Zone Retail Ltd 04 Oct 2014 (000s) 05 Oct 2013 (000s) 29 Dec 2012 (000’s) Sales Turnover £172,861 £193,882 £189,423 Profit (Loss) Before Taxes £11,677 £9,529 £8,488 Tangible Net Worth £29,677 £45,666 £36,609 Net Current Assets (Liabilities) £28,403 £36,950 £30,105

INCOME ANALYSIS

Rental Income £120,000 per annum.

Market Rent £154,691 per annum.

Service Charge/Rates Shortfall Not applicable

CONDITION

 “The property was redeveloped in the 1990’s, where the original stone façade was retained and remaining structure replaced with a steel frame to form the current building layout. We have not found any adverse issues with the property, apart from on-going maintenance works and decorations, which the tenant will need to undertake during the course of their remaining lease term.” 32 Lister Gate, Nottingham NG1 7DD October 2015

The Report concludes that:

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £72,500, exclusive of professional fees and VAT. In our opinion this cost is fully recoverable from the tenant via the full repairing provisions in the lease.

MARKET OVERVIEW

Retailing in Nottingham Nottingham City centre is one of the UK’s foremost retailing destinations and is ranked 6th on the PMA retail score and 7th on the 2014 Venuescore. The city centre’s retail floor space is estimated at 2.88 million sq ft, whilst the primary catchment population is circa 1,059,000 persons and the estimated shopping population impressively 586,000. The extensive retail offer ensures that the city dominates competing and neighbouring centres within the East Midlands.

Retailing is concentrated along a linear axis anchored by the Broadmarsh Shopping Centre in the South running along the main thoroughfares of Lister Gate, Bridlesmith Gate and Clumber Street, to the Victoria Shopping Centre in the North. Intu, owners of The Broadmarsh Centre, in January 2014 signed a conditional development agreement with Nottingham City Council to undertake a £150m remodelling of the centre with improvements to the centre’s car park and public realm. A planning application has recently been granted proposing a complete re-modelling of the centre with a leisure bias which could include a new multiscreen cinema, restaurants and an improved walkway from the train station to the city centre.

Prime pitch in Nottingham now lies entirely within Intu Victoria Centre on the lower mall. The prime part of Intu Victoria Centre offers some destination stores including John Lewis, WH Smith, Top Shop/Top Man and Next. Other retailers on this pitch include Monsoon, Dorothy Perkins, River Island, Office, Superdry and Urban Outfitters.

There is a large amount of good quality secondary shopping floorspace in Nottingham city centre. This is mainly found along Albert Street (and its southern continuation Lister Gate), on High Street/Bridlesmith Gate and on the streets surrounding Old Market Square and the Council House, including Exchange Arcade and Flying Horse Walk.

Clumber Street, once part of Nottingham's prime retail pitch and an extension of fashionable Bridlesmith Gate, has become increasingly rundown in recent years. Although pedestrianised, the street is, nevertheless, somewhat cramped with its fashion offer now diluted by value retailers, like Poundland, as well as a number of services such as William Hill, Ladbrokes and McDonalds and various mobile 'phone operators. Remaining fashion retailers include Levi's, USC and Size?, along with leisurewear retailers, JD Sports, SportsDirect.com and Footlocker.

Albert Street/Lister Gate, where the subject property is located, provide a key north-south route, linking Old Market Square with Intu Broadmarsh. The main Marks & Spencer store is located on Albert Street, along with Accessorize and Body Shop, whilst retailers to the south on Lister Gate include Marks & Spencer Home, WH Smith and H&M Hennes, along with flagship stores for both New Look and River Island. The redevelopment of the Lister Gate frontage to Intu Broadmarsh created six new unit shops, occupied by Thorntons, O2, Holland & Barrett, Eurochange and Claire's.

Quality retailers tend to be concentrated in the area between Clumber Street and Albert Street, especially Bridlesmith Gate, Exchange Arcade, High Street, St Peter's Gate and Low and Middle Pavement. Pelham Street and Victoria Street also appear to be increasingly attractive to high profile fashion brands.

Exchange Arcade, situated between Smithy Row and Cheapside, with a High Street entrance, offers an attractive shopping environment for quality fashion including Jaeger, Viyella, Austin Reed, Warehouse, Radley and Karen Millen. Zara occupies a large unit behind a historic facade on High Street.

Bridlesmith Gate is the centre of a vibrant retail pitch, with quality retailers focused on younger/cutting edge fashion eager to locate in this historic street. Those represented include Hobbs, Cath Kidston, Ted Baker, Hugo Boss, Fred Perry, Flannels, American Apparel, Comptoir des Cotonniers and Diesel, whilst Paul Smith and Reiss are located on Byard Lane, just off Bridlesmith Gate to the east. To the west of Bridlesmith Gate are TM Lewin, The White Company and Fat Face on St Peter's Gate and a striking Paul Smith flagship store on Low Pavement. To the east of Bridlesmith Gate at its northern end, Victoria Street boasts Lacoste, Pretty Green and French Connection, whilst nearby and also on the east-west axis, Pelham Street is home to All Saints, Bravissimo and Sweaty Betty. At the southern end of Bridlesmith Gate, Whistles and Size? trade from Middle Pavement.

Low Pavement and Middle Pavement have also seen a significant improvement, with restaurants Carluccio's, Prezzo and Jamie's Italian, all having started trading here.

Vacancies, in-movers and closures Nottingham has a wide range of multiples spanning the whole of the fashion spectrum with the bulk of these tending to locate within Intu Victoria Centre and on Bridlesmith Gate. The most noticeable recent change, however, is the expansion of branded catering which boosted the city's Café/Restaurant Score between 2013-2015 - a trend that looks set to continue when the new dining quarter completes at Intu Victoria Centre.

At the time of reporting the vacancy rate in Nottingham city centre stood at 12.0% of units, below the national average. The level of take-up between 32 Lister Gate, Nottingham NG1 7DD October 2015

the October 2013 and March 2015 was 6.2% of units, above the PROMIS average.

There were six vacancies on prime Intu Victoria Centre at the time of reporting as a result of the departure of Accessorize, Boots Opticians, La Senza, Phones 4 U, Clarks and Sole Trader. Recent in-movers to prime include Superdry, which had replaced Gap, River Island which had taken the former HMV unit as well as some vacant units on the upper level, and The Fragrance Shop. JD Sports, Natwest and Office had all taken vacant units on prime.

A refurbishment of both levels of Intu Victoria Centre is currently underway. As several units were being reconfigured, some tenants had relocated within the scheme. Poundworld had relocated into a vacant unit on the upper mall; its former unit, just outside prime, had been subdivided into three to accommodate Costa and Vision Express who had both relocated from the new dining quarter development. JD Sports had left the upper mall, relocating to the ground level; HMV had also relocated from prime, taking a unit previously occupied by an independent retailer, also at ground level. Sole Trader similarly relocated from prime, replacing That's Entertainment.

On the upper level, independent retailers had replaced Early Learning Centre and Wallis. Yankee Candles and Taking Shape had taken vacant units and Supercuts had replaced Suits Plus.

A block of units had been vacated around the clocktower fronting Milton Street and twelve new restaurant units are currently under construction; pre-lets to Tortilla, Ed’s Easy Diner, Coast to Coast and Handmade Burger Co have been reported.

In all, there are currently fifteen vacancies within Intu Victoria Centre, although this excludes units under construction to create the new dining quarter. Vacant units outside prime were mainly left by independents or were long term vacancies. Meanwhile, there had been little change at Trinity Square, situated opposite Intu Victoria Centre; the only significant in-mover to report was Poundworld which had taken two large vacant units. We estimate that there are three units still vacant here.

Close by, on Lower Parliament Street, Poundland had taken the former Peacocks store and Tesco Express had taken a vacant unit on the eastern end of Upper Parliament Street. Nationwide had replaced Miss Selfridge on Clumber Street and Size? had taken the former Bank unit. There was a good deal of churn amongst independent retailers to the west of our audit area, on units fronting Market Street, Chapel Bar/Long Row and the western end of Upper Parliament Street.

Moving southwards there are no vacancies at Exchange Arcade where an independent retailer had taken a vacant unit previously occupied by Castle Galleries and Radley had replaced Hawes and Curtis in a unit fronting Smithy Row.

Rents and deals Overall, prime rental growth in Nottingham city centre has been broadly on a par with the average for PMA Major Cities over the period 1987 to end- 2014. After showing a steady increase since the mid-1990s to reach a peak of £250 psf Zone A in 2009, prime rents then dropped markedly during the economic recession, experiencing a sharper fall than the Major Cities generally between 2009 and 2010, although subsequently seeing some recovery. At end-2014, prime Zone A rents for the city continued to lag slightly behind the average for Major Cities, although there is, perhaps, further indication that these are beginning to strengthen.

At mid 2015, agent sources estimated prime rents in Nottingham at £250 psf Zone A. This represents a significant increase on the end 2014 level of prime rents in the city with rents now equal to the pre-recession peak. On average, prime rents across the national towns remain at 28.7% below the pre-recession peak. Prime rents are achievable on the strongest part of prime within Intu Victoria Centre, although details of individual lettings throughout Intu Victoria Centre are confidential.

Zone A rents for the non prime part of the ground floor of Intu Victoria Centre are reported to stand at around £200 psf. In view of the work pending on the upper floor of the centre, there is no recent rental evidence to quote, with some units being held back until after the development has finished - Zone A rents were considered to be about £110 psf on the upper level in 2012. We understand that A3 units within Intu Victoria Centre are valued on an overall basis, with rents for recent pre lets rents ranging from £40-£50 psf.

The highest prime rent in Nottingham, of which we are aware, dates from 2007 and involved a letting to HSBC at 22-26 Clumber Street - classified as part of the city's prime area at that time - which achieved a headline rent of £261 psf Zone A, with 12 months rent free.

Zone A rents for Clumber Street had fallen back significantly to £180-£220 psf by 2010 and suffered a further fall to the extent that they were no longer on a par with those achieved for the prime part of Intu Victoria Centre.

The most recent letting, of which we are aware on Clumber Street, to Size? in January 2015, achieved £175 psf Zone A. A letting to Foot Asylum at the end of 2012, achieved a headline rent of £165 psf Zone A. Lease renewals for Lush and Footlocker during 2011, were agreed at £170 psf Zone A and £138 psf Zone A respectively.

We understand that Lister Gate’s rental levels have historically reached £195 per sq ft Zone A, before falling back to current levels.

Exchange Arcade, positioned between Smithy Row and Cheapside accommodates a variety of upmarket/quality retailers. Units with a High Street frontage once commanded rents as high as £200 psf Zone A, whilst Zone A rents for those shops fronting Smithy Row used to stand at £110-£120 psf. At the time of reporting, Zone A rents were considered to be around £100 psf Zone A. The most recent letting of which we are aware, was to Radley Bags on Smithy Row in October 2014, at £100 psf Zone A. A letting to Dr Martens at the end of 2012, also within the Smithy Row frontage, achieved nearly £66 psf Zone A rent. Jojo Maman Bebe took a unit opposite the arcade on the south side of The Poultry at the end of 2012, in a deal that reflected a Zone A rent of £98 psf.

32 Lister Gate, Nottingham NG1 7DD October 2015

Local agents considered Zone A rents to be around £175 psf for Bridlesmith Gate, however, there are few open market lettings to report. The most recent letting to Joules at end 2013 achieved £200 psf Zone A.

Rents for retail units within Trinity Square are valued on an overall basis rather than a Zone A basis, with rents for retail units ranging from £16 psf (TK Maxx) to £25 psf (PC World). The most recent letting was an October 2014 letting to Poundworld which achieved £20 psf.

In terms of the subject property, Zone A rents on Lister Gate are considered to be around £125 psf although there has been no recent evidence to support this claim. The most recent letting in the vicinity was to Hotter in 2012, who took a sizeable unit on the corner of Lister Gate and Low Pavement at a net effective rent of £133 psf Zone A on a net effective basis. WH Smith took a new lease in 2011 on the former HMV store, immediately opposite the Broadmarsh frontage, in a deal that reflected £135 psf Zone A, again on a net effective basis. Further, a letting to Gordon Scott within this same pitch during Autumn 2011 achieved a headline rent estimated at about £121 psf Zone A, although we understand that the tenant received a substantial capital contribution. The evidence is therefore mixed, however Zone A rents on Lister Gate are considered to be around £125 psf at the time of reporting, although there has been no recent evidence to support this.

Competition Derby is Nottingham's nearest major competitor. Only 16 miles away, it is much smaller than Nottingham but has a good range of mainstream multiples. Whilst Derby still lacks the overall range and depth of provision of Nottingham, its retail offer was significantly upgraded with the redevelopment and extension of the former Eagle Centre, now known as Westfield Derby, which was completed in October 2007. The extended centre includes two major anchor stores - Debenhams and Marks & Spencer, both relocations from elsewhere in the city - and around 100 additional shop units. The development introduced a number of new fashion retailers to Derby and increased the city's PMA retail scores.

Leicester is around 45 minutes drive south of Nottingham city centre and provides an alternative shopping destination for residents in the southern part of the catchment. While it has an extensive retail offer with a wide range of multiples, the representation of up-market fashion/speciality traders is more limited than in Nottingham despite the improvements resulting from the extension of the former Shires Centre, now called Highcross. However, the department and variety store offer is good, comprising House of Fraser, Fenwicks and John Lewis.

Sheffield, with a retail offer of just under 1.6 million sq ft, is around an hour's drive north of Nottingham. It has a good range of mass-market multiples, but lacks quality and speciality retailers and - with the notable exception of John Lewis – its department store offer is not of high quality. The city has only one small shopping centre and a sprawling central retail area. In this context, Sheffield is unlikely to attract much spending from Nottingham's catchment.

MARKETABILITY

Typical Void Letting Period In the event of the current tenant vacating, a marketing period of 6 months would be required.

Typical Tenant Profile This is likely to be of a national covenant. We consider there would be a reasonable number of retailers who would also seek to occupy this unit.

Typical Lease Length Leases are likely to be between 5 and 10 years, and 15 for banks.

Typical Rent Free Period 3-6 months for 10 year leases.

RENTAL EVIDENCE

Rental levels vary considerably throughout the retail pitches in Nottingham and for this reason we have considered rental transactions as close to the subject property as possible, accepting that they are slightly dated. However as discussed the evidence is mixed. We detail the most relevant transactions below:

 2-4 Lister Gate – This unit was let to H Samuel in October 2014 for a term of 5 years with a tenant option to break in year 3. The agreed rent was £65,000 pa, equating to £118 per sq ft Zone A. This property occupies an inferior position to the subject property, and we would therefore expect the subject property to transact at a premium to this level.

 1-3 Lister Gate – This unit was let to Hotter Shoes in August 2012 for 10 years at a passing rent of £170,000 pa, reflecting £146 Zone A. This included a 9 months rent free period, equating to £133 per sq ft net effective Zone A. This unit is situated close to the subject property in a slightly superior trading location, and we consider that the subject property if available would command a discounted level of rent.

 28-30 Lister Gate – This unit was let to Gordon Scott in September 2011 for a term of 10 years at £170,000 pa, reflecting £121 per sq ft Zone A. The agreement was based on a stepped rent and no rent free incentive, albeit there was a significant capital contribution 32 Lister Gate, Nottingham NG1 7DD October 2015

payable to the tenant. The property is adjacent to the subject property, and although the transaction is dated, we consider this is a useful comparable to the subject property. The headline rent would be in the region of £130 per sq ft Zone A.

 38 Lister gate – This unit was let to WH Smith for 10 years at a rent of £255,000 pa, reflecting £177 Zone A. The lease was renewed in May 2011 with a 24 months rent free period equating to £135 per sq ft Zone A on a net effective basis.

The rent at the subject property was re-based in April 2013 at £120,000 per annum, which equates to £100 Zone A on a net effective basis. From our discussions with agents, the re-gear rent was considered to be at a conservative level as the tenant had been in occupation. On the basis of the above and following discussions with our retail agency teams, we have applied a headline Zone A rate of £125 per sq ft. We have adopted rates of A/15 on the first floor (ancillary) and A/25 to the second floor. This provides a rental value of £154,691 per annum and therefore the income profile in our opinion is currently reversionary by 22.5%.

INVESTMENT EVIDENCE

Prime retail yields in Nottingham currently stand at 5.50%, showing small hardening on the level 6 months previous. In arriving at our opinion of value we have had regard to a range of comparable investments, as below:

 2-4 Lister Gate – This property was sold to a private investor in October 2014 for £0.95m, reflecting a net initial yield of 6.47%. The property is let to H Samuel with a WAULT of 3.9 years and 1.9 years until the tenants option to break. The unit was considered to be slightly reversionary at the time of the acquisition which we have analysed at approximately 7.00%. The property occupies a slightly superior trading location to the subject property and we would therefore expect the subject property to transact at a small discount to this.

 28-32 Lister Gate – This property is adjacent to the subject property. The investment was sold in June 2013 to Milford Estates for £2m, reflecting a net initial yield of 8.05%. The property was let to Gordon Scott with a WAULT of 8.1 years and 4.1 years until the tenant’s option to break, which is comparable to the subject property. However, the property has a weaker covenant strength to the subject property, and the market has improved since this transaction. We would therefore expect the subject property to achieve a keener yield.

 10-12 Lister Gate – This property was sold to a private investor in July 2013 for £1.95, reflecting a net initial yield of 9.50%. The property is let to EE with a WAULT of 3.1 years. At the time of this transaction, the covenant strength of EE was unknown and was being perceived with some caution by investors. Given the improvement in the investment market since, we would expect the subject property to achieve a better yield than this comparable.

 34-38 Lister Gate – This property was sold to the Nottingham Council in August 2012 for £8.93m, reflecting a net initial yield of 6.6%. The property is let to WH Smith, Optical Express and Poundland (on a temporary lease) with a WAULT of 7.7 years at the time of the transaction. The property was deemed to be significantly over rented.

We have also had regard to more recent evidence, further afield:

 8-10 Upper Parliament Street & 1-5 Milton Street - In March 2015, a private Investor acquired this property for £3.45 million, reflecting an initial yield of 5.48%; the unit is let to Burger King with an unexpired term of 10 years. This is a well located unit, although it is not considered to be in a prime location. The unit is however slightly reversionary, albeit with no opportunity to capture the reversion for a further 4.5 years.

 6-10 Victoria Street - In July 2014, George Capital purchased this unit from Rockspring for £1.8m, reflecting an initial yield of 7.61%. The shop is occupied by French Connection. The deal was off market and we are unaware of the lease terms.

 29 Bridlesmith Gate - A private investor acquired 29 Bridlesmith Gate in July 2014 for £2.38 million, reflecting a net initial yield of 5.63%. The shop is occupied by Kurt Geiger, with an unexpired term of 8 years. This unit is situated in a superior trading position to the subject property, has a stronger WAULT and the tenant offers a stronger, more attractive covenant. We would therefore expect the subject property to transact at a discount to the yield achieved in this transaction.

VALUATION METHODOLOGY

The property is a small lot size and provides good quality retail accommodation in a good secondary retail pitch in Nottingham. The property is freehold, and as an investment is let to a secure retail covenant strength. The property has a relatively short unexpired term of 2.75 years remaining, and although there is a dearth of directly comparable rental transactions in the vicinity at this time, we are confident that the unit is reversionary.

Based on our opinion of market sentiment and the above comparable information we have targeted an initial yield of 7.50%. Our opinion of the Market Value of the above property is therefore £1,512,000 which reflects an equivalent yield of 8.24%, a reversionary yield of 9.67% and a capital value of £282 per sq ft based on an overall basis. We consider that we have made adequate adjustments to the initial yield to reflect the re-letting risk.

In light of the length of time until lease expiry, we have adopted a 6 marketing void and 6 month rent free incentive on expiry of the lease, with associated void costs.

32 Lister Gate, Nottingham NG1 7DD October 2015

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

The property offers a relatively short term income profile, and there is risk of voids should the tenant not renew. However we understand that they are trading well, although early discussions indicate that they will not commit to a longer lease at this time. However, the property is reversionary and with little to no vacant units within the close proximity. Should the tenant not wish to renew their lease at expiry, we consider that the position of the property would attract a lot of interest from high end retailers and banks. We consider that the re-lettting risk is therefore mitigated to an extent.

Should the property be marketed we consider that the asset would attract interest from a wide range of investors, funds, and high net worth individuals.

PHOTOGRAPHS

Front Elevation Storage

Ground Floor Retail Staff Kitchen

f) 24 Broad Street, Reading RG1 2BT

24 Broad Street, Reading RG1 2BT October 2015

24 Broad Street, Reading RG1 2BT

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Strong. Reading is a popular regional Market Value: £4,378,000 retailing destination and a major commercial and administrative centre.

Micro Location: Strong. Situated in a very prominent Key Inputs corner position in a 95% prime retailing pitch. Initial Yield 4.75% Property Type: High Street retail unit. A2 financial and professional services at ground floor Equivalent Yield 5.17% with ancillary uses on the upper parts. Reversionary Yield 5.18% Total Property Area: 701.6 sq m (7,551 sq ft) Capital Value per sq ft £699 overall Tenure: Freehold Market Rent £240,000 per annum Number of Tenants: 1 tenant Market Value assuming Vacant £2,950,000 Percentage Vacant: 0% Possession Total Rent Reserved: £220,000 per annum Reinstatement Value £1,650,000

Covenant Strength: Established national bank registered in 1865 providing an undoubted and attractive tenant covenant. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Very good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Located very close to town’s prime retailing pitch at the entrance to  Drive revenue through rent reviews. the Oracle Shopping Centre.  Possible lease extension or re gear opportunity as the property is  The property is one of the most prominent units on Broad Street, approximately 8% under rented. occupying a corner position on the junction of the pedestrianised  Possible opportunity to convert the upper parts to office or residential section of Broad Street and Cross Street. use subject to planning and reconfiguration.  The property has a significant return frontage.  The income is well secured, being let to a large national bank (Lloyds Bank Plc) that offer an undoubted covenant.  The tenant is planning a significant refurbishment on the unit and clearly has long term intentions.  Strong investment demand for this asset.

Weaknesses Threats 24 Broad Street, Reading RG1 2BT October 2015

 The property has an imposing stone façade at ground floor level which  We do not consider there are any material threats. has little or no shopfront and may prove to be a deterrent to some A1 retail users.

LOCATION

Overview The property is located in the retailing centre of Reading. Reading is one of the principal commercial centres along the M4 corridor with a shopping population of 393,000, above the Regional Centre average. A primary catchment population of 685,000 highlights Reading as a popular and affluent regional retail destination. The town is a major administrative centre for the Thames Valley Region hosting the HQ’s of numerous British companies and the UK offices of many foreign internationals. Reading is situated approximately 40 miles to the west of Central London, and 80 miles east of Bristol.

Reading has a resident population of circa 155,700 (2011 Census), which is expected to reach 169,400 by 2020. The town’ has an extensive retailing catchment and boasts an above average PROMIS primary catchment population of 685,000 with an estimated total catchment in excess of 2.3m persons. Reading’s affluence is reflected in the significantly above average proportion of the most affluent AB social group and an underrepresentation of the least affluent C2 and D&E categories. This affluence is further supported by the estimated £4bn of retail and leisure spend within a 30-minute drive time.

Communication The town benefits from excellent road, rail and air links. The M4 motorway lies immediately to the south with Junctions 10 ,11 and 12 serving the town ultimately connecting to the M25 (Junction 15) some 24 miles (39km) to the east. In addition the A33 provides direct access to Basingstoke, 18 miles (29km) to the south, the A4 to Maidenhead 16 miles (26km) to the north east and the A329(M) to Wokingham and Bracknell 12 miles (19km) to the south east. Reading Rail Station is particularly busy, providing fast and frequent services to London (Paddington) with a journey time of 25 minutes and direct services to Oxford, Basingstoke, Cardiff, Manchester, Birmingham and Gatwick Airport. Importantly Crossrail is to be extended to Reading opening in 2019 improving access to all central London areas.

Situation The Property is located close to the prime retailing centre of the town on the pedestrianised Broad Street which runs east-west just to the south of the mainline railway station. The property occupies a prominent corner at its junction with Cross Street. The entrance to The Oracle Shopping Centre is just to the south east of the property, being the main indoor shopping mall.

SITE

The site extends to approximately 0.03 ha (0.07 acres).

Access The property is accessed directly off Broad Street, a pedestrianised high street.

DESCRIPTION

The property presents as two distinct buildings, with the main element fronting both Broad Street and Cross Street. The premises are of period appearance with brickwork and stone masonry features and the second, fronting Cross Street only, presenting a simpler brickwork facade.

Internally the two buildings present as a single area on most floors. The internal structure has likely been altered on a number of occasions, with in-situ concrete floors resting on a masonry, steel and concrete supporting structure.

The roof comprises mostly pitched slated sections with a number of small flat roof areas. No access was available to the upper pitched areas.

There is a basement under much of the building footprint.

The ground floor comprises a banking hall with the basement and upper parts providing ancillary accommodation. The property is fitted out in the tenant’s corporate style and is scheduled for an extensive re-fit this summer.

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Ground Floor Sales 2,324 216.0 ITZA 1,031 95.8 First Floor 1,830 170.0 24 Broad Street Lloyds Bank Plc Second Floor 1,453 135.0 Third Floor 472 43.8 Basement 1,472 136.8 TOTAL 7,551 701.6

24 Broad Street, Reading RG1 2BT October 2015

TENURE

The property is held freehold.

TENANCIES

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Lloyds Bank No.24 £220,000 £29.14 25/12/95 23/06/26 31 25/12/15 Upward only rent review in Dec 2015 and Dec Plc 2020. Total £220,000

Number of Tenants and Lease Type The property is single let to Lloyds Bank Plc on a 15 year lease from 24th June 2011 at a rent of £220,000 per annum. There is a rent review in December 2015 and there are no break clauses. The unexpired term is approximately 11 years.

Covenant Strength The property is let in its entirety to Lloyds Bank Plc who were incorporated in 1865. The bank has a D&B rating of 5A1 with a turnover in excess of £40 billion. The bank has been given a minimum risk of business failure.

Year Ending Year Ending Year Ending Lloyds Bank Plc 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000’s) Sales Turnover £40,761,000 £53,977,000 £55,410,000 Profit (Loss) Before Taxes £2,289,000 £894,000 (£474,000) Tangible Net Worth £44,691,000 £39,444,000 £43,593,000 Net Current Assets (Liabilities) £3,346,000 £61,444,000 (£309,770,000)

Having regard to the above, we consider prospective investors and their lenders would regard the tenant to offer a very strong covenant and as offering institutionally acceptable covenant strength.

INCOME ANALYSIS

Rental Income £220,000 pa.

Market Rent £240,000 pa.

Service Charge/Rates Shortfall Not applicable

CONDITION

As instructed, we have not carried out a structural survey, nor have we tested any of the services. Instead, we have been provided with a copy of the Building Inspection Report dated 3rd August 2015, prepared by Clarkebond on behalf of APAM, and which we assume will be assigned to the Bank prior to completion of the purchase. The principal conclusions of the Report are summarised as follows:

 “The property appears to be in robust structural condition with no visual evidence of underlying concerns”.  “Internally the property is in fair - good condition and functioning as retail (banking) space with back of house administrative and other facilities”.  “Maintenance is required to high level slated and flat roof sections and occasional areas of internal damp”.  “The status of fixings within the elevation to take street decorations should be confirmed, and a ‘hands on’ assessment of the ornate stone features to the elevations is recommended to check for potential loose or damaged elements.” Clarkebond have not provided any estimation on the cost of outstanding repair or maintenance. However, the 2010 lease provides for the tenant to keep the premises in good and substantial repair and condition, and to maintain and renew, to clean and paint all external and internal parts, to comply with statute and to yield up in accordance with lease provisions. In our opinion, the cost of any outstanding repairs and maintenance, together with ongoing repair and maintenance costs will be fully recoverable from the tenant via the FRI provisions in the lease. Our valuation assumes this.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

We are not aware of any deleterious materials in the construction of the Property and considering the existing use it is unlikely that there are any contamination issues which will have a material adverse impact on value.

MARKET OVERVIEW

Town centre competition Reading is surrounded by a number of smaller towns, particularly to the south and east. However, none of these centres have an offer comparable in scale 24 Broad Street, Reading RG1 2BT October 2015

or range to that of Reading and some of their residents are likely to visit Reading for comparison shopping trips. Nevertheless, there are a number of schemes which have recently been built, are planned or are under construction which may help these centres retain more local expenditure and in the longer term, possibly reduce Reading's draw to shoppers from these outlying areas.

Like most major shopping centres in the Home Counties, Reading also competes with London for infrequent, and often high spending, shopping trips.

An alternative shopping destination for those living in the north western part of the Reading catchment is provided by Oxford three quarters of an hour's drive away. Oxford, though congested, offers an attractive environment along with two covered shopping centres and many high street multiples, although it perhaps has a more limited range of upmarket and speciality retailing than might be expected in a major historic city. Construction on the long-awaited redevelopment and extension of the Westgate Centre began in February 2015, with completion scheduled for end 2017. This major project will bring John Lewis to the city; further pre-lets include H&M, Superdry and Schuh.

Bracknell is the closest of Reading's competitors, although it has a dated town centre shopping environment. However, plans by the Bracknell Regeneration Partnership to redevelop much of the town centre to create an additional 600,000 sq ft of comparison floorspace are advancing. Construction on the project commenced in summer 2015 with completion expected in autumn 2017. At present, however, we would expect many Bracknell residents to make regular comparison shopping trips to Reading in view of the very poor provision in their local town centre.

Basingstoke is around half an hour's drive to the south of Reading. Festival Place accommodates a range of generally mainstream retailers including Gap, H&M, Zara, Monsoon and Debenhams along with Bhs, Marks & Spencer and Next. Whilst Reading still provides a superior offer, the centre may help to retain more local spend within Basingstoke itself, perhaps reducing visits to Reading from Basingstoke residents.

Although Camberley is a small centre it has two shopping centres. The Atrium completed in late 2008 with around 130,000 sq ft of retail floorspace anchored by Next and Laura Ashley and 130,000 sq ft of leisure, including restaurants such as Prezzo, Bill's, Nando's and Frankie & Benny's, as well as a Vue cinema and a Bowlplex. We understand that discussions are underway involving a possible 200,000 sq ft extension to the other shopping centre in the town - The Mall Camberley.

The retail offer of High Wycombe, situated around 20 miles to the north of Reading, improved with the opening of the Eden Centre in early 2008. The centre incorporates the former Octagon Shopping Centre and provides some 530,000 sq ft retail floorspace. House of Fraser and Marks & Spencer anchor the scheme.

Retailing in Reading Broad Street was once Reading's prime pitch, however, the development of The Oracle provided a new retail focus for retailers and shoppers alike.

The traditional prime pitch - the main section of Broad Street, from its junction with Chain Street, eastwards, to just beyond Marks & Spencer - accommodates retailers John Lewis, Marks & Spencer, Gap, Fat Face, WH Smith and Monsoon.

Agents consider that the prime pitch in Reading now also includes both main malls of The Oracle - Town Walk and Holy Brook Walk - as well as Town Link Mall, leading through to the main section of Broad Street. Retailers along the prime section of The Oracle include Debenhams and House of Fraser, located at opposing ends of Town Walk and Holy Brook Walk, New Look, Topshop/Topman/Miss Selfridge and Zara.

Vacancies, in-movers and closures There are a limited amount of vacancies in the core retailing areas of Reading.

Reading's offer and status was greatly strengthened by the development of The Oracle in the late 1990's and the town became the dominant shopping centre for the Thames Valley, there being relatively little competition close by. As a strong business centre in its own right, and with good transport links to London, the town benefits from a substantial and relatively prosperous catchment population.

Reading has consistently ranked within the top 20 of the 200 PROMIS Centres on PMA's Retail Provision Score, although it has not been untarnished by the consequences of the 2008 financial crisis and the difficult trading conditions of recent years. Its retail rank has fallen back slightly from 11 out of the 200 PROMIS centres in 2005 to a position of 22 by 2015.

Although a number of high profile retailers have arrived in Reading in recent months, the town has, nevertheless, lost some key fashion retailers such as French Connection, Gap, Karen Millen, Superdry and Wallis, along with other high street names, notably Bhs, The Disney Store, Currys/PC World, Goldsmiths and Early Learning Centre. Several well known catering brands have, however, opened in the town centre, helping to offset the impact of the departure of these comparison retailers.

La Senza, Gap, Dorothy Perkins/Burton, Wallis and Currys/PC World all vacated units along the prime upper ground level of The Oracle, with Smiggle, Kiko, Five Guys, Jessops and Holland & Barrett moving into units on this pitch.

Jack Wills took a large unit previously occupied by Disney Store on the prime lower ground level of the centre and Reebok replaced West One. Mamas & Papas and David Clulow had both ceased trading recently.

Within those parts of the centre outside prime, Timberland had taken a unit formerly let to Crabtree & Evelyn and an independent café had replaced Thorntons. Hugo Boss had started trading from a double unit previously occupied by French Connection and Karen Millen.

Cote Brasserie and Handmade Burger Company had located along The Riverside. There was a total of eight vacant units in The Oracle at the time of reporting, an increase on the level recorded in 2013.

The former Bhs store was the key vacancy on prime Broad Street but all other units on this pitch were occupied. Most changes had occurred amongst mobile phone operators with EE, an independent café and an independent retailer all taking units which had once been occupied by Phones 4 U, Nokia and Carphone Warehouse respectively. Dorothy Perkins/Burton now operates from the former Miss Selfridge unit.

24 Broad Street, Reading RG1 2BT October 2015

There had been a good deal of activity along non prime Broad Street since our previous survey. Brother 2 Brother, Ecco Shoes and Millets had all started trading here and the unit once occupied by Optical Express was being fitted out for Hotter Shoes at the time of reporting. Both Phones 4 U and West Cornwall Pasty Co had left vacancies on this pitch as a result of the companies entering administration.

The main change at Broad Street Mall was the arrival of Morrisons who took a unit fronting St Mary's Butts from which Millets had previously operated. The only departures of note were Poundland, Modelzone and Animal. Broad Street Mall had a total of ten vacant units at the time of reporting.

Rents and deals Prime rental growth in Reading has been in line with the Regional Centres' average over the period of record. A period of steady growth in prime Zone A rents during the second half of the 1990s was followed by a slight dip during 2002, with a further uplift throughout 2004-2007, peaking at £280 psf in 2008. Although this level of rent proved unsustainable after the 2008-2009 banking crisis and the recession, prime Zone A rents in Reading saw a below average decline at this time relative to Regional Centres as a whole.

We currently estimate prime rents in Reading at £245 psf Zone A. This represents no change on the end 2014 level of prime rents in the town with rents remaining 12.5% below the pre-recession peak of £280 psf ZA. On average, prime rents across UK Towns remain 28.7% below the pre-recession peak.

At the time of reporting, the owners of The Oracle revealed that Zone A rents for both prime malls of the centre were in order of £245 psf, although we understand that many of the retailers within the centre have leases that include provision for a base rent plus a turnover related supplement.

Although details of the 2014 lettings with Reebok on the lower mall and Jessops on the upper mall remain confidential, agents confirm that these deals reflect Zone A values in the region of £245 psf. Mango took a unit on the lower mall in 2010 at £245 psf Zone A, a level that was also maintained in 2011 with a letting to Hollister and later with Apple in 2013.

On the upper level, Zone A values tail off to just below £200 psf in areas which attract lower footfalls. Vodafone expanded into an empty unit just beyond Debenhams in 2012 at a rent of £200 psf Zone A and more recently, in 2015, Holland & Barrett took a unit close to Boots at a similar rent.

There had been little tenant movement on Broad Street recently and agents consider that rents here still remain at approximately £200 psf Zone A.

Zone A rents vary on those parts of Broad Street outside prime, with units just off prime commanding the highest rents. For instance, recently a unit was being fitted out by Hotter Shoes on the edge of prime in a deal that apparently reflects £150 psf Zone A. In 2011, Cath Kidston took a unit just outside prime at £198 psf Zone A, £170 psf net effective. In contrast, Brother 2 Brother took a sub-lease from EE in August 2014 at £128 psf Zone A and Millets acquired the remainder of a 20 year lease on a unit close by, at a passing rent of £134 psf Zone A. To the east of prime Broad Street, Ecco Shoes signed terms on a unit at £134 psf Zone A in the first quarter of 2014.

Future change in TC supply The Reading Central Area Action Plan (RCAAP), which sets out the planning framework for the central area up to 2026, was adopted by Reading Council in 2009 and adapted in early 2015.

Station Hill regeneration area lies just outside the central area. Outline consent has been granted for a large office led development, which would create 1 million sq ft of offices, a public square and 60,000 sq ft of additional retail floorspace.

Royal Mail Estates have full consent for a predominantly office based scheme at the former postal sorting office site to the north-west of the town. The scheme will also include modest retail, leisure, hotel, residential and possibly a foodstore.

Construction has begun on a small extension to The Oracle shopping centre, over two floors to the Holy Brook side of the centre. Argentinian themed restaurant, CAU, is expected to take this space shortly.

MARKETABILITY

Typical Void Letting Period We are of the opinion that A2 retail use will continue to have the best demand and appropriate planning permission. Although the unit does not lend itself easily to A1 retail uses due to the structural layout of the unit, including the hard frontage, it is possible that it could be well utilised for A3, A4 or A5 use as the wider market has demonstrated. Units which have previously been used as banks are often a popular location for many large chain restaurants such as Pizza Express. If the unit were to become vacant a marketing void of 6 months would be realistic.

Typical Tenant Profile This is likely to be of a national A2 occupier or national covenant retailer. We consider there would be a reasonable number of occupiers who would seek to acquire this unit.

Typical Lease Length Leases are likely to be for 10 years.

Typical Rent Free Period 12 months for 10 year leases.

Letting Strategy N/A.

24 Broad Street, Reading RG1 2BT October 2015

RENTAL EVIDENCE

We would cite the following rental evidence:

 22 Broad Street is currently on the market and generating a strong amount of interest. The anticipated rent is likely to be in the region of £145,000 per annum based on £230 per sq ft Zone A. We are of the opinion that the building occupies a more prominent position than the subject property having a return frontage onto Cross Street that reflects a higher Zone A.

 35 Broad Street was recently let in June 2015. This is located to the west of the subject property and we understand Itsu has taken a 15 year lease at a rent of £165,000 per annum with 7 months rent free reflecting a Zone A of £201 per sq ft (net effective over 10 years).

 107/108 Broad Street let to Gap had a lease renewal in January 2014 for a term of 10 years. The comparable is situated on the opposite side of the High Street to the west in close vicinity to the subject property. The passing rent of £280,000 per annum reflects a £181 per sq ft Zone A. We are of the opinion that the subject property is in a better retailing location being closer to the entrance of the Oracle Shopping Centre.

The property is extremely well located in a prominent corner position. This pitch and footfall in general will also be improved further as Primark open their new store almost directly opposite the subject property, in the old Debenhams department store. Given the unusual layout of the unit and the hard frontage, it is possible that a 10% discount would be appropriate. However we would also expect a premium on account of the significant return frontage. In our opinion, one would offset the other. Accordingly, and having carefully considered the above evidence and the likely good demand for the unit, we have adopted a Market Rent of £200.00 per sq ft ITZA. This is further supported by the level of interest being received on 22 Broad Street. We have adopted rates of A/20 on the basement, A/15 on the first floor, A/25 on the second floor and £2.50 per sq ft on the third floor. This provides a rental value of £240,000 per annum.

INVESTMENT EVIDENCE

Reading attracts both institutional and private investors and at the peak of the market, transactions generated net initial yields of 4%. Whilst the downturn did supress yields in Reading this was mainly as a result of the rental tone dropping and therefore assets appearing to be overrented. Rents are catching up and with Crossrail on the horizon, coupled with the significant railway station redevelopment and town centre infrastructure improvements. Reading is seen as a strong investment location. We detail the following investment transactions:

 107 / 108 Broad Street, Reading – This property was purchased by the Legal and General UK Property Fund in June 2015. The property is fully let to Gap, the clothing retailer. The property has an unexpired lease term of 9 years. The property is part of the Mayfly Portfolio and was purchased for £5.35m reflecting an initial yield of 4.95%. The subject t property is secured against a stronger tenant covenant and is, in our opinion, more prominently located. Accordingly we would expect the subject property to transact at a lower yield.

 49 High Street, Godalming, Surrey – This retail investment was sold in January 2015 for £1,510,000 reflecting a net initial yield of 5.32%. The property was let to Lloyds Bank Plc for a term expiring June 2021. The unit had a hard frontage, similar to the subject property. This property occupies an inferior location to the subject property, and has a shorter unexpired lease term. We would therefore expect the subject property to transact at a premium to the yield achieved in this transaction.

 17-19 Market Square, St Neots, Cambridgeshire – This property was sold in December 2014 for £900,000 reflecting a net initial yield of 4.78%. The property was let to Lloyds Bank Plc for a term expiring June 2022. The unit had a hard frontage, similar to the subject property, however was relatively well located in the town. We note the capital lot size is quite small, and the property would provide an investor with a secure income stream. We would anticipate a similar yield being achieved for the subject property.

 1 London Road and 25 Station Road, Redhill, Surrey – This retail investment was sold at auction in July 2014 for £2,310,000 reflecting a net initial yield of 5.47%. The property was let to Lloyds Bank Plc for a term expiring September 2023. The macro location of this property is generally considered to be weaker, however the property is very well located and prominent at the junction of London Road and Station Road. The unit has excellent visibility and in this expect is very similar to the subject property. The property is let to the same tenant, albeit has a shorter unexpired lease term. The market has also improved since this transaction. Overall, we would expect the subject property to transact at a significant premium to the yield achieved here.

 161 High Street, Cheltenham – We understand that this property was purchased in June 2015 by Legal and General UK Property Fund for £3.38m. The property is located along a pedestrianized high street and is occupied by 02 with an approximate unexpired term of 10 years. This reflects an initial yield of 4.75%.

 26-28 Broad Street, Reading – This property is adjacent to the subject property and was sold in May 2011 for £8.2m reflecting an initial yield of 5.07%. The property was let to HSBC with an approximate unexpired term of 15 years. This is a dated transaction although still provides a good indication that prime yields in Reading have remained strong in recent years. The HSBC covenant is considered to be stronger than the subject property, and the term is longer, however the market has improved since, as have the supply/demand characteristics of Reading.

VALUATION METHODOLOGY

The property forms a freehold high street retail investment in Reading with an unexpired term certain in the order of approximately 11 years. The current passing rent of £220,000 per annum reflects £200 per sq ft. Our valuation reflects the current very strong covenant status of the tenant, the property’s excellent position and overall income security.

In arriving at our Market Value, our approach has been to target an initial yield of 4.75%. We have also had regard to the imminent reversionary yield of 24 Broad Street, Reading RG1 2BT October 2015

approximately 5.18% in December this year. Our valuation at £4.159m reflects a net initial yield of 5.18% and an equivalent yield of 5.17%. It further reflects a capital value of £550 per sq ft. We have allowed for purchaser’s costs of 5.80%.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

Reading is a popular retail centre, and the unit is very well located. We would expect the unit to relet quickly should it ever become vacant. We believe that rents will remain stable and based on recent letting history we consider the rent is marginally reversionary. Should the tenant not wish to renew their lease, we consider that the property would attract a lot of interest from national A2 financial and professional services occupiers as well as national retailers, who may look to convert or sublet the upper floors should the tenant not require the additional space.

We consider the tenant covenant strength would be perceived by the investment market as offering a minimum risk, and given the long unexpired term the property will provide good security over the term of the loan.

Should the property be put to the market we consider that the asset would attract very strong demand from a wide range of institutional investors, cash rich buyers, including owner occupiers, property companies and high net worth individuals.

PHOTOGRAPHS

Front Elevation New Rear Elevation

Office Space Lift

g) 12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ

12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Reasonable. Colchester is a major Market Value: £6,180,000 regional retailing centre, a popular commuter destination and the second largest conurbation in Essex. Key Inputs Micro Location: Strong. Located in a 95% prime pedestrianised retailing pitch fronting Initial Yield onto both Culver Street West and 6.00% High Street, opposite Culver Square Equivalent Yield 5.95% Shopping Centre. Reversionary Yield 5.88% Property Type: Retail High Street Capital Value per sq ft £598 Total Property Area: 15,511 sq ft Market Rent Tenure: Freehold £387,198 per annum Market Value assuming Vacant Number of Tenants: 2 tenants £4,140,000 Possession Percentage Vacant: 0% Reinstatement Value £ 2,850,000 Total Rent Reserved: £395,475 per annum

Covenant Strength: Established retailers incorporated in 1964 (Superdrug) and 1984 (Office Holdings). Both with good covenant strength. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Located within the prime retailing pitch in Colchester.  Drive revenue through lease events.  Let to good national retailers with strong covenant strength.  Potential regear of Office Holdings lease to waive tenants  Generous WAULT of 10.2 years. break option, albeit this is unlikely in the short term.  Freehold interest.  Office have recently agreed to rebased their rent from £115,000 pa to £105,000 pa and 6 months’ rent free in exchange for a ten year lease, tenant only break clause in year 5, and therefore have committed to location where they trade well. 12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

Weaknesses Threats

 Limited rental growth within Colchester retail market.  Future voids should the tenant not renew their lease. However  Whilst rack rented, the rent agreed by Office sets a new benchmark for this would not deter purchasers given the long unexpired the pitch which will limit the chances of securing any uplift on the terms on the Office unit. Superdrug unit at review (September 2015).  Continued pressure on tenants and the high street in general due to the lack of spending by consumers.

LOCATION

Overview The property is located in Colchester, a large town in Essex and is a popular commuter destination and regional retailing centre. The property is in an attractive retail area with a shopping population of 239,000 with an additional 4.5 million tourists visiting each year. The property occupies a prime, pedestrianized retailing pitch with a very strong footfall. In addition to retailing, Colchester also boasts an impressive history, being the first capital of Roman Britain and there are also a lot of leisure activities to enjoy such as Colchester Zoo.

Colchester has a local authority population of circa 176,000 persons (mid 2012 estimate), a primary catchment of 451,000 persons and a shopping population of 239,000. These figures are boosted by circa 4.5m tourists visiting each year. The town’s relative affluence is reflected in the spending habits of the catchment with current per capita spending levels above the national average. Significant above average percentage growth in comparison spending is also forecast over the next few years.

Communication Colchester is situated 60 miles north-east of London and approximately 18.5 miles south-west of Ipswich and 24 miles north-east of Chelmsford. The town benefits from good transport links as it sits south of the A12, allowing access to Central London via the M25 motorway. Rail services are also good with a direct line to London Liverpool Street with a journey time of 50 minutes. Stanstead Airport is also located 33 miles away.

Situation The property, situated in an established retailing pitch with strong footfall and frontages onto both Culver Street West and High Street, is located close to the entrance to Culver Square Shopping Centre (Shewell Walk). Next and Nat West Bank adjoin the units with Gap, Ann Summers, Starbucks and Santander opposite. Other nearby occupiers include Blacks, Greggs, Virgin Media, Vodafone and JD Sports.

SITE

The site extends to approximately 0.124 hectares (0.306 acres).

Access The properties are accessed directly off Culver Street West and the High Street.

DESCRIPTION

The property comprises two adjoining shops with ground floor retail sales and ancillary accommodation on the first and second floors. Superdrug benefits from dual frontage onto Culver Street West and High Street. The ground floors are used as retail and the first and second floors are ancillary.

Both of the High Street elevation upper facades (1st and 2nd floors) are brickwork, whereas to the Culver Street West elevation one is brickwork and the other a rendered / painted facade at 1st floor with a gabled 2nd floor.

Internally the structure is of steelwork with in-situ concrete floors cast on permanent metal decking, indicating that the interior has been effectively completely rebuilt.

The roof comprises pitched tiled sections on timber trusses to the street elevations with the central area a flat roof at 2nd floor level. There is no basement.

12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² ITZA (CSW) 1,066 99 ITZA (HS) 1,435 133 22/24 High Street Superdrug Stores Plc G (Sales) 5,150 478 1st (A/12) 4,823 448 2nd (Anc.) 1,788 166 ITZA 726 67 G (Sales) 1,118 104 12 Culver Street Office Holdings Ltd 1st (Anc) 1,076 100 2nd (Anc.) 1,556 146 TOTAL 15,511 1,442

TENURE

The property is held freehold.

TENANCIES

Number of Tenants and Lease Type Superdrug Stores Plc is the occupier of 22/24 High Street let on a 15 year lease from 29 September 2000 at a rent of £290,475 per annum. There is a rent review on 29 September 2015. The unexpired term is approximately 10 years.

12 Culver Street is let to Office Holdings Ltd on a 10 year lease from 10 July 2015 at a rent of £105,500 per annum. There is a tenant only break clause in year 5 and a 6 month rent free period.

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review

Superdrug 22/24 £290,475 £24.70 29/09/00 28/09/25 25

Office have recently agreed to rebase their rent from £115,000 pa Office 12 £105,500 £28.13 10/07/15 9/07/25 10 to £105,000 pa and 6 months’ rent free in exchange for a ten year lease, with a TOB in year 5. Total £395,975

Covenant Strength Superdrug Stores Plc was incorporated in 1964 and principal activities include health and beauty retail, as well as running pharmacies in over 200 stores. The company is perceived as a strong covenant and for the year ending December 2013 had a turnover of over £1 billion and a pre- tax profit of £38.044 million. D&B Rating of 5A1. Year Ending Year Ending Year Ending Superdrug Stores Plc 27 Dec 2014 (000s) 28 Dec 2013 (000s) 29 Dec 2012 (000s) Sales Turnover £1,058,047 £1,010,212 £1,021,021 Profit (Loss) Before Taxes £38,044 £28,982 (£3,977) Tangible Net Worth £138,513 £122,235 £106,905 Net Current Assets (Liabilities) £74,581 £55,060 £30,094

Office Holdings Ltd operates Office the shoe shop, the first of which opened in 1984. The company is seen as strong covenant and for the year ending January 2014 had a turnover of £256 million and a pre-tax profit of £28.1 million. D&B Rating of 5A1.

Year Ending Year Ending Year Ending Office Holdings Limited 26 Jan 2014 (000s) 27 Jan 2013 (000s) 29 Jan 2012 (000s) Sales Turnover £256,044 £243,370 £204,712 Profit (Loss) Before Taxes £28,106 £35,372 £30,519 12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

Tangible Net Worth £103,595 £80,848 £61,142 Net Current Assets (Liabilities) £89,725 £67,533 £49,603

INCOME ANALYSIS

Rental Income £395,475 per annum.

Market Rent £387,198 per annum.

Service Charge/Rates Shortfall Not applicable

CONDITION

We have been provided with a copy of the Building Inspection Report dated 3rd August 2015, prepared by Clarkebond on behalf of APAM, which we assume will be assigned to the Bank prior to completion of the purchase. The principal conclusions of the report are summarised as follows:

 “The property appears to be in robust structural condition with no visual evidence of underlying concerns.”  “Internally the property is in fair or good condition and functioning as retail space with back of house storage and administrative facilities.”  “Maintenance is required to some elements of the external envelope.”

The Report concluded that:

 “Our building fabric inspection did not reveal evidence of significant structural defects. From a technical building viewpoint we saw no major defects preventing your intended freehold acquisition.”

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £50,000, exclusive of professional fees and VAT. However, we would comment that under the Part Ground, 1st and 2nd 12 Culver Street West lease dated 7/8/06, the tenant is responsible for the interior demise and the landlord for structure and exterior. Further the 22/24 High Street and Part 1st + 2nd 12 Culver Street West lease (29/9/00 ‐ 29/9/25) contains clauses and requirements to keep the property in good and substantial repair, redecorate, keep clean and yield up in repair.

Accordingly, in our opinion, the cost of any outstanding repairs and maintenance, together with ongoing repair and maintenance costs will be fully recoverable from the tenants via the provisions in the lease.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

MARKET OVERVIEW

Retailing in Colchester Colchester has an extensive retail offer. Prime retailing is focused on Culver Square and Lion Walk Shopping Centres with Culver Street West (pedestrianised) and High Street a strategic link between the two schemes. Major national multiples represented in the town include Marks & Spencer, Boots, Debenhams, H&M, TK Maxx, WH Smith, Bhs and River Island.

Culver Street West is a popular retailing pitch generating strong footfall with the likes of Next, JD Sports, Gap, Debenhams, Pandora, Starbucks, Ann Summers and Accessorize having frontages onto the street. The High Street, historically Colchester’s prime pitch remains popular with Williams & Griffins’ (Fenwick) department store anchoring the pitch, which is currently undergoing an extension and £30m ‘facelift’. Other occupiers include Waterstones, Burger King, Edinburgh Woollen Mill, McDonalds and Burton. Bill’s Restaurant are currently shop-fitting nearby.

Colchester's prime pitch is relatively small, focused on Culver Walk within Lion Walk shopping centre; Marks & Spencer, Topshop, Bhs, O2 and WH Smith are all situated within the prime area.

Vacancies, in-movers and closures Colchester's position in the retail hierarchy has fallen from a rank just inside the top 40 towns in 2005 to a position of 47. This reflects the difficult trading conditions since the 2008 financial crisis and the fact that Colchester, like other national centres, has suffered from retailer administrations. The character of Colchester's shopping appears to be changing; in particular, the town has seen a decline in the higher scoring, upper middle fashion retailers, but an increase in mainstream fashion retailers.

At the same time, many multiple retailers have been considering their locational strategies and implementing store rationalisation programmes. Given the town's relatively distant location in a largely rural area, supported by a catchment population of comparatively modest affluence, some operators may prefer to trade from more dominant, strategic positions. 12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

The vacancy rate in Colchester town centre stands at 12.9% of units, comparable with the national average and a marked increase on the level recorded in January 2013. The level of take-up between the January 2014 and January 2015 was 5.7% of units.

Other than Red Lion Yard in Lion Walk, where there was a cluster of vacant units, there were no particular concentrations of vacancies, these being spread across most of the shopping area. There is currently no vacancy in the areas surrounding the subject property, this is highlighted in the lack of evidence along the pedestrian circuit including Culver Street West, Trinity Street and Shewell Walk.

There were two vacant units in Lion Walk at the time of reporting, all of which were located on the prime pitch. HMV relocated from prime into a unit in Culver Square, Phones 4 U vacated a unit following the company's administration and the third vacancy was the result of First Choice Travel's departure. There was just one notable change to the rest of the centre where an independent retailer had replaced Paperbox; all other changes in the centre related to independents.

Both HMV and Pandora moved into Culver Square, taking units previously occupied by Republic and Game respectively. There is currently one vacant unit in the scheme following the departure of Early Learning Centre.

There are five vacancies at Priory Walk, with Cheque Centre being the most notable departure. Store 21 moved into a vacant unit at St. John's Walk with the centre being fully let.

There are a number of changes along High Street. The Entertainer had taken a vacant unit and Paddy Power replaced Pizza Hut; an independent retailer took the former Jessops unit on this pitch. Coral Bookmakers took the former branch of Britannia Building Society and Blacks replaced Millets. William Hill ceased trading here, as did Kurt Geiger, although work was underway on the shoe retailer's former unit at the time of reporting; we understand that it is to become part of Williams & Griffin's department store.

Kodak Lens and Timpson had replaced independent retailers on Sir Isaacs Walk recently. Further east, independents replaced both Long Tall Sally and Phase Eight on Short Wyre Street and Eld Lane respectively.

An independent café replaced West Cornwall Pasty Company on Culver Street West when the company fell into administration; T-Mobile had also ceased trading here.

Blue Inc took the former Bon Marche unit on Long Wyre Street, elsewhere, all other changes concerned independent retailers.

Rents and deals Prime rental growth in Colchester has been on a par with the average for Regional Centres over the period of record. Following a slight dip during the recession of the early 1990s, prime rents then rose steadily from 1995, peaking at £165 psf in 2002 and remaining at this level until the end of 2008. However, the ensuing fall in prime Zone A rents in Colchester since 2008 was much less than experienced across the nation generally after the credit crunch and the onset of economic recession.

At mid-2015, agent sources estimated prime rents in Colchester have risen again at £160 psf Zone A. This represents no change on the end 2014 level of prime rents in the town with rents remaining 3% below the pre-recession peak of £165 psf ZA. On average, prime rents across the national towns remain 28.7% below the pre-recession peak.

Zone A rents for prime Culver Walk in Lion Walk shopping centre were considered to stand at around £160 psf, although agent estimates show some variation due to the lack of recent market evidence for this pitch. We have, for instance, been informed that the former HMV and First Choice units, which were vacant and on the market, were expected to achieve rents of £167 psf Zone A and £145 psf Zone A respectively. Therefore, the most recent evidence comes from a letting to O2 in October 2012, which achieved a headline rent of £174.50 psf Zone A. An earlier letting to Card Factory in May of the same year achieved just £147 psf Zone A, this unit however, was considered to be less favourably located on prime.

There was little tenant movement on Trinity Square - also part of Lion Walk shopping centre - however, Zone A rents for units here are at £135 psf.

Although there is some variation regarding Zone A rents at Culver Square, recent lettings to HMV and Pandora in August 2014 achieved in the region of £125 psf Zone A. However, an April 2012 letting to Schuh achieved a higher rent of £145 psf Zone A.

Zone A rents for Priory Walk are in the order of £30-£40 psf although there was no recent available evidence to substantiate this claim. Higher Zone A rents are usually achieved on units fronting Long Wyre Street, which at one time stood at around £60 psf with a letting to William Hill in 2010.

Local agents report that the tone of rents on Culver Street West is around £120 psf to £130 psf Zone A; whilst recent rental evidence is limited for this pitch, the Carphone Warehouse unit, though still trading at the time of reporting, was said to be on the market at around this level.

On High Street, rents in 2013 stood at around £67 psf Zone A, based on a July 2012 letting to BrightHouse. Despite the recent activity along this pitch, agents were hesitant to disclose details of more recent lettings which, it is claimed, are sometimes on the basis of business rates and service charge only. We have, however, been informed that Zone A rents tail off to £40 psf Zone A at end of High Street.

Competition Ipswich is one of the largest of Colchester's competing centres, while the offer includes a similar range of department stores to Colchester, overall it is mainstream with little quality/speciality provision. Ipswich does, however, provide a pleasant environment that is almost entirely pedestrianised and may attract some shopping trips from residents in the northern part of Colchester's catchment. Planning permission has been granted for the inclusion of a nine screen Vue cinema and restaurants in the former TJ Hughes store in Buttermarket Shopping Centre. 12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

Chelmsford, less than 30 miles to the south west, is of a similar scale to Colchester. There are, however, a number of potential large scale, retail based schemes for the town centre, including a development known as The Hub - part of which has been completed. Phase Two of The Hub will be anchored by a John Lewis 'flexible format' store. Pre-lets include a Cineworld cinema, L'Occitane, Goldsmiths, Byron Burger, Ask, Las Iguanas, Prezzo and Bill's; the development is expected to complete in 2016.

Bury St Edmunds is an hour's drive to the north of Colchester. Retail in the market town is centred around The Arc, a 265,000 sq ft shopping centre anchored by a 75,000 sq ft Debenhams' department store with around 35 shops, housing, a new public building and over 850 car parking spaces. Tenants at the scheme include Next, H&M, Topshop/Topman, Crew Clothing, Wallis, Waterstone's, HMV, River Island and New Look.

Despite its distance from Colchester - well over an hour's journey - and difficulties with accessibility, Cambridge may represent some competition for the town. The Grand Arcade is the city's main focus for retail, which opened in 2008. Anchored by John Lewis, the scheme includes many upmarket tenants such as TM Lewin, All Saints, Coast and Apple, which were new to the city, as well as high street staples such as Laura Ashley, River Island, Top Shop and Warehouse.

Development Pipeline LaSalle Investment Management bought Lion Walk in 2008 and carried out a series of small refurbishments. As part of this process, planning consent was obtained for the redevelopment of the existing Bhs store, with the company intending to downsize to smaller premises. However, the scheme was sold to Sovereign Land in February 2013 and as a result it is not yet clear whether these plans will be implemented.

St. Botolph's Quarter - the area around Queen Street bus station on the eastern edge of the town centre - is the location for a new cultural quarter and a new visual arts facility was completed here at the end of 2011. The scheme also allows for a large retail element of around 155,000 sq ft, to be known as Vineyard Gate, to be sited on the southern edge of the central area between Eld Lane and Southway.

Curzon is considering seeking permission for a three screen boutique cinema at Queen Street, close to this new cultural quarter.

Summary The strength of Colchester is shown by the lack of voids in the pedestrian circuit and rents held up well during the recession.

Fenwicks are undertaking a £30m reconfiguration and extension of their store to 85,000 sq ft. The Fenwicks’ redevelopment will revitalise the High Street and the subject property is well placed to benefit from the improvements to this location. Primark will be a new attractive anchor to Lion Walk bringing new shoppers to Colchester.

There is limited rental evidence on High Street and Culver Street West because retailers trade well from non-demanding rents and therefore decent size units, such as the subject property, rarely become available. The subject property is likely to command nearer the £130 per sq ft Zone A mark, with local agents predicting close to £135 per sq ft Zone A being achieved in the near future. Rental growth is being driven by a lack of supply in the area and a number of anchor occupiers opening new stores in Q4 2015 including Primark and Fenwicks department store.

MARKETABILITY

Typical Void Letting Period In the event of the current tenants vacating, a marketing period of 6 months would be required.

Typical Tenant Profile This is likely to be of a national covenant of a mid-range nature. We consider there would be a reasonable number of retailers who would seek to acquire this unit.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 3-6 months for 10 year leases.

Letting Strategy Should either of the properties become vacant we would expect them to be marketed for a period of 6 months and let on a 10 year lease with a break at year 5. A three to six month rent free period would be expected.

RENTAL EVIDENCE

There has been limited rental evidence on Culver Street West & the High Street. However, we are aware of the following:

 12 Culver Street West (Subject Property) - Office Holdings Limited have recently agreed a new lease on the subject property The rent was rebased from £115,000 pa to £105,000 pa equating to a Zone A rental of £125 per sq ft Zone A. The lease agreed was for a term of 10 years with a tenant only break option in year 5. This provides the most pertinent evidence in regard to the current rental value.

12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

 15 High Street - We understand that iCandy have taken a 10 year straight lease assignment in May 2015 at a rent of £47,000 pa with a 6 month rent free being agreed. The rent equates to £64 per sq ft Zone A. The unit is located towards the top end of the High Street which is significantly inferior to Culver Street. The unit is particularly narrow with a limited frontage, occupiers either side of the unit include Greggs and Moss Bros.

 23 Culver Street West - In March 2014 Santander agreed a new lease at £85,000 pa which was a rebased from £91,850 pa. The term agreed was 10 years with a tenant only break in year 5. The rent equates to a Zone A rental of £120 per sq ft. The unit is located directly opposite the subject property however it is particularly narrow with a limited frontage.

 2-3 Trinity Square - Open market letting to Lush in October 2013. The new lease was agreed for a term of 10 years with a tenant only break option in year 5. The rent was agreed at £72,500 pa equating to £125 per sq ft Zone A. The unit is located in a prime position on Trinity Square and offers an extensive frontage onto the prime retail pitch.

 12-13 High Street – We understand that Waterstones agreed a lease renewal on their premises in May 2013. The lease agreed was for a 5 year term at an annual rent of £65,000 pa with no rent free period. The unit is located at the top end of the high street in a prominent position.

On the basis of the lease renewal at 12 Culver Street West we have applied a Zone A rate of £125 per sq ft to the Culver Street West space, and a Zone A rate of £65 per sq ft to the High Street accommodation. We have adopted rates of A/12 on the first floor, and £2.00 per sq ft on the second floor ancillary areas. This provides an aggregated rental value of £387,198 pa, apportioned as follows

22/24 High Street & 12 Culver Street West £282,198 pa. 12 Culver Street West £105,000 pa.

Based on the current income of £395,475 pa, the income profile is therefore marginally over rented.

INVESTMENT EVIDENCE

Investment demand for Colchester has remained strong even throughout the downturn. Institutional lot sizes are rare in Colchester due to the historic nature and individual ownerships within the town. Institutional appetite will be strong for a secure c.£6m holding. In arriving at our opinion of value we have had regard to a range of comparable investments, as detailed below:

 69-70 North Hill, Colchester – This property is located in a prominent position facing onto North Hill and overlooking the high street. The characterful property was built in 1936 and is of mock Tudor design with three large gables and exposed timbers. The building is let in its entirety to the Post Office with a WAULT of 6.3 years. It was sold in January 2015 for £1.515m to a private investor representing a net initial yield of 6.85%. This property is let for a shorter term than the subject property and occupies a significantly weaker retail location in comparison to Culver Street West. Accordingly we would expect the subject property to transact at a keener yield.

 19 High Street, Colchester – This property is located in the centre of Chelmsford on the pedestrianized High Street, the towns prime pitch. The area predominately comprises of 1960’s shop units which are mostly let to national occupiers. The unit is let in its entirety to Holland and Barrett and with a WAULT of 9.5 years. The property was sold in July 2015 for £3.015m which represented a net initial yield of 5.25%. The property occupies a stronger retail location and is let for a longer term. We would expect the subject property to transact at a discount to the yield achieved in this transaction.

 6 Culver Street West, Colchester – This property is located towards the Western end of the street around 100 metres from the subject property. Debenhams is located opposite and Barclays adjoins the property. The unit is let in its entirety to Cafe Nero with an unexpired term of 9.2 years and was sold in August 2013 for £684,000 to a pension fund representing a net initial yield of 6.75%. This is a useful comparable, as the property is located very close to the subject property and offers similar investment characteristics. However the market has improved since the transaction date and we would expect the subject property to transact at a sharper yield.

VALUATION METHODOLOGY

For this type of property in this market we believe that there would be a heavy focus on the initial yield, having regard to the fact the property is effectively rack rented. In valuing the subject property we have capitalised the income stream at an initial yield of 6.00% which produces a capital value of £6,180,000, and capital value of £398 per sq ft. We have not made an allowance for costs, given the length of lease still remaining on both units. We have however made a £52,500 capital deduction in preparing our valuation to reflect the Office Holding outstanding rent free period.

The property is in a robust location within Colchester and there is an acute shortage of assets on the market. The income profile is broadly rack rented and the lot size would be attractive to a wide range of institutional investpors.

12 Culver Street West & 22/24 High Street, Colchester CO1 1XJ October 2015

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

We consider the tenant covenant strength would be perceived by the market as offering ‘lower than average risk’.

The subject retailing pitch that the property falls within is considered to be the prime retailing pitch in Colchester, and whilst rental growth will be limited in the short –medium term, it is anticipated that good investor demand would be expected for well let retail units in this location.

Should the property be put to the market we consider that the asset would attract interest from a range of investors looking outside of prime retail centres such as London, seeking value from slightly riskier assets. Given the lot size, we would expect institutional appetite.

PHOTOGRAPHS

Frontage Suspended ceiling with A/C

Second floor flat roof and A/C units Storage

h) 11 Broad Street, Reading RG1 2BH

11 Broad Street, Reading RG1 2BH October 2015

11 Broad Street, Reading RG1 2BH

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Strong. Reading is a popular regional Market Value: £2,268,000 retailing destination and a major commercial and administrative centre.

Micro Location: Situated in a 95% prime location on Key Inputs Broad Street opposite to the Oracle Centre entrance being the retail prime Initial Yield pitch within the town. 6.25% Property Type: Ground floor retail unit with ancillary Equivalent Yield 5.34% accommodation on first and second Reversionary Yield 5.75% floors. Capital Value per sq ft £715 overall Total Property Area: 294.9 sq m (3,173 sq ft) Tenure: Freehold Market Rent £138,000 per annum Number of Tenants: 1 tenant Market Value assuming Vacant £1,590,000 Possession Percentage Vacant: 0% Reinstatement Value £725,000 Total Rent Reserved: £150,000 per annum

Covenant Strength: Established retailer registered in 1975 and perceived to be a strong and attractive tenant covenant. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Located very close to the town’s prime retailing pitch at the entrance to  As the lease is due to expire in approximately 3 years we recommend the Oracle Shopping Centre. that negotiations are instigated with the current tenant in an attempt to  Freehold interest. agree a lease extension.  The Property adjoins M&S and is highly lettable.  If the tenant were to vacate, there is an opportunity to re-let to a food operator at a premium rent. Food operators that can’t afford the  The Property comprises an A1 retail unit in an excellent trading shopping centre rents want to be around the entrance to the scheme. position currently let to a strong covenant on a lease expiring in We are aware of a significant amount of interest on the Moss Bros unit October 2018. at 22 Broad Street for this purpose.  The Property comprises a well configured rectangular retail unit.  Primark are due to open a retail outlet opposite the subject property  Reading is a strong town for retailing and there is very good which may improve the rental tone in the immediate surrounding area. occupational demand. If this is the case, rental values will increase having a positive impact 11 Broad Street, Reading RG1 2BH October 2015

 Cross Rail is to be extended to Reading and will be opening in 2019 on the capital value of the unit. which should only further open up the catchment which provides a current shopper population of circa 400,000 people.

Weaknesses Threats

 The Property is currently 8% over rented (£12,000 pa).  Increased risk due to the over rented nature of the asset. However the  3 years until lease expiry. level of over rent is marginal and would not deter purchasers given the favourable rental growth prospects over the next three years.

 There is potential for void periods following expiry of the existing lease in 2018. However any voids and associated costs will be offset by the strong letting prospects.  We would expect a marketing void in the region of 6 months.

LOCATION

Reading has a resident population of circa 155,700 which is expected to increase to 169,400 by 2020. The town has an extensive retailing catchment and boasts an above average PROMIS primary catchment population of 685,000 with an estimated total catchment in excess of 2.3m persons. Reading’s affluence is reflected in the significantly above average proportion of the most affluent AB social group and an underrepresentation of the least affluent C2 and D&E categories. This affluence is further supported by the estimated £4bn of retail and leisure spend within a 30-minute drive time.

Communication The town benefits from excellent road, rail and air links. The M4 motorway lies immediately to the south with Junctions 10, 11 and 12 serving the town ultimately connecting to the M25 (Junction 15) some 24 miles (38km) to the east. In addition the A33 provides direct access to Basingstoke, 18 miles (29km) to the south, the A4 to Maidenhead 16 miles (26km) to the north east and the A329(M) to Wokingham and Bracknell 12 miles (19km) to the south east. Reading Rail Station is particularly busy, providing fast and frequent services to London (Paddington) with a journey time of 25 minutes and direct services to Oxford, Basingstoke, Cardiff, Manchester, Birmingham and Gatwick Airport. Importantly Crossrail is to be extended to Reading opening in 2019 improving access to all central London areas. Heathrow Airport is some 29 miles (47km) to the east.

Situation The property is situated along a prime retailing pitch and occupies a prominent position on the northern side and eastern end of the pedestrianized section of Broad Street. Broad Street is characterised by a predominance of national retailers. The property adjoins Marks and Spencer and benefits from being directly opposite the entrance to The Oracle Shopping Centre, the main indoor shopping mall. Other nearby occupiers including HSBC, John Lewis and Primark

SITE

The site extends to approximately 0.02 ha (0.05 acres).

Access The Property is accessed directly from the pedestrianised Broad Street. The unit does not have any rear access.

DESCRIPTION

The property comprises a mid-terraced retail unit with accommodation over ground, first and second floors. The ground floor is given to retailing accommodation with ancillary accommodation at first and second floors.

On the west and north the subject property is bounded by Marks & Spencer, 12-19 Broad Street, and on the east by 9-10 Broad Street. M&S over sails the subject property. 11 partly over-sails 9-10 on the front elevation. Part of the rear of 9-10 over-sails 11.

There is a rendered chimney stack on the party wall with 9-10 adjacent to Broad Street.

The rear 1st floor structure is set back on the west facing elevation adjacent to M&S providing access onto the flat roof and means of escape to the rear external metal fire escape stairs.

The main access to the subject property is via the Broad Street entrance. A timber stairs provides access to the 1st floor at the rear of the property adjacent to the party wall with 9-10.

11 Broad Street, Reading RG1 2BH October 2015

The 2nd floor only occupies the front of the property and access is via a timber stairs from one of the store rooms adjacent to M&S. The windows are timber framed except for four metal framed casement windows in the 1st floor staff kitchen and toilet.

ACCOMMODATION

AREAS UNIT TENANT Description Sq.Ft. M² ITZA (Units) 670 62.2 G (Sales) 1,879 174.6 Unit 11 Monsoon Holdings Limited G (Anc.) 45 4.2 1st (Anc.) 1,514 140.7 2nd (Anc.) 228 21.2 TOTAL 3,666 340.7

TENURE

The Property is held freehold.

TENANCIES

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Monsoon We understand that there was a 3 month rent 11 £150,000 £47.27 07/10/93 06/10/18 25 N/A Holdings Ltd free period upon commencement of this lease.

Total £150,000

Number of Tenants and Lease Type The Property is single let to Monsoon Holdings Ltd on a 25 year lease to expire on 6th October 2018. The Property is in our opinion slightly over rented with a current rent passing of £150,000 pa exclusive. There are no break clauses and the unexpired term is approximately 3 years.

Covenant Strength The Property is let in its entirety to Monsoon Holdings Ltd who were registered in 1975 and whose principal activities include women’s clothing retailing. The tenant has a dun&bradstreet rating of 4A 1, which represents a minimum risk of business failure. The company recorded a profit before tax as at 30th August 2014 of in excess of £21 million. We believe investors would consider them as offering a strong covenant.

Year Ending Year Ending Year Ending Monsoon Holdings Ltd 30 Aug 2014 (000s) 31 Aug 2013 (000s) 25 Aug 2012 (000’s) Profit / (Loss) Before Taxes £21,003 £7,195 £5,810 Tangible Net Worth £30,238 £30,413 £30,481 Net Current Assets (Liabilities) £20,148 £20,201 £20,264

INCOME ANALYSIS

Rental Income £150,000 pa.

Market Rent £138,000 pa.

Service Charge/Rates Shortfall Not applicable. The property is fully let.

CONDITION

 “Whilst the overall visual condition on the building is (sic) fabric highlighted nothing untoward there were isolated areas of local deflection to the second and first floor and local distortion of the cut timber pitched roofs over both the front three storey and rear two storey buildings.  Maintenance is required to elements of the external envelop the dressing up of the first floor roof, felt to No 9 and 10 onto the timber casement 11 Broad Street, Reading RG1 2BH October 2015

window sills requires addressing.  There were isolated areas of dampness observed to some of the first floor perimeter walls.”

For valuation purposes the property is considered to be in a reasonable state of repair commensurate with its age, use and construction. No significant defects were noted at the time of our inspection.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the Property is considered to be low.

MARKET OVERVIEW

Town centre competition Reading is surrounded by a number of smaller towns, particularly to the south and east. However, none of these centres have an offer comparable in scale or range to that of Reading and some of their residents are likely to visit Reading for comparison shopping trips. Nevertheless, there are a number of schemes which have recently been built, are planned or are under construction which may help these centres retain more local expenditure and in the longer term, possibly reduce Reading's draw to shoppers from these outlying areas.

Like most major shopping centres in the Home Counties, Reading also competes with London for infrequent, and often high spending, shopping trips.

Retailing in Reading Broad Street was once Reading's prime pitch, however, the development of The Oracle provided a new retail focus for retailers and shoppers alike.

Vacancies, in-movers and closures There are a limited amount of vacancies in the core retailing areas of Reading.

Goldsmiths and Early Learning Centre. Several well known catering brands have, however, opened in the town centre, helping to offset the impact of the departure of these comparison retailers.

Cote Brasserie and Handmade Burger Company had located along The Riverside. There was a total of eight vacant units in The Oracle at the time of reporting, an increase on the level recorded in 2013.

There had been little tenant movement on Broad Street recently and agents consider that rents here still remain at approximately £200 psf Zone A.

11 Broad Street, Reading RG1 2BH October 2015

MARKETABILITY

Typical Void Letting Period In the event of the current tenant vacating, a marketing period of 6 months would be required.

Typical Tenant Profile This is likely to be of a national covenant within a range of retailing sectors. We consider there would be a reasonable number of retailers who would seek to acquire this unit.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 12 months for 10 year leases.

Letting Strategy Should the Property become vacant we would expect the unit to be marketed for a period of 6 months and let on a 10 year lease with a break at year 5. A six month rent free period would be expected.

RENTAL EVIDENCE

We would cite the following rental evidence:

 We understand that 22 Broad Street is on the market and generating a strong amount of interest. The expected achievable rent is £145,000 pa based on £230 psf Zone A. We are of the opinion that the building occupies a more prominent position than the subject property having a return frontage onto Cross Street that reflects a higher Zone A.

 35 Broad Street was recently let in June 2015. This is located to the west of the subject property and we understand Itsu has taken a 15 year lease at a rent of £165,000 pa with 7 months rent free reflecting a Zone A of £201 psf (net effective over 10 years).

 107/108 Broad Street let to Gap had a lease renewal in January 2014 for a term of 10 years. The comparable is situated on the opposite side of the High Street to the west in close vicinity to the subject property. The passing rent of £280,000 pa reflects a £181 psf Zone A. We are of the opinion that the subject property is in a better retailing location being closer to the entrance of the Oracle Shopping Centre.

In arriving at our opinion of market rent we have applied £190 per sq ft Zone A as a headline level. We have adopted rates of A/20 on the first floor and A/25 on the second floor. This provides a Market Rent of £138,000 per annum. A rent free period of up to 6 months may be required on a lease with a term certain of 5 years. The unit adjoins Marks & Spencer’s and is very close to the entrance of the Oracle Centre and Primarks new store. We would anticipate further rental growth from the prevailing levels over the next 2/3 years.

INVESTMENT EVIDENCE

 107/108 Broad Street, Reading – This property was purchased by Legal and General UK Property Fund in June 2015 and is fully let to Gap. The approximate unexpired lease term is 9 years. The property is part of the Mayfly Portfolio and was purchased for £5.35m reflecting an initial yield of 4.95%. The yield on the subject property has been discounted for the over rented income profile and shorter unexpired lease term.  161 High Street, Cheltenham – We understand that this property was purchased in June 2015 by Legal and General UK Property Fund for £3.38m. The property is located along a comparable pedestrianised high street and is occupied by 02 with an approximate unexpired term of 10 years. This reflects an initial yield of 4.75%. The yield on the subject property has been discounted for the over rented income profile and shorter unexpired lease term.  15 James Street, Harrogate – The property is located in a town of similar affluence and is let to Waterstones. There is approximately 8 years left unexpired on the lease. It was purchased in April 2015 by Alterity Investment Ltd for £3.045m reflecting an initial yield of 4.5%.  99 Broad Street, Reading – In January 2014 the freehold interest in the property was purchased by a private investor for £3.6m which reflected a net initial yield of 6.50%. The property is let to Nationwide on a 15 year FRI lease from November 2003 providing an unexpired lease term at the time of sale of sale of 4.8 years. The subject property would trade at a keener yield to this comparable to reflect the superior location and improved investment market.  100-101 Broad Street - In November 2014 Aspect Property Group purchased the freehold interest in the property for £3.4m reflecting a net initial yield of 6.20%. The property is let to Santander until December 2020 proving an unexpired lease term at the time of sale of circa 6 years. The subject property occupies a superior location and the yield has been adjusted accordingly.

11 Broad Street, Reading RG1 2BH October 2015

VALUATION METHODOLOGY

The property forms a freehold high street retail investment in a very good retailing location in Reading with an unexpired term certain in the order of 2 years and 9 months.

In preparing our valuation we have targeted a net initial yield of 6.25%, which has been adjusted form the investment comparables to reflect the over rent. Our capital value of £2.268m reflecting an equivalent yield of 5.35% and a reversionary yield of 5.75%. The level of over rent is not a material concern and in our opinion would not deter purchasers given the favourable rental growth prospects over the next three years. We have allowed for a six month letting void on expiry with an additional 6 month’s rent free. In addition, we have allowed re-letting fees of 15% and empty rates during the marketing period.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

We consider the tenant covenant strength would be perceived by the market as offering ‘lower than average risk’.

The t retailing pitch that the property is located is in good demand with the majority of the units occupied by large national retailers. The property is located immediately adjacent to Marks & Spencers and near to the entrance of the Oracle Shopping Centre which commands a high level of footfall as the prime retailing pitch. Should the tenant not wish to renew their lease upon expiry, we consider that the property would attract good interest from national retailers who may look to convert the upper floors should the tenant not require the additional space. It should be noted that the property is currently over rented, in our opinion, and it is possible that there will be a rent adjustment (downwards) upon expiry of the existing lease.

Should the property be put to the market we consider that the asset would attract very strong demand from a wide range of cash rich buyers, including owner occupiers, smaller institutional funds, property companies and high net worth individuals.

PHOTOGRAPHS

Front Elevation Ground Floor Retail 11 Broad Street, Reading RG1 2BH October 2015

Rear Fire Escape First Floor Office

i) 28 High Street, Winchester SO23 9BL

28 High Street, Winchester, Hampshire SO23 9BL October 2015

28 High Street, Winchester, Hampshire SO23 9BL

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Strong. Winchester is an historic, Market Value: £3,450,000 Cathedral city, Hampshire’s administrative centre and a renowned tourist destination with an affluent catchment population. Key Inputs

Micro Location: Strong. Located in a 100% prime Initial Yield pitch within the City, on the 4.30% pedestrianised High Street. Equivalent Yield 5.30% Property Type: Retail High Street Reversionary Yield 5.65% Total Property Area: 483.5 sq m (5,204 sq ft) Capital Value per sq ft £666 overall Tenure: Freehold Market Rent £216,280 per annum Number of Tenants: 1 tenant Percentage Vacant: 32% Market Value assuming Vacant £3,000,000 Possession Total Rent Reserved: £164,500 per annum Reinstatement Value £1,050,000 Covenant Strength: Established retailer perceived to be

a strong and attractive tenant covenant. Sale Timescale: 6 months by private treaty. Suitability for Loan Good Security Purposes:

SWOT ANALYSIS

Strengths Opportunities

 100% prime retailing pitch within historic and affluent Hampshire  Lease extension or re gear opportunity. cathedral city.  Re-let vacant space back to current tenant. Tenant were looking to  Winchester is very popular with aspirational retailers and has seen expand into adjoining unit but weren’t successful. We understand strong rental growth throughout the recession. Well configured they would now consider taking back space to trade first floor to retail units in the best locations are highly sought after and create a flagship store. This would also potentially create retailers will pay high rents and be prepared to receive next to no additional GF sales space. incentive.  Possible opportunity to convert the upper parts to residential use  Let to Fat Face, who provide an attractive strong covenant who given property layout and features. trade very well.  Asset management opportunities.  Freehold. 28 High Street, Winchester, Hampshire SO23 9BL October 2015

 Reversionary with attractive equivalent yield of 5.30%.

Weaknesses Threats

 Only let for a further 2.5 years until lease expiry.  Future voids should the tenant not renew their lease. However any  The upper parts are in disrepair and require capital expenditure. voids and associated costs will be offset by the reversionary profile and very strong letting prospects.  The staircase to the upper parts is located close to the front of the ground floor compromising the sales space.

LOCATION

Overview The Property is located in the Cathedral city of Winchester approximately 60 miles to the south-west of Central London and 10 miles to the north of Southampton. Winchester is the administrative centre for Hampshire and a significant retail and commercial centre, as well as a popular tourist destination. The city has a particularly affluent catchment population of circa 100,000 with approximately a third more persons in the AB class groupings compared with the national average. The local economy is boosted by tourism and it is estimated that 4 million people visit the city generating an estimated income of £240m per annum. Employment is high compared with surrounding areas and is boosted by the presence of a number of large companies including IBM, University of Winchester, Arqiva, Hampshire County Council and Eastleigh NHS Healthcare Trust.

Communication Principal road communications are via the M3 motorway. Junctions 9 to 11 link the city with the south coast, London 67 miles (107km) and the M25 motorway. The A34 dual carriageway also serves the city providing access to Oxford 54 miles (86km) and the Midlands, while the A303 links the area to the west. Regular rail services are available to London (Waterloo) with a fastest journey time of 57 minutes. Southampton Airport is located 11 miles (17.5km) to the south of the city, whilst Heathrow Airport is 52 miles (83km) to the north-east.

Situation The property is located within the prime retailing centre of the city on the south side of the pedestrianised High Street which runs east-west to the north of Winchester Cathedral. The property benefits from strong footfall and nearby retailers include River Island, Costa, Boots, White Company, Ernest Jones and Starbucks.

SITE

The site extends to approximately 0.03 ha (0.07 acres).

Access The Property is accessed directly from the pedestrianised High Street with rear loading access from The Square to the south via Mint Yard.

DESCRIPTION

The Property is a Grade II Listed mid-terraced period building with accommodation over basement, ground, first and second floors. The ground floor provides the single retail unit with ancillary accommodation at basement and part first floor level which is occupied by the existing tenant.

The remaining accommodation on the first floor and the whole of the second floor is vacant and benefit from separate access onto the High Street. It is considered that this accommodation may be suitable for conversion to residential or office space subject to planning.

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Ground Floor 2,467 229.2 Ground Floor – (ITZA) (895) (83.1) Fat Face Ltd Part First Floor Ancillary 700 65.0 28 High Street Basement 92 8.5 Vacant Part First - Vacant 909 85.5 Vacant Part Second - Vacant 1,036 96.3 TOTAL 5,204 483.5

28 High Street, Winchester, Hampshire SO23 9BL October 2015

TENURE

The property is held freehold.

TENANCIES

Number of Tenants and Lease Type The majority of the Property is single let to Fat Face Ltd (T/A Fat Face) on a lease to expire on 24th March 2018 at a current passing rent of £164,500 per annum exclusive. The unexpired term is therefore approximately 2.5 years.

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Vacant accommodation has a self Fat Face Ltd 28 £164,500 £34.11 25/03/08 24/03/18 10 N/A contained, separate entrance onto High Street.

Vacant Part 1st ------

Vacant Part 2nd ------

Total

Covenant Strength The Property is let in its entirety to Fat Face Ltd who were registered in 1994 and whose principal activities include clothing retailing. The tenant has a dun & bradstreet rating of 5A 1 with a minimum risk of business failure. The company has a current turnover in excess of £200 million, and a net worth of £87,000,000.

Year Ending Year Ending Year Ending Fat Face Ltd 31 May 2014 (000s) 01 Jun 2013 (000s) 02 Jun 2012 (000’s) Sales Turnover £200,051 £178,829 £163,622 Profit (Loss) Before Taxes £18,737 £16,307 £9,223 Tangible Net Worth £87,165 £68,630 £56,275 Net Current Assets (Liabilities) £77,811 £59,926 £48,397

INCOME ANALYSIS

Rental Income £164,500 per annum

Market Rent £216,280 per annum

Service Charge/Rates Shortfall Not applicable

CONDITION

 “The property appears to be in robust structural condition with no visual evidence of underlying concerns, albeit it is susceptible to damp ingress via the facades.  Internally the Fat Face demise is in fair condition and functioning as retail space with back of house storage and administrative facilities.  The vacant demise is, however, in very poor condition with extensive damp penetration, likely unserviceable building services and dated and deteriorating finishes and fittings.  Maintenance is required to elements of the external envelope, particularly the rendered facades, and it is likely that the vacant areas will require a total strip and refit to render it suitable for letting in any form. No access was available at the upper roof level.”

In terms of repairs and maintenance, the Building Report concluded that the following works were necessary:

 “1 Allowance to refurbish dilapidated 1st and 2nd floors of vacant demise. 28 High Street, Winchester, Hampshire SO23 9BL October 2015

 2 Possible upgrade of means of escape from Fat Face 1st floor storage area and 2nd floor of vacant demise.  3 Replace felt roof.  4 Allowance to repair rendered facades.  5 Repair and paint windows externally; some may need replacement.  6 Allowance for damp ingress to walls.  7 Allowance for repairs to M&E installations to ground floor.  8 Asbestos allowance; may be a significant issue”.

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £210,000, exclusive of professional fees and VAT. We note that the lease requires the tenant to keep the demise in good and substantial repair and to decorate and clean and in our opinion approximately £20,000 of the above repairs will be recoverable from the tenant via the provisions in their lease. We have made a £190,000 capital deduction in preparing our valuations to cover the works to the vacant upper parts.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

MARKET OVERVIEW

Retailing in Winchester Winchester’s retail offer is focused on the pedestrianised High Street. The prime pitch within the High Street is situated between the junction of The Square and Upper Brook Street where the subject property is located. Notable retailers within the immediate vicinity include Boots, WH Smith, Starbucks, Monsoon, River Island, Phase Eight and Body Shop. More secondary retailing is available at the extremities of High Street and also within the covered Brooks Shopping Centre located a short distance to the north. The Brooks is anchored by Primark and Beales Department Store.

The development of Silverhill, a site bounded by High Street and Middle Brook Street, has long been mooted for development to incorporate a retail and food store anchor scheme. The Council were recently taken to court over the development’s tender process which subsequently went to Judicial Review. In February the High Court held that the process was inadequate, which has resulted in a re-tender. For Winchester’s favourable demographic profile it is poorly provided for in terms of a covered centre. Most retailer demand is therefore restricted to High Street where supply of adequate sized and configured retail units is limited. We anticipate rental growth will continue going forward.

Availability of Vacant Space in Locality There are currently no vacant units on the High Street.

Rental Levels In mid 2015, agent sources estimated prime rents in Winchester at £200 per sq ft Zone A. This represents a significant increase on the end 2014 level of prime rents in the city with rents now 5.9% above the pre-recession peak. In terms of rental growth, as a retailing centre the city is outperforming the majority of regional centres.

MARKETABILITY

Typical Void Letting Period Well configured retail accommodation in the best locations in the town are sought after and retailers will pay high rents and be prepared to receive next to no incentive. In the event of the current tenant vacating, a marketing period of 6 months would be required.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 3-6 months for 10 year leases.

Letting Strategy Should the retail unit become vacant we would expect the unit to be marketed for a period of 6 months and let on a 10 year lease with a break at year 5. A three month rent free period would be expected.

In terms of the vacant upper parts, the most likely scenario would be to re-let the vacant space back to the current tenant. We understand that the tenant were looking to expand into the adjoining unit, and have been unsuccessful. We are advised by their represented agents that they would now consider taking back the vacant upper space to trade at first floor as sales and use the second floor as ancillary. The tenant currently trades from part first floor. This would enable them to create a flagship store in Winchester.

28 High Street, Winchester, Hampshire SO23 9BL October 2015

RENTAL EVIDENCE

Winchester is a strong retailing location and there is strong demand currently from all corners of the retail market. We detail the following rental evidence:

 29 High Street – This unit is currently on the market with a quoting rent of £175,000 per annum, which reflects a Zone A rent of £200 per sq ft. We understand the unit has had strong interest and that terms will be agreed shortly at the quoting level. The details of the transaction and tenant are confidential, however we understand that a 3 month rent free incentive has been agreed. This property is located very close to the subject property and in our opinion provides the most pertinent evidence.  47 High Street – This property was the subject of an open market letting to White Stuff in May 2015 on a 10 year lease, at a rent of £140,000 per annum, reflecting a net effective Zone A of £204 per sq ft. This property is situated close to the subject property.  106b High Street – This retail unit was let to Mint Velvet in May 2015 on a 10 year lease at a rent of £127,500 per annum, reflecting a Zone A of £190 per sq ft. This property is located in a slightly inferior retail location, and we would therefore expect the subject property to transact at a small premium to this.  32 High Street – This unit was let in September 2013 on a 15 year lease at a rent of £135,000 per annum that equates to £199 per sq ft on a Zone A basis. The property is situated in a similar trading location and is close to the subject property.

On the basis of the new letting at 29 High Street we have applied a Zone A rate of £200 per sq ft, which shows an improvement on the current rent of £164,500 per annum, equating to approximately £169 per sq ft Zone A. We have adopted rates of A/10 on the ground floor ancillary and A/15 on the first floor (sales). For the vacant accommodation, we have allowed for rates of A/15 on the first floor and A/25 on the second floor ancillary areas. We have allowed for refurbishment costs of £190,000. This follows our assumption that the most likely scenario for the vacant upper parts would be to re-let vacant space back to current tenant. This provides an aggregated rental value of £216,280 per annum, apportioned as follows:

Fat Face Demise £195,800 pa Vacant Upper Parts £20,480 pa

INVESTMENT EVIDENCE

Winchester is very popular with both Institutional and private investors and is seen as a strong investment location and has seen strong rental growth throughout the recession. We are aware of the following investment comparables;

 123-124 High Street, Winchester – This property is currently under offer at price reflecting a net initial yield of 4.00%. The property comprises a 1,680 sq ft retail unit providing floor retail space only let to the Signet Group Limited (trading as Ernest Jones) for a term of 25 years from 31st December 1991, expiring 30th December 2016. The lease is drawn on effectively full repairing and insuring terms. The current rent is £110,000 per annum exclusive, reflecting £170.80 per sq ft Zone A. The property is considered to be reversionary, on a similar level of the subject property.

 13 North Street, Chichester - This property was sold in July 2015 for £1.645 million reflecting an initial yield of 4.5%. The property is occupied by Starbucks with an unexpired lease term of 5 years on a full repairing and insuring lease. The property is comparable to the subject property, however is rack rented.

 57 High Street, Winchester – This property is let to Zizzi with an unexpired lease term of 25 years. The property was sold in June 2015 for £3.7 million, which reflects an initial yield of 4.93%. The property is considered to be broadly rack rented.

 87-88 East Street, Chichester, is let to Mint Velvet and Lush with an unexpired lease term of 4 years. The property sold in May 2015 for £3.58 million, reflecting an initial yield of 4.72%. The property is considered to be broadly rack rented.

 46 High Street, Winchester- The property was sold in April 2014 for £2.4 million. The property was reversionary and the transaction reflected an equivalent yield of 5.00%. This property was let to Cath Kidston with 5 years unexpired.

The above comparable transactions highlight a range of prime high street investments in attractive Cathedral towns in Hampshire and West Sussex ranging from 4.00% to 5.00%. In each instance, the yield achieved is driven by the location, tenant covenant strength, unexpired term and lot size, although regard is also had to the underlying real estate. However, in this location the value is not entirely driven by the unexpired lease term. Opportunistic and institutional buyers would also view short term income and the opportunity to secure vacant possession highly favourable against a background of robust short term rental growth, and it is this variable that drives the yield in such locations.

Whilst 123-124 High Street occupies a comparable location to the subject property and offers a similar level of reversionary potential, it is let for a shorter term and therefore the opportunity to capture the higher rent is sooner. We would therefore expect the subject property to transact at a discount to the yield achieved in this transaction. 13 North Street, Chichester also occupies a comparable location, albeit slightly inferior in terms of the town and was considered to be rack rented at the time. We would therefore expect the subject property to achieve a slightly keener yield. Whilst 57 High Street, Winchester is let for a longer term than the subject property, the property is rack rented and therefore no rental growth is anticipated until the next rent review in five years time. We would therefore expect the subject property to achieve a keener yield. The same applies to 87-88 East Street, Chichester, which offers similar investment characteristics. 46 High Street, Winchester reflected a net initial yield of 5.00%, and was also reversionary. However, the higher net initial yield reflected the fact that the reversion was 5 years away.

28 High Street, Winchester, Hampshire SO23 9BL October 2015

VALUATION METHODOLOGY

The property provides a marketable High Street retail investment in a prime retail location in Winchester. Although the property has a relatively short unexpired term (2.75 years), the property is highly reversionary with an opportunity to capture rental growth in the short term. We further understand that the current tenant would like to increase their presence and have been unsuccessful recently in acquiring and expanding into the adjoining unit. The vacant upper floors therefore provide further opportunity to drive revenues and consolidate the holding. The recent investment evidence suggests that investors will pay yields as keen as 4.00% for such reversionary opportunities.

Based on our opinion of market sentiment and the above comparable information we have targeted an initial yield of 4.30%. Our opinion of the Market Value of the above property is therefore £3,450,000 which reflects an equivalent yield of 5.30%, a reversionary yield of 5.65% (March 2019) and a capital value of £666 per sq ft based on the accommodation on an overall basis. We have allowed for purchaser’s costs at 5.80%.

In preparing our valuation, we have examined in general terms the redevelopment options that would be available to a purchaser on the upper parts. We note that historic planning permission was granted (now expired) for residential conversion. In our opinion, the site lends itself to redevelopment for alternative use as residential. However we are not able to provide an accurate residual valuation, as there are so many imponderables concerning the type and density of the development, the planning controls that might be attached to this, section 106 agreements and other planning gain issues that might arise, and the final design of the scheme which means that any residual value presented at this stage is likely to be misleading. However, in our opinion the most likely scenario would be re-let the upper parts to the current tenant and create a flag ship store. This would certainly yield a better return than, say, B1 accommodation over, and a re-gear of the lease for such an opportunity would also provide the landlord with an opportunity to expand the ground floor unit into the corridor space to the left of the unit, that currently provides self- contained access to the upper parts not demised to the current tenant.

Our valuation therefore assumes a discounted retail rental value on the upper parts, following repairs and refurbishment. We have allowed for capital cost of £190,000 in this regard, as set out in the Building Survey Report. We have assumed a void period of 9 months on this space, at which time the yield increases to approximately 4.85%.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

We consider the tenant covenant strength would be perceived by the market as offering ‘substantial strength.

The property is located within the city’s prime retailing pitch which commands a high level of footfall. The property has excellent re-letability prospects and the majority of the units are occupied by national retailers.

Should the tenant not wish to renew their lease upon expiry, we consider that the property would attract a lot of interest from national retailers who may look to convert the upper floors should the tenant not require the additional space. It should be noted that the property is highly reversionary which creates an opportunity to drive revenues, as discussed.

This is a high quality asset and should the property be marketed we consider that the asset would attract significant interest from a wide range of investors, including owner occupiers, property companies and high net worth individuals.

PHOTOGRAPHS

Front Facade First floor storage 28 High Street, Winchester, Hampshire SO23 9BL October 2015

Rear access Ground Floor Storage

j) 37/39 Fore Street, Taunton TA1 1HR

37-39 Fore Street, Taunton TA1 1HR October 2015

37-39 Fore Street, Taunton, TA1 1HR

KEY PROPERTY FACTS VALUATION AS AT 1 OCTOBER 2015

Macro Location: Strong. Taunton strong affluent Market Value: £1,709,000 catchment with limited competition from neighbouring centres and a limited out of town retail offer. Key Inputs Micro Location: Reasonable. Occupies a 95% prime, retail pitch on Fore Street Initial Yield adjoining TK Maxx, with Joules, WH 6.03% Smith, Starbucks and Crew Equivalent Yield 6.77% Clothing. Reversionary Yield 6.43% Property Type: Retail High Street. Capital Value per sq ft £365 overall Total Property Area: 435.0 sq m (4,684 sq ft) Market Rent Tenure: Freehold. £122,600 per annum Market Value assuming Vacant Number of Tenants: 2 (1 in administration). £1,365,000 Possession Percentage Vacant: 0% Reinstatement Value £2,000,000 Total Rent Reserved: £115,000 per annum (not including Unit 39). Covenant Strength: Part let to an established retailer being a strong and attractive tenant covenant. Sale Timescale: 6 months by private treaty. Suitability for Loan Reasonable Security Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Prime retailing pitch within affluent South West town.  Possible combining of both units to create single “flagship”  100% prime retail and opposite a mall entrance to The Orchard retail unit. Shopping Centre.  Possible lease extension on Ann Summers unit or re gear  Part let to a strong covenant in Ann Summers (5A1 rated). opportunity. Ann Summers’ trade reasonably and we understand they are interested in committing to the location  Freehold. longer in order to refit property in exchange for rent free and  Asset management opportunities. rebased rent.  The upper parts of the Ann Summers benefits from separate access and might suit a residential conversion, subject to 37-39 Fore Street, Taunton TA1 1HR October 2015

vacant possession and planning.

Weaknesses Threats

 Whilst the lease remains in place the tenant of No.39 has vacated and  Risk of protracted void and associated void costs following the unit is in a dilapidated state. We have assumed this unit is vacant departure of Optika at 39 Fore Street. However risk may be in preparing our valuations. mitigated by the reasonable letting prospects.  Capital expenditure required to re-instate the vacant unit into a good  Risk of future voids and associated void costs following expiry tenantable order. of Ann Summers lease. However we understand they are interested in committing to the location for a longer period.  Only 4 years remaining on Ann Summers lease, which is over rented by 25%.  Increased risk due to the over rented nature of the asset. However the level of over rent is potentially mitigated by the favourable rental growth prospects over the next three years.

LOCATION

Overview The property is located in the historic county town of Taunton. Taunton is situated approximately 50 miles south west of Bristol, and 150 miles west of London. The town is the principal market town for Somerset with an affluent and extensive catchment area. This is boosted by limited competition from other retail centres and a below national average quality of retail provision.

The total population within Taunton’s primary catchment area is circa 340,000 people with an estimated shopping population of 206,000 people. Taunton’s catchment population is above average in terms of affluence, ranked 65th of the national centres on the PMA Affluence Indicator. Employment is also increasing faster than the PROMIS average while Taunton Deane have projected a 5 year target for 4,250 new homes (Savills Research). The manufacturing industry is important to Taunton’s local economy, being home to a number of notable businesses including Lafarge Tarmac, GSI, Relyon, Swallowfield, Taunton Aerospace and Taunton Fabrications. In addition, Debenhams have a head office in the town which employs circa 1,500 staff. Tourism is also central to the local economy, attracting circa 2 million visitors per annum to the town accounting for 6% of employment in the area.

Communication The town has excellent road accessibility to the national road network and is adjacent to the M5 Motorway. In addition Bristol International Airport is approximately 40 miles north of the town.

Situation Fore Street is the prime retailing pitch within the town which links Corporation Street to the west with East Street. The property is adjacent to TK Maxx and close to WH Smith, Clintons, Carphone Warehouse, HMV, Next and River Island. The property also benefits from strong footfall being directly opposite The Orchard Shopping Centre.

SITE

The site extends to approximately 0.03 ha (0.06 acres).

Access The Property is accessed directly from Fore Street and does not have the benefit of rear loading access.

DESCRIPTION

The subject property comprises two adjoining shop units of traditional construction with brick elevations. The accommodation is arranged over three floors with retail sales on the ground floor of each unit and ancillary accommodation on the first and second floors. Servicing is from Fore Street and the upper parts of Ann Summers are capable of separate occupation for alternative uses with a separate access from the retailing frontage.

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Nos.37/38 Ground 1,762 163.7 Floor 37/38 Fore Street Ann Summers Ltd Nos.37/38 (ITZA) (943) (87.6) Nos.37/38 First 971 90.2 Nos.37/38 Second 839 77.9 39 Fore Street Optika Holdings (t/a David Nos.39 Ground Floor 474 44.0 37-39 Fore Street, Taunton TA1 1HR October 2015

Clulow) Nos.39 (ITZA) (355) (33.0) Nos.39 First 346 32.1 Nos.39 Second 292 27.1 TOTAL 4,684 435

TENURE

The property is held freehold.

TENANCIES

Number of Tenants and Lease Type 37/38 Fore Street is currently let to Ann Summers Ltd on a 15 year lease to expire on 3rd October 2019 at a rent of £125,000 per annum. The lease is on a full repairing and insuring basis. There are no break clauses.

39 Fore Street was recently let to Optika Holdings (t/a David Clulow) on a 25 year lease to expire 4th October 2019 at a rent passing of £49,000 per annum. However the tenant is not in occupation of the premises (having vacated in September 2013). The tenant has removed all stock from the premises but the tenant fit out remains. Additionally, we understand that the tenant is in arrears of rent (for the period from 1 May 2015 to 31 October 2015 and insurance rent (for the annual 2014/2015 insurance payment) totalling £30,417.91 including VAT. We are advised that the vendor has commenced proceedings to wind up the tenant on 14 August 2015. An interim schedule of dilapidations has been served.

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Ann Summers Ltd 37/38 £125,000 £34.99 04/10/2004 03/10/2019 15

Tenant in administration. We have Optika 39 £49,000 £44.00 05/10/1994 04/10/2019 20 NA assumed the property is vacant.

Total

Covenant Strength Ann Summers Ltd were registered in 1971. The company has a dun&bradstreet rating of 5A1 with a turnover in excess of £101 million. The company has been given a minimum risk of business failure. Year Ending Year Ending Year Ending Ann Summers Ltd 28 Jun 2015 (000s) 29 Jun 2014 (000s) 30 Jun 2013 (000’s) Sales Turnover £101,212 £114,914 £117,675 Profit (Loss) Before Taxes (£3,938) £2,395 £4,011 Tangible Net Worth £46,875 £50,543 £48,810 Net Current Assets (Liabilities) £45,854 £51,089 £49,782

INCOME ANALYSIS

Rental Income £125,000 per annum (gross). £115,000 per annum (net).

Market Rent £122,600 per annum.

Service Charge/Rates Shortfall £10,000 per annum

CONDITION

In terms of repairs and maintenance, the Building Report concluded that the following works were necessary:

 “Allowance to repair vacant DC Optika holdings demise; subject to review of dilapidations served on DC.  Allowance to repair upper level façade/damp.  Allowance to repair AS demise roof.  Allowance to maintain external envelope.  Allowance related to ground level damp. Possible rot and infestation survey required.  Asbestos allowance; seek Register.  Test concrete; first screening survey instructed”.

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £100,000, exclusive of professional fees and VAT. According to the title report, the tenant is in breach of its repairing obligations and the landlord served a notice of repair on the tenant in June 2015. Nothing has been disclosed to confirm these repairs have been made good. The Seller has been unable to confirm the likely cost of making good such damage as the repair works have not been formally costed. In the absence of any other information, and given the position with the previous tenant, we consider it prudent to make an allowance for the cost of the above repairs.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

MARKET OVERVIEW

Retailing in Taunton Taunton has an estimated shopping area of 1.14 million sq ft of retail floor space ranking the town 75th in the UK on this measure. Taunton has a significantly below average volume and quality of retail provision relative to the size and affluence of the shopping population. The town has two managed shopping centres; Orchard Shopping Centre (recently acquired by Rockspring) and County Walk (owned by Courteasy Ltd) and four department stores; Bhs, Debenhams, Primark and Marks & Spencer. Fashion retailers are well represented with many multiple nationals present such as Fat Face, Austin Reed, Jones Bootmakers, Moss Bros, Next, Joules, Phase Eight and New Look. The retail warehousing provision within the town is estimated at 684,000 sq ft, well below the national average and consisting of predominantly bulky goods and DIY/furnishing retailers.

The town lacks a dominant managed shopping centre and the lack of a fashion offer out of town means a high concentration of national retailers reside on Fore Street where the subject property is located. Retailers along this pitch include Caffe Nero, L’Occitane, Crew Clothing, Joules, Santander, Hotter Shoes, Starbucks and Vision Express. The subject property is located on the prime pitch of Fore Street which stretches from the WH Smith (47-50 Fore Street) to Clintons (33 Fore Street). The subject property is located adjacent to TK Maxx in a 95% prime pitch.

Availability of Vacant Space in Locality There are some vacant units in the vicinity, but the subject property is within a pitch that will enable it to compete favourably against these units. Taunton already has a strong full range fashion offer. Upmarket retailers are now starting to enter the town which will drive future rental growth.

Rental Levels At mid 2015, agent sources estimated prime rents in Taunton at £90 per sq ft Zone A. This represents no change on the end 2014 level of prime rents in the town with rents remaining 33.3% below the pre-recession peak of £135 per sq ft Zone A.

MARKETABILITY

Typical Void Letting Period In the event of the current tenants vacating, a marketing period of 6 months would be required.

Typical Tenant Profile This is likely to be of a national covenant. We consider there would be a reasonable number of retailers who would seek to acquire these units.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 3-6 months for 10 year leases.

Letting Strategy We would expect the vacant unit to be marketed for a period of 6 months and let on a 10 year lease with a break at year 5. A six month rent free period would be expected.

37-39 Fore Street, Taunton TA1 1HR October 2015

RENTAL EVIDENCE

Taunton has a strong retail offering. Upmarket retailers are now starting to enter the town which will drive future rental growth. We detail below the most relevant rental transactions.

 12 Fore Street, Taunton – This property was let in August 2014 for a term of 10 years with 6 months rent free to L’Occitane. The lease was subject to a tenant only break option in year 6. The passing rent is £40,000 pa which reflects a Zone A of £92 per sq ft.

 45-46 Fore Street, Taunton – This property was let to Joules in June 2014 on a 10 year lease with 6 months rent free and a tenant only break option in year 5. The passing rent is £90,000 pa reflecting a Zone A of £82 per sq ft.

 33 Fore Street, Taunton – This property was subject to a lease renewal in October 2014. The unit is let to Clinton Cards on a 10 year lease and 9 months rent free with a tenant only break option in year 6. The passing rent is £85,000 pa reflecting a Zone A of £83.50 per sq ft.

 2 East Street, Taunton – This property was let to Deichmann in February 2013 for a term of 10 years with 24 months rent free. The passing rent is £125,000 pa that equates to a net effective rent of £90 per sq ft Zone A.

 47-50 Fore Street, Taunton, the WH Smith unit was subject to a lease renewal in November 2012 on a 10 year lease. The Zone A is £75 per sq ft with a total passing rent of £200,000 pa with no rent free period. The building is located in close proximity to the subject property, albeit is slightly dated.

Given its location and the above evidence, we are of the opinion that the subject property will command an estimated rental value of £122,600 per annum exclusive, reflecting a Zone A rent of £85.00 per sq ft. We have adopted rates of A/15 on the first floor and A/20 on the second floor. We are of the opinion that the property will re-let at our opinion of Market Rent although we acknowledge that it is possible that a higher rent could be achieved.

INVESTMENT EVIDENCE

Taunton is a strong market town that appeals to private investors and smaller funds. We detail below the most relevant investment transactions:

 33 Fore Street, Taunton – This property is let to Clintons and sold to a private investor for £1.12m in February 2015 reflecting an initial yield of 7.59%. The property had an unexpired lease term certain of 5.5 years.

 45-46 Fore Street, Taunton, is let to Joules and sold to CBRE GI for £1.375m in January 2015 to reflect an initial yield of 6.15%. The WAULT term certain is 4.7 years.

 47-50 Fore Street, Taunton, is let to WH Smith and sold to CBRE GI for £2.9m in March 2014 to give a net initial yield of 6.50%. The WAULT is 7.6 years.

 2-4 East Street, Taunton, was purchased by a private investor as part of a 3 store parade in March 2014 for £2.65m reflecting an initial yield of 6.25%.

Our initial yield of 6.00% is low relative to the evidence. However the investment will show an attractive return of 8.30% upon letting the vacant unit. On this basis we believe our equivalent yield of 6.75% is supported by the reasonable letting prospects.

VALUATION METHODOLOGY

The property is situated in the prime town centre retailing position. One of the units is currently vacant, with the other unit let to a good covenant with some 4 years un-expired. The Ann Summers unit is currently over rented, however there are active management opportunities to re-gear and rebase the income, let up the vacant unit and stabilise the investment. Our valuation is based on the following inputs:

 Contracted net income of £115,000 per annum.  Market Rent of £122,600 per annum based on £85 per sq ft Zone A.  Expiry void period or current void period of 9 months followed by a rent free period of 6 months.  Refurbishment costs of £100,000 on the vacant unit. The tenant is in breach of its repairing obligations and although the repair works have not been formally costed, this in our opinion is a likely cost of making good such repairs.  We have allowed re-letting fees of 15.0% and empty rates during the void periods.  Capitalisation rate of 6.75%.

Based on the above assumptions, the property shows the following yield profile based on a Market Value of £1,709,000 and having regard to the £100,000 refurbishment cost.

37-39 Fore Street, Taunton TA1 1HR October 2015

Initial Yield: 6.02% Yield on letting up vacant unit (March 2016): 8.30% Yield on ERV (Oct 2019): 6.42% Equivalent Yield (Ann Arr): 6.75% Capital value per sq ft: £365 psf

SUITABILITY FOR LOAN PURPOSES

On the basis of the information provided and subject to the comments contained within this report, we consider that the property forms suitable security for a mortgage advance assuming it is maintained to a reasonable state of repair for the duration of the loan.

The property is within the prime retailing pitch and we would expect reasonable interest from occupiers

Should the property be marketed we consider that the asset would attract interest from a wide range of investors, including owner occupiers, property companies and high net worth individuals.

PHOTOGRAPHS

Front Elevation Ground Floor Retail (No 37/38)

Ground Floor Retail (No 39) First Floor Ancillary

k) 28/30 King Street, Manchester M2 6AZ

28/30 King Street, Manchester, M2 6AZ October 2015

28/30 King Street, Manchester, M2 6AZ

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Strong. Manchester is the UK’s third Market Value: £3,362,000 largest city with a strong affluent primary catchment totalling 1,600,000. Key Inputs Micro Location: Strong. King Street is a renowned ‘High’ Fashion pedestrianised Initial Yield retailing pitch which is experiencing a 6.40% ‘retailing renaissance’. Equivalent Yield 6.09% Property Type: Retail High Street Reversionary Yield 6.04% Total Property Area: 5126.86 sq m (55,185 sq ft) Capital Value per sq ft £368 psf Tenure: Freehold Market Rent £230,050 per annum Number of Tenants: 7 Market Value assuming Vacant £2,200,000 Percentage Vacant: 12.5% (subject to a rental Possession guarantee). Reinstatement Value £2,853,056 Total Rent Reserved: £243,810 per annum

Covenant Strength: Good.

Sale Timescale: 6 months by private treaty. Suitability for Loan Security Good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Prime location on Manchester’s primary aspirational retailing street.  Opportunity to enhance income return on letting of vacant office  Freehold interest. suites.  Well secured for a WAULT of in excess of 6.00 years to expiry.  Rental growth and yield compression is expected.  88% of income secured to retail tenants, Charles Tyrwhitt & Mint Velvet.  Recently re-based retail rents and new letting to Mint Velvet.  Charles Tyrwhitt recently removed their tenant only break clause in exchange for rent free indicating that they trade well from this location.  Recent letting activity on the offices. 28/30 King Street, Manchester, M2 6AZ October 2015

 Strong investment demand.

Weaknesses Threats

 There are vacant units currently on King Street, although the  Tenant default. However any voids and associated costs may vacancy rate is falling. be mitigated by the strong letting prospects.  Two vacant units.  Continued pressure on tenants and the high street in general  Charles Tyrwhitt had a negative net worth of -£346,000 in 2014. due to the lack of spending by consumers.  Over rented by 11.00%.

LOCATION

Overview Manchester, the third largest city in the UK, is the commercial and administrative capital of the North West of England and the largest regional economy outside the south east.

Manchester is one of the UK’s most dynamic cities and regarded as the largest corporate, financial and media hub outside of Central London. Manchester has a local authority population of circa 503,000 and benefits from a primary catchment of 1,600,000 which is in excess of the major city average and ranks the city second out of the PROMIS centres. The city has an eclectic mix of residents and is a densely populated conurbation with an array of differing employers in a variety of business sectors. The service sector accounts for a major percentage of employment in the city with the Co-operative Society (HQ), RBS and HSBC important occupiers/employers. Similarly the BBC have relocated various functions from London to Salford Quays and many legal and consultancy practices have major regional offices including DLA Piper, Eversheds, Grant Thornton as well as KPMG and PWC.

Communication The city benefits from excellent transport links located in close proximity to the M6, M56, M62, M66 and the M60 Orbital motorways. It is estimated 6 million people live within 1 hours’ drive time from the city centre. Manchester is also served by two large train stations, Manchester Piccadilly and Manchester Victoria which link the city to the rest of the UK including London (2 hours), Edinburgh (3 hours 20 minutes) and Cardiff (3 hours 29 minutes). In addition to the mainline train service, Metrolink operates trams between Bury and Altrincham and the Government has confirmed that a budget of £520m is available for an additional extension to this service to Oldham and Rochdale, along the south and east Manchester conurbations. Manchester Airport, located 8 miles (13 km) south of the city centre, connects with over 200 destinations globally, being the third largest airport in the UK.

Situation The subject property is located on the southern side of the prime pedestrianised section of King Street. Renowned for ‘high end’ retailing, nearby retailers include Bravissimo, White Company, Watches of Switzerland, Chalk, TM Lewin, Hawes & Curtis, Phase 8, Jigsaw and Jack Wills.

SITE

The site extends to approximately 0.034 ha (0.084 acres).

Access Access to the unit is from King Street, a pedestrianised and publicly adopted street.

DESCRIPTION

The property comprises two Grade II listed period buildings, believed to date from the late 1800s, arranged over ground, basement and three upper floors. Retailers occupy ground and basement, a hairdressing salon part of the first floor, while the remaining upper floors are utilised as offices.

The title is generally limited to the footprint of the building, subject to the basement voids which undersail the rear pavement.

The property is of traditional construction with load bearing external walls and supplementary cast iron and steel framework internally. The main roofs are of pitched construction with a slate covering. A lightwell is provided to the centre of the properties, which forms a roof over the ground floor retail units. This is of flat construction and covered with mineral felt. The elevations are faced in stone to the front elevation to No. 30, with brick elsewhere (including a combination of glazed and original facing brickwork). Original period detailing is provided to the front elevation, although the front elevation masonry to No. 28 has been overpainted. Windows generally comprise timber framed vertically sliding sash windows with timber framed shop fronts and doors at ground level, all incorporating single glazing. Side hung timber casements are provided to the front elevation of No. 28.

Internal areas are fitted out to typical retailer requirements to the ground floor areas, with more basic finishes to the basement areas as is typical of “back of house” areas. The upper offices are provided with a combination of painted lath and plaster ceilings and more modern suspended mineral fibre ceilings. Walls are plastered and painted with areas lined. Carpet floor coverings are provided. Basic common part WC facilities are provided to 28/30 King Street, Manchester, M2 6AZ October 2015

the upper office areas with vitreous china fittings.

The building services are relatively basic in nature and comprise separately metered 415 volt electrical supplies to the retail units with a single supply serving the upper office parts, which are then understood to be sub metered. There is a single live gas supply serving the third floor office space central heating installation. Lighting includes a mixture of spot feature lighting to the retail units with recessed modular lighting and surface fixed fluorescent fittings provided to the office areas. Heating is provided via electrical heating to the upper parts (with the exception of the gas fired central heating to the third floor), with heat pump units provided to the ground floor retail areas and mechanical fresh air ventilation. An automatic fire detection system is provided throughout the premises.

ACCOMMODATION

AREAS UNIT USE TENANT Description Sq.Ft. M² Sabre Retail Fashion ITZA (Units) (658) n/a Limited G (Sales) 1,224 113.7 28 Retail B(Sales.) 663 61.5 B (Anc.) 663 61.5 ITZA (Units) (668) N/A Charles Tyrwhitt 30 Retail G (Sales) 1,380 128.2

B (Anc) 1,283 119.0 Kevin R Quinn & Zoe 1st (Salon) 603 56.0 28 Retail Joanne Eaton 1st (Anc) 239 22.2 Paul Nichols & James 28 Office 2nd Part Ft 458 42.5 Nichols Unique Visa Services 30 Office 1st Rear 480 44.6 Limited 30 Office Project Octo Limited 2nd Part Ft 689 64.0

30 Office John Eunice Cooper 1st Part Ft 650 60.4

30 Office Vacant 2nd Part Rear 650 60.4

30 Office Vacant 3rd 1,432 133 Total 10,414 967

TENURE

The property is held freehold.

TENANCIES

Lease Start Lease Expiry Option To UNIT TENANT Current Rent Comments Date Date Break Sabre Retail Fashion Limited Tenant received 18 month RF to be topped up 28 08/06/2015 07/06/2025 Year 6 £92,500 (t/a Mint Velvet) by vendor TBO in year 6. RR on 08/06/2020. TBO and RR removed. 12 months RF from 30 Charles Tyrwhitt LLP 15/10/2010 14/10/2020 N/A £100,000 15/10/15 (topped up by vendor). Kevin R Quinn & Zoe Joanne Upwards only rent review on 29 September 28 29/09/2006 28/09/2016 N/A £11,000 Eaton 2011. MBO at any time upon 6 months’ written notice. 28 Paul Nichols & James Nichols 23/01/2015 22/01/2018 N/A £4,000 Inclusive of service charge. 30 Unique Visa Services 09/06/2014 08/06/2018 Year 2 £3,172.50 TBO 09/06/2016.

30 Project Octo Limited 19/08/2015 18/08/2018 N/A £5,167.50

30 John Eunice Cooper 25/03/2015 24/03/2017 N/A £7,150 No incentive or break option.

Assumes 24 month rent, service charge and 30 Vacant - - - £6,500 rates guaranteed by RLAM. Terms agreed with Wanna Insure Limited. 3 30 Vacant - - - £14,320 years at £10,740 pa and 6 months rent free. Total £243,810 28/30 King Street, Manchester, M2 6AZ October 2015

Covenant Strength The available company D&B ratings and financial accounts are summarised below:

Sabre Retail Fashion Limited is a British womenswear clothing brand with over 23 stores across the UK and Ireland. The tenant has a dun&bradstreet rating of 2A 3, which represents a higher than average risk of business failure. Year Ending Year Ending Year Ending Sabre Retail Fashion Limited 30 Apr 2014 (000s) 30 Apr 2013 (000s) 30 Apr 2012 (000s) Sales Turnover £48,103 £34,368 - Profit (Loss) Before Taxes £6,309 £3,944 - Tangible Net Worth £3,865 (£2,192) - Net Current Assets (Liabilities) £6,927 £2,677 -

Charles Tyrwhitt LLP is a British menswear retailer chain store founded in June 1986 and which specialises in formal men’s shirts, shoes, suits, knitwear and accessories. The tenant has a dun&bradstreet rating of N2, which represents a lower than average risk of business failure. Year Ending Year Ending Year Ending Charles Tyrwhitt LLP 02 Aug 2014 (000s) 03 Aug 2013 (000s) 28 Jul 2012 (000s) Sales Turnover £145,213 £120,857 £98,361 Profit (Loss) Before Taxes £16,803 £13,044 £7,636 Tangible Net Worth (£346) (£384) (£422) Net Current Assets (Liabilities) £7,429 £6,214 £648

Unique Visa Services facilitate visa requirements for British nationals. The tenant has a dun&bradstreet rating of F2, which represents a lower than average risk of business failure. Year Ending Year Ending Year Ending Unique Visa Services Limited 31 Mar 2014 31 Mar 2013 31 Mar 2012 Sales Turnover - - - Profit (Loss) Before Taxes - - - Tangible Net Worth £20,893 £20,904 £15,444 Net Current Assets (Liabilities) £20,518 £20,435 £14,858

Project Octo Limited are a digital marketing agency which specialise in eCommerce to help grow small and medium sized businesses. The tenant has a dun&bradstreet rating of N3, which represents a higher than average risk of business failure. Year Ending Year Ending Project Octo Limited 31 Mar 2015 31 Mar 2014 - Sales Turnover - - - Profit (Loss) Before Taxes - - - Tangible Net Worth (£5,875) £1,000 - Net Current Assets (Liabilities) (£9,509) £1,000 -

INCOME ANALYSIS

Rental Income £243,810 per annum (net).

Market Rent £230,049 per annum.

Service Charge/Rates Shortfall There are limited vacancies, and shortfalls are covered by vendors guarantees.

CONDITION

28/30 King Street, Manchester, M2 6AZ October 2015

The following items of repair were identified:

 “The external fabric is in need of its next external repair and redecoration maintenance cycle with several elements now in need of “catch up” maintenance. In particular the elevations facing the central light well area are tired with deteriorated decorations to the timber windows and flat roof coverings having now reached the end of their serviceable life. Our budget costs allow for scaffold to all elevations with patch repairs and decorations. Any works will need to pay due regard to the listed status of the property and the external window decorations will also need to be carried out in agreement with the tenants (as they form part of their demise).  The internal common parts generally present reasonably well in the context of the nature of the space. The vacant offices are in good decorative order although evidence of soiling and wear was apparent to the carpets. We believe that it is likely that any in going tenant will require new carpets to be laid or a contribution in lieu.”

The building surveyors reported that the cost of repairs identified from the building fabric inspection is £90,000, exclusive of professional fees and VAT. In our opinion the cost of these repairs and maintenance, together with ongoing repair and maintenance costs will be fully recoverable from the tenants via the service charge provisions in the lease.

From a postcode search to assess the asset’s environmental agency flood risk rating it would appear that in common with almost the entirety of Manchester city centre the property is located within Flood Zone 3 on the floodmap for planning, with flood defences being noted.

MARKET OVERVIEW

Retailing in Manchester The city provides an estimated 2.67 million sq ft of retail accommodation in an attractive, compact and predominantly pedestrianised environment. The shopping population is estimated at 744,000 ranking the city 3rd of the national centres. The city’s mass market retail pitch focuses around Market Street and the extended Arndale Centre which accommodates nearly 50% of Manchester’s total retail space. Manchester’s second managed centre - The Corn Exchange, once known as The Triangle - opened in 2000 and fronts Exchange Square. As such it, too, forms part of the retail quarter constructed in the northern part of the central area.

Manchester Centre is home to a large proportion of the city’s key mass market multiples including Bhs, New Look, WH Smith, Boots, Wilkinson, Next, Top Shop, River Island, Oasis, JD Sports and Argos. Some of these key retailers, namely Next, Top Shop, River Island and New Look, relocated within the centre to much larger new premises in Arndale North. The newer malls also include some rather more upmarket retailers such as Hollister, Kurt Geiger, Coast, Guess and Dune, as well as specialist retailers, Waterstone's, Henri Lloyd, Clas Ohlson, Currys/PC World, Sweatshop, Lush and Apple.

Department store provision is particularly strong and includes House of Fraser (Kendals), Harvey Nichols, Debenhams, Marks and Spencer, Next and Selfridges. The traditional prime pitch is Market Street where retailers such as Boots, TK Maxx, Tesco, Aldi and H&M are located. ‘High’ fashion retailers continue to locate along King Street, St Ann’s Square, New Cathedral Street and Spinningfields’ ‘The Avenue’.

Prime Pitch Prime pitch in Manchester is on Market Street, between Cross Street / Corporation Street and Fountain Street / High Street. Units on the north side of prime pitch fall largely within Manchester Arndale and Bhs has a frontage both on Market Street and within the centre. TK Maxx joined this line-up in 2007, taking space in the centre next to Bhs. Other retailers on this pitch include Urban Outfitters, Nike, American Apparel, Schuh and Topman. On the southern side of prime, key retailers include H&M, Tesco Metro, Miss Selfridge, Mango, Adidas and Boots; Boots is also within the ownership of Manchester Arndale.

King Street King Street is the traditional home of quality fashion in Manchester, providing a pleasant shopping environment and leading to the popular House of Fraser department store on Deansgate.

The eastern, non-pedestrianised section of King Street is dominated by office occupiers but also houses some high-profile fashion retailers including Belstaff, Diesel, Agent Provocateur, Vivienne Westwood, Whistles and Pretty Green. Whilst this area has experienced some volatility in recent years and lost Emporio Armani and Armani Collezione to Spinningfields, it, nevertheless, appears to have retained its cachet with designer names. Like other parts of the city centre, restaurateurs are gaining a foothold, with Jamie's Italian, Miller & Carter and Pizza Express taking premises on this pitch; fashionable Rosso and Brown's Brasserie are closeby on Spring Gardens.

At the western end of King Street, Deansgate runs north/south, marking the western edge of Manchester’s core retail area. This is a secondary retail pitch and has a varied range of retailers on the eastern side, including many independents. On the west side is the important House of Fraser department store, as well as a North Face flagship store and Sainsbury's Local. Branded catering dominates much of the west side of Deansgate. Several high profile brands have joined this hitherto mainstream offer, notably Gaucho and Cote on St Mary's Street and Bem Brasil on King Street West.

Competition Manchester city centre faces some competition from a number of smaller, but significant town centres in the Greater Manchester conurbation and a number of them have retail schemes in the pipeline. Further afield, Chester and Liverpool may attract shoppers from parts of Manchester's catchment.

Bolton has a wide-ranging but standard retail offer with two covered shopping centres; one of these, Market Place, was substantially extended in 2008, although it has struggled to fill all of the new floorspace in the difficult economic climate since the scheme completed. Some of this floorspace is being converted into leisure uses with a new multiplex being integrated into the centre. There is, however, still the possibility of further new retail 28/30 King Street, Manchester, M2 6AZ October 2015

floorspace for the town centre at Central Square, although this is at a very early stage in the pipeline.

Stockport is another large competing town centre, with much of its retail provision concentrated in the Merseyway Centre; the town has only one department store, Debenhams, and its overall offer is mid-down market. In addition, there is a superstore and large retail park - The Peel Centre - next to the central shopping area. A major regeneration project for part of the town centre, known as Bridgefield, had been proposed that would have involved around 650,000 square feet of new retail floorspace. Although Lend Lease had been selected as developer, the company withdrew from the project in 2008 and the Council has since put forward a smaller scheme, known as Redrock, involving a mix of retail and leisure floorspace.

There are a number of other surrounding centres in Greater Manchester that all offer a degree of competition to Manchester city centre; these include Rochdale, Oldham, Bury and Altrincham. These are all more modest centres than Bolton and Stockport, but Rochdale, Oldham and Bury all have relatively modern shopping centres, as does Altrincham with the recent redevelopment of the Stamford Quarter.

Oldham has two adjoining shopping centres, The Spindles - which was completed in 1993 and is anchored by Debenhams - and Town Square shopping centre, which was refurbished at the start of the 1990’s. Variety store provision in Oldham has never been strong; neither Marks & Spencer nor Bhs are in the town.

Vacancies, in-movers and closures Manchester has consistently been one of PMA's highest ranking centres along with Glasgow and Edinburgh even though the city's Retail Score has slipped back in recent years, like that of many other centres. The continuing upgrade of the central area and the expansion of Metrolink across a large part of Greater Manchester is helping the city centre to consolidate its status and reputation, even in comparison with its popular neighbour, Intu Trafford Centre.

Manchester city centre continues to attract multiple fashion operators, including premium brands, with the bulk of these tending to locate within Manchester Arndale or New Cathedral Street. The most noticeable recent change, however, is the expansion of branded catering and upmarket restaurants that has significantly boosted the city's Café/Restaurant Score, helping it to rise from a rank of 21 in 2012 to 9 in late 2014.

Thus, popular brands such as Pret a Manger, TGI Friday, Pizza Express, Nando's and Zizzi have all opened operations at Deansgate, Royal Exchange, King Street East and Piccadilly Gardens respectively recently, along with high end restaurants like Jamie's Italian, Miller & Carter and Cote at King Street East, Deansgate and St Mary's Street.

More catering is to follow with the completion of the refurbishment of The Corn Exchange later in 2015, which promises to bring new names to the city centre such as Vapiano, Pho and Wahaca, along with well known caterers such as Byron and Pizza Express that are already represented in the central area. Byron, along with Ask, is also due to open at Piccadilly Gardens in spring 2015 and further opportunities for the conversion of retail to restaurants may become available at King Street and The Avenue in Spinningfields.

In March 2015 the vacancy rate in Manchester city centre stood at 10.4% of units, below the national average and a marked fall on the level recorded in January 2013. The level of take-up between the January 2013 and March 2015 was 10.2% of units, above the national average.

Although Manchester city centre continues to feel the impact of corporate failures amongst retailers with Jane Norman, Phones 4 U, Barratts, Republic and La Senza all having ceased trading in recent years and Bank and USC entering administration at the beginning of 2015, retailer demand for representation within Manchester Arndale remains buoyant.

There are currently nineteen vacant units throughout the whole of Manchester Arndale, most of these at ground level. Notable recent arrivals include Homesense, who now occupy a large store on Arkwright Way next to Bhs, Thomas Sabo, HMV, Boux Avenue, Mamas & Papas, Drome, Open and Kids Footlocker.

There are eight vacant units on King Street at the time of reporting although some of these were already under offer. Kitchenware specialist, Peter Maturi, had ceased trading here as had Ceci Gee and Monsoon. Newcomers Jigsaw and Bravissimo relocated to King Street after closing at The Corn Exchange; White Stuff took the unit once occupied by Savoy Taylors Guild and upmarket menswear retailer, Dalveys, took a vacant unit. Prospective tenants include the restaurateur, Quill, while Min Velvet have moved into the subject property. Two independent menswear retailers - Karl Milton and Dress2kill - took vacant units at the end of 2014.

Rents and Deals Looking at the period from 1987 to mid-2015, prime rental growth in Manchester slightly exceeded the average for PMA's Major Cities, with particularly high growth in the early part of this period. Manchester has seen only weak rental growth since 2000, although prime rents appear to have stabilised in 2012 and have since shown some modest growth.

Given the degree of change in the Manchester retail market, with significant amounts of new retail space created, it is perhaps not surprising that rents in the established parts of the city centre experienced very little uplift over the period 2006-2008 and then a decline, slightly below that experienced across Major Cities as a whole, in the aftermath of the credit crunch and the onset of economic recession.

At mid 2015, agent sources estimated prime rents in Manchester at £275 psf Zone A. This represents no change on the end 2014 level of prime rents in the city with rents remaining 12.7% below the pre-recession peak of £315 psf ZA. On average, prime rents across the PROMIS 200 Towns remain 28.7% below the pre-recession peak.

In the early 2000s, prime Zone A rents remained at around £300 psf with only limited retailer movement during this period. However, in mid 2006 two small units on Manchester Arndale’s prime Market Street frontage were let to 3 Store and Swatch at rents reflecting £310-£315 psf Zone A - although as far as we are aware, this peak has not been achieved since. 28/30 King Street, Manchester, M2 6AZ October 2015

Uncertain market conditions, especially since the end of 2008, contributed to a number of shop closures in the city centre and constrained retailer demand. While there were a number of new lettings throughout the city centre during the first half of 2009, there was little new market evidence for the prime pitch with agents reporting that top achievable Zone A rents were closer to £280-£290 psf at that time.

In the latter half of 2009, prime rents slipped back yet again and advice from agents suggested that these stood at around £275 psf Zone A by the end of the year, remaining at this level during 2010. By summer 2011, agents reported that although rents achieved on some prime deals had at one stage dropped to £230 psf Zone A, prime rents were now considered to stand at £250 psf Zone A. Indeed, a letting to Schuh early in 2011 on the Market Street frontage of the Arndale Centre achieved a rent of just £230 psf Zone A, although an earlier letting to City Store, in the same frontage, in autumn 2010, had achieved £249 psf Zone A.

By 2013, there had been some further activity on prime, albeit limited, and confined to the Market Street frontage of Manchester Arndale. Dr Martens took a new lease on a small unit here towards the end of 2012 at a headline rent of £275 psf Zone A, indicating a modest uplift in prime rents.

Rents in King Street, the traditional quality pitch in Manchester, peaked at around £220-£225 psf Zone A in 2007 with lettings to East and Phase 8; rent reviews dating from the same period were settled at around £215 psf Zone A. Whilst an influx of strong fashion/lifestyle retailers to King Street was evident in 2011, it did, nevertheless, lead to a further correction in market rents, with deals taking place over late 2010-summer 2011 to Nigel Hall, Kuyichi, Charles Trywhitt, Aubin & Wills and The Kooples at Zone A rents of £118- £152 psf.

Since then more fashion retailers such as Gant, Timberland, Cecil Gee and Kuyichi have left Manchester, vacating their premises. Details of recent lettings are sketchy, but market opinion indicates that Zone A rents at 2014 were around £120-£130 psf, although it was acknowledged that landlords sometimes provide very generous incentives to ingoing tenants.

Development Pipeline The Corn Exchange is currently not trading while a comprehensive refurbishment and reconfiguration is undertaken to transform what was a struggling shopping centre into a restaurant quarter; Vapiano, Pho, Wahaca, Pizza Express, Eclectic Grill, Byron and Tampopo have all agreed to take space here. A hotel will operate from the upper floors and a leisure 'box' is being developed in the basement of the building. Work is due to complete imminently.

Whilst The Avenue at Spinningfields initially let well, several of the retailers who originally located here have ceased trading. Two shops have already been converted into a restaurant with the possibility that others may follow.

Whilst there are a number of schemes in the pipeline for edge of centre development, which include some retail floorspace, these are generally mixed use schemes where retail is a relatively small component.

Summary King Street suffered during the recession with the turn in consumer spending and retailers paying unsustainably high rents. Rents in the late 2000’s reached circa £230 psf ZA which was unsustainable for many retailers leading to many re-locating away from the street. Subsequently, rents have reduced dramatically and consequently the number of completed new lettings have increased. King Street is undergoing a recovery. Over the last 3 years King Street rents’ have been rebased and therefore attracted many new retailers, cementing King Street as Manchester’s high end retailing location of choice. The strong growth of aspirational retailers outside of London means the number voids on King Street has diminished and the street is now well positioned to witness rental growth. We believe there is potential for positive rental growth from this historically low base rental tone.

MARKETABILITY

Typical Void Letting Period In the event of the current tenants vacating, a marketing period of 6 months would be required.

Typical Tenant Profile This is likely to be either a national covenant.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period Retail - 9 months for 5 year leases. Offices – 3 to 6 months, depending on the lease lengths.

Letting Strategy N/A

28/30 King Street, Manchester, M2 6AZ October 2015

RENTAL EVIDENCE

We have had regard to the following in arriving at tour opinion of Market Rent:

 28 King Street (subject property) – In June 2015 Mint Velvet took a new 10 year lease at a rent of £92,500 per annum equating to £125.00 psf Zone A. An 18 month rent free incentive was given and the tenant has the right to break at the end of the sixth year of the term. This provides the best evidence of the prevailing rental levels.

 20-22 King Street – We understand that Chalk have recently agreed a new 10 year lease at a rent of £110,000 per annum equating to £129.00 psf Zone A. The tenant was given a 9 month rent free period and the option to break at the end of the fifth year of the term. This further provides salient evidence of the current tone along King Street.

 27 King Street – In April 2015 Neil’s Yard took a new lease of the property for a term of 10 years at a rent of £75,000 per annum equating to £127.00 psf Zone A. There was a tenant only break option at the end of year five and the tenant received a 9 month rent free period.

 46 King Street - In April 2015 Hawes & Curtis took a new lease for a term of 10 years at a rent of £80,000 per annum equating to £141.00 psf Zone A. A 12 month rent free period was given and the tenant received an option to break at the end of the fifth year of the term.

 40-42 King Street – In February 2014 Bravissimo took a new lease of the property for a term of 10 years at a rent of £125,000 per annum which equates to £105.00 psf Zone A. The incentive period was not disclosed and the tenant did not benefit from a break option.

 30 King Street (subject property) - Project Octo has leased the front 2nd floor office suite totalling 689 sq ft at £7.50 psf on a 3 year term with 3 months rent free at commencement and 2 months rent free at the beginning of the 2nd year.

 30 King Street (subject property) – The entire 3rd floor is currently under offer to Wanna Insure Ltd at £7.50 psf on a 3 year term with 6 months rent free.

On the basis of the recent evidence from the subject property we have applied a benchmark Zone A rate of £125 per sq ft for the retail units. From this benchmark level we have made adjustments for rent review terms, position, and configuration etc. We have adopted rates of A/15 on the basement accommodation. We have applied a rate of £9.50 per sq ft on the first floor accommodation, and £7.50 on the second and third floor accommodation, in line with the recent lettings. This provides an aggregated rental value of £230,049 per annum, apportioned as follows

28 (Sabre Fashion) £91,918 per annum. 30 (Charles Tyrwhitt) £95,180 per annum. 28 (Hair Salon) £7,999 per annum. 28 (Paul & James Nichols) £3,435 per annum. 30 (Unique Visas) £4,560 per annum. 30 (Project Octo) £5,168 per annum. 30 (John Eunice Cooper) £6,175 per annum. 30 (Vacant) £4,875 per annum. 30 (Vacant) £10,740 per annum.

Adopting these rental values we are of the opinion that the property is over rented by approximately 11.00%.

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as detailed below:

 35 King Street – In July 2015 Alterity purchased this property for £4.1million reflecting an initial yield of 5.15%. The unexpired lease term was 5.2 years to tenant break. The property is let to Jack Wills who provide a strong retail covenant. This property occupies a comparable location to the subject property, and is for similar term to the retail element of the subject property. However the covenant is more attractive and the rent was off a lower base. We would therefore expect the retail element of the subject property to transact at a discount to the yield achieved in this transaction.

 1 King Street - In December 2014, Epic UK Ltd acquired this asset from Royal London Asset Management for £17 million, reflecting a net initial yield of just below 5.91%. The property is let to Patisserie Valerie, Fraser Hart, Boodles and Waterstones on the ground floor, with a variety of office tenants on short term leases on the office accommodation above. The property had an overall WAULT of just under 8 years. This asset provides a stronger income profile than the subject property, and although the transaction is slightly dated, it is a good indication of where investment yields are for multi let retail high street investments on King Street. Overall, we would expect the subject property to transact at a discount to the yield achieved in this transaction.

 7-9 Piccadilly – In January 2014 TIAA Henderson purchased this investment for £8.2million reflecting an initial yield of 6.33%. At the time of sale the unexpired lease term was 8.2 years to tenant break. The property is let to Superdrug. However this unit is in a weaker location and at the time of sale the income profile was believed to be 40% over rented. 28/30 King Street, Manchester, M2 6AZ October 2015

VALUATION METHODOLOGY

We have valued the property using the traditional “all risks” yield method of valuation, having regard to the recent evidence of comparable retail investment transactions on King Street and current investment market sentiment.

In our opinion, a prospective purchaser of the property would be prepared to accept an initial yield of approximately 6.40% due to the well secured income profile with a WAULT of just over 6.00 years to expiry. We would also comment that since the property was put under offer, one of the vacant 2nd floor suites has been let, whilst the entire third floor is currently under offer, mitigating letting risk and void costs. Prime initial yields in Manchester are currently in the region of 5.00% within the core retail areas. Our valuation of £3.362M reflects an initial yield of 6.40% and a “blended” equivalent yield of 6.08% on the basis of the following equivalent yields for each part of the property:

Retail 6.00% Offices 6.50%

In arriving at our valuations, we have made the following assumptions

 Contracted net income of £243,810 per annum.  Rental guarantees on the third floor (24 months at £14,320 pa) and second floor rear (24 months at £6,500 pa).  Capital deduction for the rental guarantees totalling £41,640.  Capital deductions for the outstanding rent free period on 28 King Street (£100,000), 30 King Street (£107,916) and 30 King Street part 2nd floor front (£1,292) totalling £209,208.  Market Rent of £230,049 per annum based on £125 per sq ft Zone A.  Expiry void periods of between 9 and 12 months on the office accommodation, followed by a rent free period of 6 months.  We have allowed re-letting fees of 15.0% and empty rates during the void periods.  Purchaser’s costs of 5.80%.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

We consider the tenant covenant strength would be perceived by the market as offering ‘lower than average risk’.

We believe that rents will remain stable in the short term, though there is little immediate prospect of significant uplift. That said, the tone of rents across the city centre remains circa 13% below the pre-recession peak awhile rents in King Street have recently been robust to historic low levels. Against this background and King Streets ongoing recovery we believe there are reasonable prospects for rental growth in the medium term.

PHOTOGRAPHS

Frontage No. 30 Entrance No. 30 28/30 King Street, Manchester, M2 6AZ October 2015

Ground Floor Retail Storage

l) 74/76 English Street, Carlisle CA3 9HP

74/76 English Street, Carlisle CA3 8HP October 2015

74/76 English Street, Carlisle CA3 8HP

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Good. Carlisle is the principal Market Value: £1,311,000 commercial, administrative and retailing centre for Cumbria with a catchment population of 300,000 people. Key Inputs

Micro Location: Good secondary retail pitch. Initial Yield 8.00% Property Type: Retail High Street. Equivalent Yield 7.59% Total Property Area: 642.8 sq m (6,919 sq ft). Reversionary Yield 7.44% Tenure: Freehold Capital Value per sq ft Number of Tenants: 1 Market Rent £107,000 per annum Percentage Vacant: 0% Market Rent in accordance with Total Rent Reserved: £115,000 per annum £107,000 per annum lease terms Covenant Strength: Established retailer incorporated in Market Value assuming Vacant £915,000 1974 and perceived to be a strong Possession and attractive tenant covenant Reinstatement Value £1,024,355 Sale Timescale: 6 months by private treaty.

Suitability for Loan Security Reasonable. 4 year unexpired term. Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Located in a good secondary retail location in Carlisle.  The property is a relatively dry investment, being let for a further 4  Occupational demand in the town has improved over the last 12 years to a strong covenant. months.  We would recommend initiating an early lease extension with current  Let to a national covenant who trade well from the unit. tenant.  Current camping/outdoor retailer offer suited to tourist demographic.  The unit is well configured and would appeal to retailers that require large open space for a discounted rent to prime.  With over 4 years remaining on the lease there are no pressing dilapidations matters. The tenant occupies on a full repairing and insuring lease and has reinstatement provision and therefore defects noted within this report will be the responsibility of the tenant.  Small lot size, attractive to cash rich purchasers and local investors. 74/76 English Street, Carlisle CA3 8HP October 2015

Weaknesses Threats

 4 years remaining on the existing lease.  Some competition from similar operators within the immediate vicinity.  Over rented.

LOCATION

Overview Carlisle is the county town and principal commercial, administrative and retailing centre for Cumbria and the Borders region. The city is located approximately 9 miles (14km) to the south of the Scottish border, 68 miles (109km) north of Lancaster, 96 miles (154km) south east of Glasgow and 117 miles (187km) north of Manchester.

Communication Carlisle has excellent transport links with junctions 43 and 44 of the M6 motorway located approximately 2 miles (3km) to the east linking the city with the rest of England and Scotland. The city’s principal railway station is on the West Coast Main Line, which operates between London Euston (3 hours 20 minutes) and Glasgow (1 hour 20 minutes). Other connecting lines serve Newcastle, Leeds and Dumfries.

Carlisle has a local authority population of circa 107,500 persons and an extensive primary catchment in the order of 381,000 with a shopping population estimated at 192,000. This ranks the city on a par with the PROMIS Sub-Regional Centre average for similar locations. The catchment’s affluence is reflected in the high proportion of ‘Wealthy Achievers’ (36%) and the ‘Comfortably Off’ (25%). Cumbria University also accommodates a further 13,000 students positively contributing to the city’s age profile.

Situation The subject property occupies a good secondary trading position towards the southern end of pedestrianised English Street adjacent to Clydesdale Bank and Yours. Marks & Spencer, WH Smith, Boots, River Island, Evans, House of Fraser and Stormfront (Apple) are situated opposite or nearby.

SITE

The site extends to approximately 0.02 ha (0.05 acres).

Access The unit fronts directly onto a public highway.

DESCRIPTION

The property comprises a mid-terrace retail unit within Carlisle city centre on the main pedestrianised shopping area of English Street. The property has accommodation over ground first and part second floor. There is a disused basement are to the entire length of the property. The property would have originally comprised two separate units but is now open plan internally and occupied as a single demise.

The original building was constructed with traditional loadbearing brickwork elevations (and most likely internal loadbearing brick partitions). The front elevation has a stone façade to the upper floors and glazed retail entrance set within a timber frame and surround at ground floor level. Upper floors are inset with original timber framed, single glazed sliding sash windows. Fire exit doors are timber in timber frames with doors being faced with steel security plates.

The main pitched roofs are the original timber framed construction and are weathered with natural slates. These drain into replacement UPVC gutters and downpipes. Weathering details and valley gutters are formed in lead. There is a low level flat roof to the rear comprising built up asphalt roof covering.

Internally, the unit has now been opened up with original loadbearing walls having been removed and an internal steel frame utilised to support upper floors. The tenant has then provided their own specific fit out. This comprises retail over ground and first floors and storage/staff amenity at second floor level.

The basement area is damp and whilst limited historic attempts have been made to provide solutions, these have failed. There is also some evidence of rat infestation. These areas could not be used without significant capital expenditure to bring them up to a good standard.

The property is provided with a mains electric service and we believe is connected to mains drains.

There are minimal external areas to the property with both front and rear elevations discharging onto the main highways. There is an alleyway to the rear right hand side which is utilised as emergency means of escape from the property.

The property is provided with mains electric and water supplies and we assume is connected to the mains drainage system. The tenant has undertaken their own specific fit out which will require reinstatement at the end of the term.

74/76 English Street, Carlisle CA3 8HP October 2015

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Ground sales 2,693 250.2 (ITZA) (1,268) (117.8) 74/76 English Street Cotswold Outdoor Limited Ground ancillary 167 15.5 First floor ancillary 2,688 249.7 Second floor ancillary 1,371 127.4 TOTAL 6,919 642.8

TENURE

The property is held freehold.

TENANCIES

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Cotswold Outdoor 74/76 £115,000 £16.62 28/09/09 27/09/19 10 N/A Limited Total

Covenant Strength Cotswold Outdoor Limited – Cotswold Outdoor Limited is an established retailer founded in 1974 selling outdoor clothing, footwear, climbing and camping equipment. The financial accounts for Cotswold Outdoor Limited are summarised in the table below and based on the information available, the company has been ascribed a D&B rating of 3A1, representing a minimum risk of business failure.

Year Ending Year Ending Year Ending Cotswold Outdoor Limited 31 Dec 2013 (000s) 31 Dec 2012 (000s) 31 Dec 2011 (000s) Sales Turnover £111,356 £103,382 £90,179 Profit (Loss) Before Taxes £5,337 £2,611 £1,521 Tangible Net Worth £12,792 £8,701 £6,969 Net Current Assets (Liabilities) £9,363 £6,314 £5,938

INCOME ANALYSIS

Rental Income £115,000 per annum.

Market Rent £107,000 per annum (£67 ZA)

Service Charge/Rates Shortfall N/A. The property is fully let.

CONDITION

We have been provided with a Pre-Acquisition Survey Report prepared by Paragon Building Consultancy Limited dated 14 August 2015. The principal conclusions of the Report are summarised as follows:

Paragon identified a number of defects, including:

 “The roof requires repairs in both the short and medium term. Initially there are leaks to address and slates to replace. Longer term, there is a likelihood that the roof will require significant overhaul or replacement (including attention to roof structure). 74/76 English Street, Carlisle CA3 8HP October 2015

 The brickwork to the right hand elevation is in poor condition and repairs are required to damaged bricks, cracked areas and missing pointing. These should be undertaken in the short term to prevent deterioration of the elevations and ensure they remain wind and watertight.  The windows to the right hand elevation are in very poor condition and in need of replacement.  The fire escape stair is in poor condition and requires some immediate repairs to ensure it is safe. It also requires redecoration. You should consider serving a repairs notice on the tenant in respect of this matter after acquisition.  There are areas where the fire compartmentation is not complete (above suspended ceilings) and steps should be taken to seal these areas.”

The total cost of repair works identified is £87,000 exclusive of professional fees and VAT. The building surveyors have estimated that £37,000 will be the responsibility of the tenant, as well as a sum of £50,000 relating to the Landlord. We have allowed for this future cost in our valuation.

MARKET OVERVIEW

Competition Carlisle benefits from limited competition with Newcastle upon Tyne which is 60 miles / 1hr 20 minutes away. Dumfries is the closest town, albeit it is much smaller than Carlisle providing a shopping population of 69,000, compared to Carlisle’s 194,000, and is therefore not considered to offer any material competition. The closest out of town shopping centre park, is Intu Metrocentre, 5 miles away.

Retailing in Carlisle Carlisle is the premier retailing destination in Cumbria and the Border Region. The city has no significant retailing competition nearby with leakage to other shopping destinations limited. The city provides approximately 970,000 sq ft of retailing floorspace with the prime offer centred on The Lanes Shopping Centre and the pedestrianised Scotch Street and English Street where a number of national multiples are represented including Marks & Spencer, House of Fraser, WH Smith, Fat Face, White Stuff and Boots. The Lanes is the city’s main covered shopping centre which extends to approximately 516,000 sq ft of retailing and is anchored by Debenhams with H&M, Next, New Look and Bhs also represented. The scheme’s main mall entrances are located on both the pedestrianised English Street and Scotch Street.

Rental Levels Prime rents in Carlisle are £110 psf Zone A, representing an increase on the end 2014 level of prime rents in the city, however rents are still 21.4% below the pre-recession peak of £140 psf ZA.

MARKETABILITY

Typical Void Letting Period The unit is small, and consequently, despite being slightly overrented, the overall rent is low and we believe that the unit would see good reletting demand. Occupational demand is improving. In the event of the current tenant vacating, a marketing period of 6 to 9 months would be required.

Typical Tenant Profile This is likely to be either a national covenant in respect of a discount or value brand, or a local covenant of a similar nature.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period We would anticipate 12 months for 10 year leases.

Letting Strategy N/A

RENTAL EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable transactions, as detailed below:

 70 English Street was let to Yours in May 2015 for a term of 10 years at a rent of £55,000 pa reflecting a Zone A rent of £62 per sq ft. A 12 month rent free period was given. Although this comparable is situated very close to the subject property the unit compares less favourably due to the small frontage and large masked areas.  11 English Street was let to Paper Chase in February 2015 for a term of 10 years at a rent of £116,000 per annum reflecting a Zone A rent of £112 per sq ft. A 6 month rent free period was given. Although the property is located on the same street, 11 English Street is located in a superior trading location.  9 English Street was let to Lakeland in November 2014 for a term of 10 years subject to a tenant break option at the end of years 3 and 6. The rent agreed was £60,000 pa reflecting a Zone A rent of £88 per sq ft. This comparable is better located than the subject property.

There have been a number of transactions close to the subject property itself within the last year, providing a good indication to the Market Rent. The transaction Number 11 and 9 English are considered to be in a superior position to the subject unit, and we believe that the rents achievable should be less. 70 English Street is much more recent and is located close to the subject property and reflects £62.00 per sq ft ITZA, which is more in line with our expectations. However this unit is slightly compromised. Taking the above evidence into account we are of the view that the current rental value on the subject property is £67.00 per sq ft ITZA (£807 per sq m), providing an aggregate Market Rent of £107,000 per annum. We have adopted rates of A/20 on the first floor and A/25 on the second floor. The unit is therefore considered to be approximately 6% overrented. 74/76 English Street, Carlisle CA3 8HP October 2015

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as detailed below:

 55-57 & 59 English Street, Carlisle – In October 2014 a private investor bought the freehold interest for £1.41m reflecting an initial yield of 9.98%. The property was let to River Island and Stormfront and the WAULT was 4.5 years. River Island occupied the first floor sales space above Stormfront. The property was over rented and would be difficult to re-let following River Island vacating. Whilst offering a similar unexpired term , the yield on this comparable was discounted to reflect the over rented income profile. We consider that the subject property would transact at a much lower yield.  70/72 English Street, Carlisle – In September 2011 St Cuthberts Estate purchased the freehold interest for £845,000 reflecting an initial yield of 6.75%. The property was let to Evans with a WAULT of 4 years. At the time of the sale the rent represented £68 Zone A. Whilst offering a similar unexpired lease term, we have discounted the initial yield of the subject property to reflect the level of over rent.

VALUATION METHODOLOGY

The property comprises a well configured single retail unit let located in a good secondary pitch in Carlisle, The property is let to a national covenant for a further 4 years. The latest company accounts show a net worth of £12.79M The company has been ascribed a D&B rating of 3A1, representing a minimum risk of business failure. In our view the tenant covenant is likely to be viewed positively by potential investors.

In valuing the subject premises we have adopted a traditional investment method of valuation whereby the income stream is capitalised at an appropriate capitalisation rate based on current investment transactions. The current income exceeds our opinion of rental value and we have discounted the initial yield accordingly.

In arriving at our Market Value, our approach has been to target an initial yield of 8.0%. Our valuation at £1.359M also reflects an equivalent yield of 7.59% and a reversionary yield of 7.44%. It further reflects a capital value of £255 per sq ft. We have also allowed for purchaser’s costs of 5.80%.

We have then made a capital deduction of £50,000 to reflect the landlords repair liabilities, providing a Market Value of £1.31M.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes.

Carlisle is a popular retail centre, and the relatively small lot size of the subject property is likely to generate good demand from cash rich private investors. The unit is well located and we would expect it to relet within 6/9 months should it become vacant. The unit is currently let to a national covenant, and there are several other national retailers looking for space in this location.

If the property were to be offered to the market we would expect that a sale could be achieved within 6 months. The property is most likely to appeal to local property companies and cash rich private investors.

PHOTOGRAPHS

Frontage Ground Floor Retail 74/76 English Street, Carlisle CA3 8HP October 2015

Staff Kitchen Storage

m) 86/87/87a Broad Street, Reading RG1 2AP

86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

86 / 87 / 87a Broad Street, Reading, RG1 2AP

KEY PROPERTY FACTS VALUATIONS AS AT 1 OCTOBER 2015

Macro Location: Strong. Reading is the largest town Market Value: £4,186,000 in the Thames Valley, a popular regional retailing destination and a major commercial and administrative centre Key Inputs

Micro Location: Reasonable. Located within an Initial Yield established strong secondary 8.75% retailing location (80% prime) to the Equivalent Yield 6.15% west of the retail prime pitch within the town. Reversionary Yield 6.50% Property Type: 3 retail units at ground floor with Capital Value per sq ft £439 overall upper parts comprising part office Market Rent £287,200 per annum and part ancillary. Total Property Area: 9,525 sq ft. Market Rent in accordance with £287,200 per annum lease terms Tenure: Freehold. Market Value assuming Vacant £2,720,000 Number of Tenants: 4 tenants. Possession Percentage Vacant: 0% Reinstatement Value £2,055,000

Total Rent Reserved: £387,500 per annum Covenant Strength: Established retailers with D&B Ratings of 4A 1, N1, & H2. Tenants perceived to have a minimum risk of business failure overall. Sale Timescale: 6 months by private treaty. Suitability for Loan Security Reasonable. Purposes:

SWOT ANALYSIS

Strengths Opportunities

 High street parade in a secondary retailing location.  These are limited and confined to re-gearing leases due to expire shortly.  Fully occupied to 3 retail tenants and 1 office tenant.  This immediate location is likely to see growth over the next few years  Good overall covenant strength. with the Broad Street Mall refurbishment. There is evidence of increasing demand from the food and beverage sector to compliment the scheme  Freehold interest. and the recent student accommodation development.  Multi let nature diversifies vacancy risk at lease expiry/void. 86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

 Zone A’s at £135 per sq ft show a significant discount from prime Broad Street therefore offering strong rental growth prospects.  Strong investment demand exists for this type of asset.

Weaknesses Threats

 Secondary retail location which suffered during the recession. The  Increased risk due to the over rented nature of the asset. However the property is significantly over rented by £100,300 per annum, or 35%. level of over rent is potentially mitigated by the favourable rental growth prospects over the next three years.  Low income security – A WAULT of 2 years until lease expiry. However the retail units should let reasonably well, with recent  Potential for future voids and associated void costs following expiry of the nearby vacant units letting up quickly. existing leases. However any voids and associated costs may be offset by the strong letting prospects.  Some cosmetic refurbishment and capital expenditure may be required on the office accommodation on expiry of the lease.  Capital value is however potentially volatile, and dependent on whether the tenants vacate.  86 Broad Street - Lease dated April 2001 with 15 year term; potential dilapidations in 2016 should be addressed now.  The lease for 87 and 87A Broad Street dated October 2002 covers the ground floor, basement, first and second floors for 15 years expiring October 2017. Dilapidations should be considered in the short term.  The lease for 87 Broad Street dated June 2002 for the ground floor shop and basement expires in December 2017; dilapidations should be considered in the short term.

LOCATION

Overview The Property is located in the retailing centre of Reading. Reading is one of the principal commercial centres along the M4 corridor with a shopping population of 393,000, above the Regional Centre average. A primary catchment population of 685,000 highlights Reading as a popular and affluent regional retail destination. The town is a major administrative centre for the Thames Valley Region hosting the HQ’s of numerous British companies and the UK offices of many foreign internationals. Reading is situated approximately 40 miles to the west of Central London, and 80 miles east of Bristol.

Reading has a resident population of circa 155,700 which is expected to increase to 169,400 by 2020. The town has an extensive retailing catchment and boasts an above average primary catchment population of 685,000 with an estimated total catchment in excess of 2.3m persons. Reading’s affluence is reflected in the significantly above average proportion of the most affluent AB social group and an underrepresentation of the least affluent C2 and D&E categories. This affluence is further supported by the estimated £4bn of retail and leisure spend within a 30-minute drive time.

Communication The town benefits from excellent road, rail and air links. The M4 motorway lies immediately to the south with Junctions 10, 11 and 12 serving the town ultimately connecting to the M25 (Junction 15) some 24 miles (38km) to the east. In addition the A33 provides direct access to Basingstoke, 18 miles (29km) to the south, the A4 to Maidenhead 16 miles (26km) to the north east and the A329(M) to Wokingham and Bracknell 12 miles (19km) to the south east. Reading Rail Station, recently comprehensively redeveloped to provide a state of the art transport hub, is particularly busy, providing fast and frequent services to London (Paddington) with a journey time of 25 minutes and direct services to Oxford, Basingstoke, Cardiff, Manchester, Birmingham and Gatwick Airport. Importantly Crossrail is to be extended to Reading opening in 2019 improving access to all central London areas. Heathrow Airport is some 29 miles (47km) to the east.

Situation The property is situated close to the prime retailing pitch and occupies a good position on the southern side of Broad Street at the western end. The property adjoins EE, Waterstones and Millets and is opposite Next, Superdrug and Clas Ohlson. The Broad Street Mall is in close proximity where TK Maxx, Wilko, Argos, New Look, Footlocker and Metro Bank are located.

SITE

The site extends to approximately 0.05 ha (0.13 acres).

Access The property is accessed directly off Broad Street, a pedestrianised high street with rear servicing from St Mary’s Butts.

DESCRIPTION

The property comprises an attractive parade of three substantial adjoining retail units.

No. 86 is a traditional period High Street terraced property constructed from loadbearing masonry, timber floors and roofs and lath and plaster ceilings. The 86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

elevations are fair faced red brickwork with decorative white painted stucco on the Broad Street 1st and 2nd floor window heads. The rear elevation is painted white on the 1st and 2nd floors. The ground floor shop front is storey height glazing. The building occupies part basement, ground, 1st and 2nd floors fronting Broad Street and a single storey ground floor rear annex.

Nos. 87/87a comprises a traditional period High Street terraced property constructed from loadbearing brickwork, timber floors and roofs and traditional shallow foundations. The elevations are fairfaced red brickwork with painted decorative stucco on the Broad Street 1st and 2nd floor window heads. The ground floor shop fronts are storey height glazing. The building occupies part basement, Ground, 1st and 2nd floors fronting Broad Street and similarly for an “L” shaped building to the rear. Situated between these two buildings is a contemporaneous single and two storey interconnected building occupying ground and part 1st floors.

ACCOMMODATION

AREAS UNIT TENANT Description Sq Ft M² Ground Floor (Sales) 2,045 190.0 ITZA 714 66.3 86 Broad Street Shoe Zone Ltd First Floor (Ancillary) 403 37.4 Second Floor (Ancillary) 410 38.1 Basement Not used Not used Ground Floor (Sales) 1,358 126.2 ITZA 693 64.4 Ground (Ancillary) 30 2.8 87 Broad Street EE Ltd First Floor (Ancillary) 572 53.1 Second Floor (Ancillary) 628 58.3 Basement (Ancillary) 1,115 103.6 Ground Floor (Sales) 857 79.6 87a Broad Street T-Mobile (UK) Ltd ITZA 374 34.7 Basement (Ancillary) 459 42.6 87/87a Broad Street First Floor Offices 793 73.7 Blue Arrow Ltd Offices Second Floor Offices 855 79.4 TOTAL 9,525 884.80

TENURE

The property is held freehold.

TENANCIES

Number of Tenants and Lease Type The property is let as follows:

No 86 Broad Street – Let to Shoe Zone Ltd on a 15 year lease with no break clauses to expire 1st April 2016 at a rent of £137,000 per annum.

No 87 Broad Street – Let to Everything Everywhere Ltd on a 15 years lease with no break clauses to expire 6th October 2017, with a passing rent of £155,000 per annum. It should be noted EE have sub-let to Maronmarch Ltd at £105,000 per annum on a lease expiring on 1st January 2017.

No 87a Broad Street – Let to T-Mobile (UK) Ltd on a 15 year lease expiring on 9th December 2017 with a passing rent of £76,000 per annum. T-Mobile has combined this unit with 88 Broad Street. Blue Arrow occupy the offices at 87/87a Broad Street on a lease to expire on 18th March 2021 with a passing rent of £19,000 per annum. There is a tenant break option at 19th March 2018. Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review Shoe Zone Retail Ltd No.86 £137,000 £47.93 02/04/01 01/04/16 15 There are no remaining rent reviews. This unit has been sublet to Maronmarch Ltd EE Ltd No.87 £155,000 £41.86 07/10/02 06/10/17 15 at a rent of £105,000 pa. T-Mobile (UK) Ltd No.87a £76,000 £57.75 26/06/02 09/12/17 15.5 There are no remaining rent reviews. Offices at Blue Arrow Ltd £19,000 £11.53 19/03/12 18/03/21 9 Upward only review at 19/03/17. 87/87a Total £387,500 86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

Covenant Strength Shoe Zone Retail Ltd were registered in 1917 and sell a range of value footwear for men women and children. The company has a D&B rating of 4A1 with a turnover in excess of £172 million. The company has been given a minimum risk of business failure. We provide a summary of their latest accounts as follows: Year Ending Year Ending Year Ending Shoe Zone Retail Limited 04 Oct 2014 (000s) 05 Oct 2013 (000s) 29 Sep 2012 (000s) Sales Turnover £172,861 £193,882 £189,423 Profit (Loss) Before Taxes £11,677 £9,529 £8,488 Tangible Net Worth £29,677 £45,666 £36,609 Net Current Assets (Liabilities) £28,403 £36,950 £30,105

EE Ltd were registered in 1989 and provide global telecoms services. The company has a D&B rating of N1 with a turnover in excess of £6.3 billion. The company has been given a minimum risk of business failure. We provide a summary of their latest accounts as follows: Year Ending Year Ending Year Ending EE Limited 31 Dec 2014 (000s) 31 Dec 2013 (000s) 31 Dec 2012 (000’s) Sales Turnover £6,327,000 £6,428,000 £6,657,000 Profit (Loss) Before Taxes (£255,000) (£101,000) (£249,000) Tangible Net Worth (£868,000) (£661,000) (£179,000) Net Current Assets (Liabilities) (£962,000) (£713,000) (£141,000)

Blue Arrow Ltd were registered in 1959. The company has a D&B rating of 5A1 with a turnover in excess of £382 million. The company has been given a minimum risk of business failure. We provide a summary of their latest accounts as follows:

Year Ending Year Ending Year Ending Blue Arrow Limited 02 Jan 2015 (000s) 27 Dec 2013 (000s) 28 Dec 2012 (000’s) Sales Turnover £328,267 £376,784 £397,290 Profit (Loss) Before Taxes £10,677 £13,013 £10,623 Tangible Net Worth £48,249 £39,583 £30,355 Net Current Assets (Liabilities) £47,249 £39,787 £30,862

Overall we are of the opinion that the investment market would consider the tenants to offer a strong covenant.

INCOME ANALYSIS

Rental Income £387,500 pa.

Market Rent £287,200 pa.

Service Charge/Rates Shortfall Not applicable

CONDITION

As instructed, we have not carried out a structural survey, nor have we tested any of the services. Instead, we have been provided with a copy of the Building Inspection Report dated 3rd August 2015, prepared by Clarkebond on behalf of the vendor, APAM, and which we assume will be assigned to the Bank prior to completion of the purchase. The principal conclusions of the report are summarised as follows:

87 & 87A Broad Street

 “Whilst the overall visual condition of the building fabric highlighted nothing untoward there were isolated areas of local deflection to the 2nd floor and local distortion of the cut timber pitched roofs over both the front and rear three storey buildings. Roof distortions in such period buildings are not uncommon due to timbers sagging / spreading over time. Equally the local deflection to the 2nd floor appeared to be historic as there was no evidence of cracking to the finishes.  The local cracking over the window head to the rear elevation of the rear building is something which can be addressed with a local repair and may be partially attributable to local degradation of the supporting brickwork and the timber lintel.  Maintenance is required to elements of the external envelope as highlighted below such as brickwork repoint, roof slate repairs, window repairs, along with removal of the graffiti.  The basement walls and floors are susceptible to damp ingress and the ground floor timber floors are at risk of decay.”

86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

86 Broad Street

 “It is clear from the pigeon detritus within the roof void it was previously open to the elements and when repaired roofing membrane was installed between the rafters but not continuous across the rafters. The effectiveness of this membrane is questionable as there was evidence of random isolated damp staining to the 2nd floor ceilings. The roof slates were randomly disturbed and fractured where viewed on the rear elevation.  The basement walls floor are susceptible to damp ingress.  Maintenance is required to elements of the external envelope.”

The lease for 87 Broad Street dated June 2002 covering the Ground Floor shop and Basement expires in December 2017. The lease requires the tenant to pay Common Costs, to well and substantially repair the exterior and interior, and keep in good and substantial repair and to decorate and yield up in good and substantial repair.

The lease for 87 and 87A Broad Street dated October 2002 covering the Ground Floor, Basement, First and Second Floors for 15 years expiring October 2017; requires the tenant to well and substantially repair, decorate and clean, and to yield up in good and substantial repair. Dilapidations should be considered soon. The lease is subject to a Schedule of Condition.

The lease for 86 Broad Street requires the tenant to keep in good and substantial repair, decorate and clean. There is a licence for alterations dated June 2011 relating to fit out.

In our opinion, the cost of all outstanding repairs and maintenance, together with ongoing repair and maintenance costs, will be recoverable from the tenants via the service charge and repairing provisions in the leases. Our valuations assume that the cost of rectifying any outstanding repairs and maintenance is the responsibility of the tenants.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

MARKET OVERVIEW

Like most major shopping centres in the Home Counties, Reading also competes with London for infrequent, and often high spending, shopping trips.

Retailing in Reading Broad Street was once Reading's prime pitch, however, the development of The Oracle provided a new retail focus for retailers and shoppers alike.

Vacancies, in-movers and closures There are a limited amount of vacancies in the core retailing areas of Reading.

Although a number of high profile retailers have arrived in Reading in recent months, the town has, nevertheless, lost some key fashion retailers such as French Connection, Gap, Karen Millen, Superdry and Wallis, along with other high street names, notably Bhs, The Disney Store, Currys/PC World, Goldsmiths and Early Learning Centre. Several well-known catering brands have, however, opened in the town centre, helping to offset the impact of the departure of these comparison retailers.

Cote Brasserie and Handmade Burger Company had located along The Riverside. There was a total of eight vacant units in The Oracle at the time of reporting, an increase on the level recorded in 2013.

There had been little tenant movement on Broad Street recently and agents consider that rents here still remain at approximately £200 psf Zone A.

Future change in TC supply The Reading Central Area Action Plan (RCAAP), which sets out the planning framework for the central area up to 2026, was adopted by Reading Council in 86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

2009 and adapted in early 2015.

Summary - Retail The location of the property is its strongest characteristic and this is set to improve in 2-3 years as the Benson Elliot/Stanhope Station Hill redevelopment comes on line. This scheme will develop 1.2m sq ft of Grade A offices with ancillary retail, residential and leisure space. We understand that the first phase is due to Practical Completion in 2016 and they are in prelet discussions already. In addition to this Brockton and Landid are redeveloping Thames Tower on the corner of the road which will significantly improve the route from the station down towards this property. This will create a ‘dumbbell’ pitch in Reading with the Oracle at one end and the station at the other.

Offices The office market in Reading until this year has proved very resilient with a number of transactions indicating rents rising on brand new space to in excess of £34 per sq ft. However, this is only for prime brand new grade A space. Much of Reading town centre including the accommodation in the subject property is in small older suites and period buildings above retail. There is reasonable demand for this accommodation, notwithstanding the limited specification, mainly from local professional firms. However, particularly with a lack of new development, rents became more expensive on the prime assets, demand for this accommodation is improving (as demonstrated by a number of recent lettings on Friar Street and Queen Victoria Street) and rents generally between £7 and £15 per sq ft have been achieved. There has recently been an increase in enquiries according to local agents active in this market.

MARKETABILITY

Typical Void Letting Period Retail – 6 to 9 months. Offices – 12 months.

Typical Tenant Profile This is likely to be of a national covenant within a range of marketing sectors. We consider there would be a reasonable number of retailers who would seek to acquire these units.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period 12 months for 5 year leases for both retail and offices.

Letting Strategy N/A

RENTAL EVIDENCE

Reading is a strong and improving retailing location and there is strong and wide ranging occupational demand. The property is situated at the western end of Broad Street where Zone A rents are significantly lower than the areas close to the entrance to the Oracle Shopping Centre. This section of Broad Street has suffered during the recession. We cite the following comparable rental evidence:

 85 Broad Street is currently under offer to Footasylum at a rent equating to Zone A £135 per sq ft. The unit is adjacent to the subject property and is therefore the most relevant evidence.  84 Broad Street is also under offer and we understand a letting has been agreed on the basis of Zone A £140 per sq ft. This unit is in a slightly superior location.  68 Broad Street has been let to a Beautician for a term certain of 10 years at a passing rent of £57,500 per annum to reflect a Zone A of £124 per sq ft. The unit is located on the north side of Broad Street in a slightly less prominent position than the subject property.  87 Broad Street at the subject property was sublet to Maronmarch Ltd in 2014 on a 3 year term at £105,000 per annum. This reflects a Zone A of £135 per sq ft.  81 Broad Street - Artigiano has taken a 10 year lease at for a rent of £120,000 per annum to reflect a Zone A of £109 per sq ft. The unit is to the west of the subject property in a less prominent position.

With regard to the offices, the evidence on the subject property and in the vicinity demonstrates rents of between £9.00 per sq ft and £18.50 per sq ft. The property itself was let in 2012 at a rent equating to £11.50 per sq ft overall. This is now slightly historic and in our opinion rental values have improved slightly. We are of the view that rents are now in the region of £15.00 per sq ft.

86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

We are of the opinion that the estimated Market Rent of the property is £287,200 per annum. This is derived by applying £135 Zone A to the retail accommodation. We have applied rates of £7.00 per sq ft to the retail basement and first floor ancillary areas, and £5.00 per sq ft to the retail second floor ancillary areas. We have applied rates of £17.00 per sq ft to the first floor office accommodation and £12.00 to the second floor office accommodation, equating to £14.38 per sq ft overall. We have not made any deductions or allowances for the retail units as they are well configured.

INVESTMENT EVIDENCE

 69-75 Above Bar, Southampton – This property was purchased by AEW UK for £9.25m in June 2015. The WAULT is approximately 6 years and gives a net initial yield of 8.8%. It is over rented and with inferior rental growth prospects to Reading.  193 High Street, Exeter – We understand that this has been sold to a private investor for £2.28m in March 2015. The property is situated in a similar off prime retail pitch and is let to Pat Val and This is it. The investment has an approximate average of 6 years unexpired and the net initial yield is 7.06%.  17-27 Queen Victoria St, Reading - A private investor purchased this property for £3.9m in December 2014 to reflect an initial yield of 7%. The unit is located in a secondary pitch in Reading, has an approximate unexpired lease term of 4 years and is slightly over rented.  6-34a Oxford Road, Reading – The property is situated in a secondary location just off the main retail pitch to the west of the subject properties. The property was purchased by a private investor for £4.445m in October 2014 reflecting an initial yield of 8.78%. The property was let to seven tenants, providing a mixed covenant strength, and a WAULT of 7.85 years

The above evidence demonstrates that yields for short term income in secondary locations are between 7.00% and 8.80%. On more secondary locations such as Oxford Road, Reading and Above Bar, Southampton, yields are much higher. Of particular interest is the 6-34a Oxford Road transaction. The property provided a mix of value tenant with a WAULT of 7 years. This is an inferior location to the subject property, with a lower level of footfall. Further, the units are larger and therefore the letabilty prospects are considered weaker. The comparable does however have a longer WAULT than the subject property. We therefore consider that the initial yield of 8.75% adopted to the subject property compares favourably.

VALUATION METHODOLOGY

The property comprises a fully let retail and investment in a good but secondary retailing pitch in Reading. The retail leases are all short term, which will concern some investors, however occupational demand is good and provided a policy of lease re-gearing, renewal and re-letting is undertaken then the asset will stabilise. The income profile will, in our opinion, reduce on lease expiry given the over rented nature and based on prevailing rental values. However the level of over rent will erode as the lease terms shorten given the favourable rental growth prospects over the next three years.

The upper parts are leased as offices to a single occupier. The location is perfect for small businesses looking for central, cost effective space. The potential for residential conversion is not seen as a viable option at this time. Going forward, the impact of new developments in the vicinity will begin to have greater effect on demand, rents and the overall perception of the location which will feed through into improved demand and rental levels.

Based on our opinion of market sentiment and the above comparable information we have capitalised the income stream at an equivalent yield of 6.15% which produces a capital value of £4,186,000, reflecting an overall 8.75% net initial yield, and reversionary yield of 6.50%. Where there are short lease expiries we have employed exit voids of between 6 and 9 months on the retail and 12 months on the offices. We have specifically allowed for unrecoverable service charge and empty rates during the void periods. We have also allowed for agent’s letting costs of 15.00% and purchaser’s costs of 5.80%.

SUITABILITY FOR LOAN PURPOSES

The property forms adequate security for loan security purposes, subject to the adequacy of capital and income cover.

Should the property be marketed we consider that the asset would attract interest from a wide range of investors, including owner occupiers, property companies and high net worth individuals. Liquidity should improve once the imminent lease re-gears are agreed.

86 / 87 / 87a Broad Street, Reading, RG1 2AP October 2015

PHOTOGRAPHS

Front Elevation Rear Elevation

First Floor Storage Ground Floor Fetail

n) 20/22 Queen Street, Cardiff CF10 2BU

20/22 Queen Street, Cardiff, CF10 2BU October 2015

20/22 Queen Street, Cardiff CF10 2BU

KEY PROPERTY FACTS VALUATION AS AT 1 OCTOBER 2015

Macro Location: Reasonable. Cardiff is the capital City Market Value: £1,745,000 of Wales and a dominant regional retailing centre with a catchment population of 1.26m. Key Inputs Micro Location: Good. 90% prime. Located at the western end of Queen Street the city’s Initial Yield main premier retailing thoroughfare. 6.50% (rising to 8.92% in 2016) Property Type: Retail High Street Equivalent Yield 8.75% Total Property Area: 578.7 sq m (6,229 sq ft) Reversionary Yield 8.85% Tenure: Freehold. Capital Value per sq ft £280 per sq ft Number of Tenants: 1 Market Rent £163,483 per annum Percentage Vacant: 0% Market Value assuming Vacant £1,100,000 Total Rent Reserved: £120,000 per annum. Possession Reinstatement Value £1,024,355 Covenant Strength:

Sale Timescale: 6 months by private treaty. Suitability for Loan Security Good Purposes:

SWOT ANALYSIS

Strengths Opportunities

 Located in a good secondary retail location in Cardiff.  The property is a relatively dry investment, being let for a further 10.8  Occupational demand on Queen Street has improved over the last 12 years to a strong covenant. months.  Drive revenue through rent reviews.  Freehold interest.  Let to a national covenant who trade well from the unit.  Well secured with circa 10.8 years to lease expiry.  Minimum uplift in June 2016 to £165,000 pax.  The unit is well configured and would appeal to retailers that want large open space for a discounted rent to prime.  Reversionary with strong prospects for future rental growth.  Small lot size, attractive to cash rich purchasers and local investors. 20/22 Queen Street, Cardiff, CF10 2BU October 2015

Weaknesses Threats

 Tenant has a lower than average covenant strength (D&B rating of  Tenant default, and therefore loss of rental overage from fixed H2) that would be viewed with some caution by investors. uplifts. However any voids and associated costs may be mitigated  Cardiff is not considered a prime high street retail location. by rental growth and the strong letting prospects.  Without rental growth and yield compression, the value could come under pressure as the unexpired term shortens.

LOCATION

Overview Cardiff is the capital city of Wales and is located 45 miles (72km) west of Bristol, 40 miles (64km) east of Swansea and approximately 150 miles (240km) west of London.

Cardiff is the capital city of Wales and the dominant centre for local and devolved Government, commerce and retailing in the region. The total population within Cardiff’s primary catchment area is 1,263,000 people with an estimated shopping population of 573,000 people ranking the city 8th of the PROMIS Centres. The city has an important tourist industry with an estimated 18.4 million people visiting in 2011, bringing an estimated total spend of £943 million to the local economy. The population includes a particularly high proportion of 15-24 year olds. It is estimated that up to 50,000 students are currently enrolled at Cardiff University, UWIC and Glamorgan University.

Communication The city benefits from excellent transport links. By road, Junctions 29 to 33 of the M4 provide direct access to the city centre. Cardiff is well served by the national rail network, with half hourly direct mainline services to London Paddington, with a shortest journey time of 115 minutes. In addition, there are frequent direct rail services to Bristol, Swansea, Newport, Hereford, Gloucester and Birmingham. Cardiff International Airport is located 12 miles (19km) to the south west of the city centre.

Situation The subject property occupies a 90% prime retailing location on the pedestrianized section of Queen Street. Nearby retailers include Starbucks, Waitrose, Poundland, Superdrug, Miss Selfridge and McDonalds.

SITE

The site extends to approximately 0.04 ha (0.09 acres).

Access The unit fronts directly onto Queen Street, a public highway.

DESCRIPTION

The property presents as a modern building fronting Queen Street, with shop frontage at ground level and precast concrete panel elevations to the upper levels (1st and 2nd floors and coping above). The rear of the building has brick elevations.

The original drawings for the property indicate that it consists of a steel frame with composite concrete floors, fire protection to steelwork being provided by concrete casings to columns and some beams. Other beams and the soffit to the fire escape stair were observed to have a proprietary fibrous material applied.

At 1st floor level there is a flat roof to the rearmost section of the building over the kitchen and toilet area. This area includes a large steel plant platform accessible through a 1st floor window or by cat ladder from the flat roof on the 2nd floor.

At 2nd floor level the L shaped flat roof to the rear extends in part over the shop floor and part over the fire escape stair. 2 separate cat ladders provide access to the upper and lower roof levels. There is also a rendered lift motor room (with a flat felt roof over) at this level, however the access door could not be opened due to corrosion of the lock.

The 3rd floor consists of a tank room (access is via a cat ladder from 2nd floor level) with brick built elevations supporting a pitched tiled roof. The tank room slab extends out to the front and rear forming the flat roofs over the second floor storage area.

20/22 Queen Street, Cardiff, CF10 2BU October 2015

ACCOMMODATION

UNIT AREAS TENANT Description Sq Ft M² Ground floor sales 2,721 252.8 Urea Catering Limited (t/a (ITZA) (1,106) (102.8) 20/22 Queen Street Chopstix) First floor sales 2,308 214.4 Second floor ancillary 1,200 111.5 TOTAL 6,229 578.7

TENURE

The property is held freehold.

TENANCIES

Rent Rent Lease Lease Term Rent Tenant Unit Comments (£ pa) (£ psf) Start Expiry (years) Review

Urea Catering Minimum uplift to £165,000 at 2016 rent review. Limited (t/a 20/22 £120,000 £19.26 28/06/11 27/06/26 15 28/06/16 The tenant has provided a £49,500 rent deposit. Chopstix) RR 28/06/2016 and 28/06/2021.

Total £120,000

Covenant Strength Urea Catering Limited (t/a Chopstix) – Chopstix is a fast food establishment with over 45 sites nationwide, they specialise in the sale of oriental quick service take away meals. The financial accounts for Urea Catering Limited are summarised in the table below and based on the information available, the company has been ascribed a D&B rating of H2, representing a lower than average risk of business failure. However, the covenant afforded at the subject property is a franchise, for which the accounts will be unregistered. We consider that the investment market would therefore perceive this tenant with some caution.

Year Ending Year Ending - Urea Catering Limited (t/a Chopsticx) 30 Nov 2014 (000s) 30 Nov 2013 (000s) Sales Turnover - - - Profit (Loss) Before Taxes - - - Tangible Net Worth £1 £1 - Net Current Assets (Liabilities) £1 £1 -

INCOME ANALYSIS

Rental Income £120,000 per annum.

Market Rent £163,483 per annum (£125 ZA)

Service Charge/Rates Shortfall N/A. The property is fully let.

CONDITION

We have been provided with a Summary Building Report prepared by Clark Bond dated 7 August 2015. The principal conclusions of the Report are summarised as follows:

 “The property appears to be in robust structural condition with no visual evidence of underlying concerns, albeit it is susceptible to damp ingress.  Internally the ChopstiX demise at ground floor is in fair condition and functioning as restaurant space with back of house kitchen, toilets and storage facilities.  Maintenance is required to elements of the external envelope and it is considered that the upper internal areas will require refurbishment to render them suitable for letting. A number (of) areas of flat roof (are) near the end of their economic life and will require replacement.”

20/22 Queen Street, Cardiff, CF10 2BU October 2015

We note that the lease requires the tenant to keep in good and substantial repair, decorate and clean. Accordingly, in our opinion, the cost of any outstanding repairs and maintenance, together with ongoing repair and maintenance costs, is fully recoverable from the tenant via the full repairing and insuring terms of the lease.

From a postcode search to assess the assets environmental agency flood risk rating the flooding risk associated with the property is considered to be low.

MARKET OVERVIEW

Retailing in Cardiff Cardiff’s shopping area comprises an estimated 2.2 million sq.ft of retail floor space ranking the city 9th in the UK. Recently the city’s retail offer has been greatly increased by the extension of St David’s Centre in October 2009 which provides an additional 960,000 sq.ft of retail floor space, a 2,500 space car park, 25 restaurants, a new library and 300 apartments. The latest phase includes the first John Lewis in Wales and the scheme is now virtually fully let with retailers including Debenhams, Marks & Spencer, Hamleys, Clas Ohlson, Boots, Pandora, Carphone Warehouse and H&M represented.

Cardiff's prime retail pitch has traditionally comprised the pedestrianised central section of Queen Street, in the north of the core retail area. Boots, Bhs and Marks & Spencer all have large units on prime; other key retailers located on this compact pitch include HMV, JD Sports, River Island, Topshop/Topman, Primark and Zara.

St David's Centre lies to the south of prime Queen Street and has several units that front onto the prime pitch including Boots, Ernest Jones, Clarks and Marks & Spencer.

With top achieved rents now surpassing those of Queen Street, Grand Arcade, the main mall within the extension of St David's Centre, is now also considered to constitute part of the prime pitch within Cardiff city centre. Occupiers here include Oasis, Superdry, Warehouse, Fossil, The White Company, Coast and Karen Millen

The subject property is located at the western end of Queen Street in close proximity to both Queens Arcade and St David’s Shopping Centre. Primark have recently relocated to 50-55 Queen Street (formerly Bhs). Matalan have in turn occupied Primark’s former store at 43-45 Queen Street.

Vacancies, in-movers and closures Cardiff city centre has seen an overall increase in its PMA Retail Provision Score between 2005-2014. This has primarily been driven by the completion of the extension to the St David's Centre in 2009 which resulted in a marked uplift to the score.

The vacancy rate in Cardiff city centre in mid 2014 stood at 11.9% of units, below the national average and a marked fall on the level recorded in August 2012. The level of take-up between the August 2012 and June 2014 was 6.3% of units, above the national average. Cardiff city centre started to show signs some signs of recovery in 2014. By Dec 2014, the vacancy rate had decreased to below the national average for the first time since 2008 and Queen Street, previously identified as an area adversely affected by the 600,000 sq ft extension to St David's, had just one vacancy on its prime section. However, not all parts of the central area appear to have recovered quite so strongly, with vacancies particularly concentrated on High Street and on the upper level of The Capitol Centre.

St David's Centre is composed of two sections, the northern section, known as SD1, anchored by Debenhams and the southern section, SD2, anchored by John Lewis. The two parts have a very different complexion, with SD1 focusing more on downmarket and non-fashion retailers, whereas SD2 is a key high fashion pitch for the city and considered a prime location.

In 2014 SD1 had a relatively high level of vacancies concentrated on St David's Way, at the entrance to Working Street; out movers include The Body Shop and Appy Feet. Elsewhere, several retailers moved in, namely Ecco, Yours, The Perfume Shop and Tiger. Primark also moved into the centre, taking over Bhs's store fronting Queen Street; Bhs ceased trading in the city centre, although the company is represented out of town, at Cardiff Bay Retail Park, where it trades as Bhs Home Store.

There is a fair amount of retailer interest in prime Grand Arcade in SD2 (lower level), and units have recently let to The White Company, Jane Norman, Karen Millen, Fossil and Blott; independent gold specialist, Clogau, have also opened a new Welsh flagship store here. Prominent departures on Grand Arcade include HMV, although part of the unit has since been let to Clinton Cards, and David and Goliath fashion, whilst Gilly Hicks and Blue Inc ceased trading from the upper floor.

Queen Street has improved considerably over the last year, experiencing a decline in vacancies from 11.5% of units in 2011 to just 1.5% today. On prime, Primark relocated across the road into the former Bhs store - part of St David's Centre; we understand that Matalan will take Primark's old store on Queen Street. Costa also plans to open another cafe on the very edge of prime. New arrivals on the non prime section of Queen Street include Holland & Barrett, The Works, Card Factory and Trailfinders.

The only change on The Hayes recently has been the arrival of Hotel Chocolat who took a small unit previously occupied by Carphone Warehouse. The Hayes has strengthened its offer in recent years and now accommodates a stable line-up of designer and boutique retailers. Recently, popular London- based restaurant chain Burger and Lobster have leased space at The Hayes, its first restaurant outside the capital.

The Capitol Centre had a high vacancy rate standing at over 40%, or 16 units, in 2014, although some of these are due to be refurbished. In light of the completion of the St David's extension, we understand that the owners are seeking to reposition the formerly fashion-oriented scheme towards convenience and leisure uses. Indeed, Internacionale, Fat Face and Tie Rack had all departed recently and we understand that Austin Reed is trying to sub-let its unit. Several shops had been amalgamated to accommodate Tesco Express, Easygym replaced Sportsdirect and Pret a Manger also took a unit in the centre.

Rents and deals Prime retail rents in Cardiff rose strongly in the late 1980s reaching £165 psf Zone A in 1990. Rents subsequently declined to around £150 psf Zone A by 20/22 Queen Street, Cardiff, CF10 2BU October 2015

late 1992, where they stayed until mid-1995. By 2000, prime Zone A rents had climbed to £250 psf and peaked at £300 psf by the end of 2007, staying at this level until 2009. Prime Zone A rents fell back sharply from mid- 2009 in the aftermath of the credit crunch and economic recession, declining at a far greater rate during 2008-2013 than Major Cities generally.

Agent sources today estimate prime rents in Cardiff at £225 psf Zone A. This represents no change on the end 2014 level of prime rents in the city with rents remaining 25% below the pre-recession peak of £300 psf ZA. On average, prime rents across the national towns remain 28.7% below the pre-recession peak.

In common with some other Intu centres, we understand that rents for units in St David's Centre are structured on a base rent plus turnover top up arrangement, with the tenant paying 80% base rent plus a turnover related supplement in some cases. Rents quoted in this report, however, are full rack rents. Additionally, as deals are only analysed on a net basis, the Zone A values quoted are net effective as opposed to headline.

Agents for St David's Centre also reported considerable fluctuation in rents at the time of our 2014 survey. What is clear, however, is that the lower floor of Grand Arcade within SD2 is established as prime, with rents in excess of £250 psf Zone A sometimes being achieved. A letting to Jo Jo Maman Bebe in 2010 was agreed at this level and 2013 lettings to independent jeweller, Clogau, and Clinton Cards, are said to reflect net effective values of £265 psf Zone A. These were considered to be exceptionally strong rents, however, and contrast somewhat with a letting to The White Company, who took a unit further along prime a little earlier in 2013, at £225 psf Zone A and a 2014 renewal to O2 at £212 psf Zone A. In light of the considerable variation in rents, and in line with the opinions of leading agents, a prime rental tone of £225 psf Zone A was considered the most appropriate estimate at mid 2015.

Prime Zone A rents for Queen Street fell from a peak of £300 psf in 2009 to £280 psf by the end of that year, reflecting the adverse economic conditions that prevailed at that time, as well as increasing competition from St David's Centre, where an additional 600,000 sq ft of retail floorspace became available upon completion of the new extension.

There has been very little recent rental evidence for prime Queen Street recently, with local agents estimating achievable Zone A rents in the region of £175- 200 psf. In 2010, Bank took a new lease on a unit at £300 psf Zone A, while the most recent 2014 letting to Costa, on the very edge of prime, reflected around £150 psf Zone A.

Elsewhere on Queen Street, rents were reported to have fallen back slightly. At both the eastern and western ends, Zone A rents were considered to be in the region of £125 psf; the only zoned deal at the western end relates to a letting to The Works, who took a unit at £90 psf Zone A in 2012. At the eastern end, Specsavers took Game's old unit in 2013 at £205 psf Zone A, although this deal is tempered by the fact that the unit is very close to prime and was, apparently, well incentivised.

Pipeline There is a relatively small amount of retail floorspace in the pipeline for Cardiff city centre, with retailer demand having been well met with the completion of the St David's extension in 2009. The majority of planned space in the pipeline is intended to accompany more significant office or residential schemes.

Marcol Asset Management has full consent for a mixed use scheme on land south of Adam Street that involves offices, a hotel and student accommodation. Sapphire Holdings also have planning permission for a small extension and refurbishment of Queens Arcade.

Cardiff Council is believed to be in discussions regarding a possible mixed use development around the area of Cardiff Central Station. In June 2014, it was announced that Cardiff-based firm, Rightacres Property, had made a development agreement with the BBC for a separate scheme for a new headquarters opposite the station, although an application is yet to be submitted.

Town centre competition Cardiff is the premier retail centre in Wales, and thus attracts shoppers from a very wide area. The main centres offering significant competition are Newport and Swansea, although small centres within Cardiff’s catchment area, such as Pontypridd and Caerphilly, will attract comparison spending from their own local areas.

Swansea is around 40 miles to the west of Cardiff and around 50 minutes drive away via the M4. The city has one department store, good variety store representation, a modestly sized covered centre, a popular market and some limited speciality shopping. There is also retail warehousing within walking distance of the city centre. Swansea lacks the quality and variety of retailing on offer in Cardiff and, as a consequence, some residents in the Swansea and west Wales area may travel to Cardiff for major comparison shopping trips.

Newport is just under 30 minutes drive to the east of Cardiff. Whilst Newport has a reasonable range of high street multiples and variety stores, it currently has no full range department store and its offer and environment are inferior to that of Cardiff. The main shopping centre and its environs are dated and the town lacks quality and speciality shopping. Newport offers only limited competition and many of its residents are likely to visit Cardiff for major comparison shopping trips. A new shopping centre is being built - Friars Walk - which is due to complete in late 2015. Debenhams will anchor the scheme, with Topshop, New Look and Next signed up, as well as a Cineworld and A3 operators Nandos, Frankie & Benny’s and Prezzo.

Bridgend, located on the western edge of the catchment area, is poorly provided for in terms of major department/ variety stores, and is thus unlikely to provide much competition for Cardiff. Nonetheless, it will attract regular shopping trips from local residents.

Bristol, nearly an hour's drive away, is the nearest major city to Cardiff. Bristol's prime shopping centre is Cabot Circus, which is anchored by House of Fraser and Harvey Nichols. The scheme includes an upmarket/designer quarter called Quakers Friars; tenants here include upmarket retailers Hugo Boss, All Saints, Reiss and LK Bennett. Since Bristol is less than an hour from Cardiff, we expect the city to attract occasional shopping trips from residents on the eastern fringes of Cardiff's catchment area. There are two scheme's in Bristol's pipeline which may increase the city's offer.

20/22 Queen Street, Cardiff, CF10 2BU October 2015

MARKETABILITY

Typical Void Letting Period The subject property occupies a high footfall location and close to other fast food operators McDonalds and Burger King. The unit is small, and consequently, the overall rent is low and we believe that the unit would see active interest if it were vacant. A marketing period of 6 to 9 months would be required.

Typical Tenant Profile This is likely to be either a national covenant, given the location.

Typical Lease Length Leases are likely to be between 5 and 10 years.

Typical Rent Free Period We would anticipate 9 months for 10 year leases.

Letting Strategy N/A

RENTAL EVIDENCE

There is limited recent rental evidence on Queen Street. In arriving at our opinion of value we have had regard to a range of comparable transactions, detailed below:

 11-13 Queen Street – In March 2015 Poundland renewed their lease of the property for a term of 10 years at a rent of £320,000 per annum reflecting a Zone A rent of £107.50 per sq ft. A three month rent free period was given and the tenant was expanding from number 13 into both 11 and 13 Queen Street. This is not seen as an arm’s length transaction and we are advised that a discounted rent was agreed on the basis that the tenant was already incumbent. The property is located in an inferior pitch to the subject property.

 3-5 Queen Street – In December 2012 Ladbrokes took a 10 year lease of the property at a rent of £85,000 per annum reflecting a Zone A rent of £131 per sq ft. A 6 month rent free period was given and there was a tenant break option at the end of the third year. This is a slightly superior location, however is now quite historic. The market has improved since this transaction. We would anticipate a slightly lower rate being achieved at the subject property.

On the basis of the above and following discussions with local agents, we have applied a Zone A rate of £125 per sq ft, adopting rates of A/15 on the first floor (sales) and A/25 on the second floor. This provides an aggregated rental value of £163,483 pa. On this basis, the property is reversionary by approximately 25.00%. The lease is subject to a fixed increase in June 2016 to £165,000 pa.

INVESTMENT EVIDENCE

In arriving at our opinion of value we have had regard to a range of comparable investments, as below:

 14 St John Street – In January 2015 a private investor bought the freehold interest in the property for £3.025m reflecting an initial yield of 6.25%. The property is let to Burger King franchisee with a WAULT of 7.7 years. Although the property is situated in a weaker location the stronger covenant means that we would expect to see the subject property trade at a discount.

 40-42 Queen Street – In January 2012 CCLA purchased the freehold interest in the property for £4m reflecting an initial yield of 5.80%. The property was let to Phones 4U and at the time of sale the WAULT was 8.9 years. Despite the fact the investment market wasn’t as strong at the time of sale the property is situated in a better location on Queen Street close to the entrance to Queens Arcade shopping centre which links with the newly built St David’s 2 shopping centre which is anchored by John Lewis. This unit occupies a stronger retail pitch and is let to superior covenant. We would expect the subject property to trade at a discounted yield.

VALUATION METHODOLOGY

The property comprises a well configured single retail unit located in a good secondary pitch in Cardiff. The property is let for a further 10.8 years, albeit to an unknown covenant that would be perceived as weak by the investment market. The lease is subject to a minimum uplift in June 2016 to £165,000 pa.

Based on our opinion of market sentiment and the above comparable information we have targeted an initial yield of 6.50%, but having regard also to the running yield in June 2016 where the yield improves to 8.92%. Our opinion of the Market Value is therefore £1,745,000 which reflects an equivalent yield of 8.75% and a reversionary yield of 8.85% and a capital value of £378 per sq ft based on the retail accommodation on an overall basis.

SUITABILITY FOR LOAN PURPOSES

We confirm that the property is suitable for loan security purposes. 20/22 Queen Street, Cardiff, CF10 2BU October 2015

Although the covenant strength of the tenant is unknown, the property is significantly reversionary with good reletability prospects, mitigating letting risk. Any voids and associated costs will be offset by the strong letting prospects, and rental growth. We are aware of a number of active requirements from national retailers looking for space in this location.

If the property were to be offered to the market we would expect that a sale could be achieved within 6 months at the level of our valuation. The property is most likely to appeal to local property companies and cash rich private investors.

PHOTOGRAPHS

Frontage – Queen Street Retail Space

Ancillary Accommodation Toilets

3. APPENDICES

a) Engagement Letter

Eurynome LLC Direct Dial: 020 7318 5106 160 Greentree Drive Mobile: 07968 172 539 Suite 101 E-Mail: [email protected] City of Dover Fax: 020 7318 5088 Kent County Delaware United States

C/O Craig Rydquist, Värde Partners, Inc.

Credit Suisse Securities (Europe) Limited One Cabot Square London E14 4QJ

For the Attention of Derek A. Rich 11 September 2015

Dear Sirs,

THE TOUCAN AND PEACOCK PORTFOLIO (the ‘Portfolio’)

Further to our various emails and telephone conversations in respect of the above, we write to thank you for your kind instructions for us to prepare a Report and Valuation in respect of the Portfolio for the benefit of the Addressees (as defined below and who may also be referred to as "you" or "your" or the "Client").

The valuation required falls within the scope of the Royal Institution of Chartered Surveyors (“RICS”) Valuation – Professional Standards January 2014 (incorporating the International Valuation Standards) and will be carried out in accordance with those standards. The first requirement of the Standards is that valuation instructions are confirmed in writing, in order to establish that the valuation will meet your needs.

Scope of Instructions

We confirm that our understanding of your instructions to us is to assess the Market Value of the freehold and long leasehold interests in the various properties as at a date to be agreed (the "Instructions").

Purpose and Reliance

You have advised that the valuation will be required for loan securitisation purposes. You have further advised that Credit Suisse will be advising in the issuance in their capacity as an Arranger. We confirm that our Report and Valuation can be disclosed to and relied upon by:

(d) any other manager, note trustee and/or security trustee in connection with any securitisation of, or referable to, any loan under the Facility Agreement,

(together the "Addressees").

The Addressees may disclose the report and any other advice, letters, certificates or other documents relating to such report (together, the "Report Documents") only to the following parties:

(b) to any affiliates of any Addressee;

(d) to any financial institution or other entity in connection with the loan and/or hedging transactions under or in respect of the Facility Agreement, and their respective advisers;

(e) to future owners, or prospective purchasers, of any property financed under the Facility Agreement;

(g) where disclosure is required by the rules of any stock exchange, listing authority or similar body on which their shares or other securities are listed;

(h) to any potential transferee or assignee of any lender under the Facility Agreement; and

We further confirm that we have the necessary expertise and experience in providing such advice, that we can provide a report suitable for such purposes and that our proposal has been prepared on this basis.

Terms

This Engagement Letter and the enclosed documents listed below together contain all the terms of the contract between you and us for these instructions (the “Agreement"). Please read this letter and the enclosures carefully to ensure they accord with your instructions. In the event of any conflict between the documents comprising the Agreement, the following order of precedence shall apply:

1. this Engagement Letter; 2. our Schedule of Exclusion Clauses; and 3. our Standard Terms of Business.

Conflict and Status

We confirm that we are not aware of any conflict of interest arising from our acceptance of this instruction and we confirm that Strutt & Parker LLP in its capacity as External Valuer, conforms to the requirements of the Practice Statements and Guidance Notes set out in the Valuation Standards of the Royal Institution of Chartered Surveyors.

General Assumptions, Information Sources and Extent of Due Diligence Enquiries

In preparing the valuation assumptions, caveats and reservations may be made; a provisional schedule of these (the Schedule of Exclusion Clauses) is attached. The extent of the due diligence enquiries we have undertaken and the sources of the information we rely upon for the purpose of our valuation will be stated in the relevant sections of our report. If any Special Assumptions are made, these will be discussed and agreed with you in advance and again these will be clearly stated in the text of the valuation report.

RICS Compliance

We confirm the Report and Valuation will be prepared in accordance with the RICS Valuation – Professional Standards January 2014 - incorporating the International Valuation Standards (the RICS ‘Red Book’ published in March 2012 and effective from 30 March 2012, as at the Valuation Date.

Inspection

We will undertake full internal inspections of the properties.

Timescale

With your agreement we propose providing an Executive Summary to you by Friday 28 August with our full Report to follow no later than Friday 4 September 2015.

Contact

The due diligence enquiries and report preparation will be undertaken by Mark Whittingham ([email protected]) and David Eden ([email protected]), both of whom are Partners in the Strutt and Parker Valuation Advisory Team.

Fees

The fee agreed between us shall be £45,000 exclusive of VAT but inclusive of any expenses, which shall become payable on provision of the valuation report.

We would ask you to note that if our full Report is not required, as a result of our instructions being varied for any reason, we reserve the right to charge an appropriate fee for our abortive work. This fee will be a proportion of the full fee that would have been due and will be assessed on a quantum meruit basis.

Liability

We confirm that we have sufficient Professional Indemnity Insurance cover for the purpose of this valuation, subject to the liability cap referred to in our Terms of Business, details of which can be made available to you on request.

What we ask you to do

Any changes to the terms of our Agreement must be agreed in writing between us before we start work. Therefore, if you have any queries or concerns about any aspect of this letter or the enclosed documents please contact us as soon as possible to discuss those changes.

We would be grateful if you would please date and sign the enclosed copy of this Engagement Letter. Should we not receive a signed copy of this letter from you, your continuing instructions will confirm your acceptance of the terms of our Agreement.

Finally, many thanks for your instructions.

Yours Sincerely,

Mark Whittingham MRICS Head of Commercial Valuation For and on behalf of Strutt & Parker LLP

We acknowledge receipt of this Engagement Letter and its enclosures and confirm our acceptance of the terms and conditions set out therein. We hereby warrant and represent that we have the appropriate authority to sign for and on behalf of the following parties:

Eurynome LLC. Signed:……………………………………………………………… For and on behalf of Credit Suisse Securities (Europe) By:……………………………………………………………… Limited Värde Partners, Inc., its Manager Print name:………………………………………………………… Print name:………………………………………………………… Title:...... Title:...... Date:……………………………………………..September 2015 Date:……………………………………………..September 2015

SCHEDULE OF EXCLUSION CLAUSES

This Schedule of Exclusion Clauses adopts the defined terms as set out in our Engagement Letter and our Standard Commercial Terms of Business.

1. Inspection and State of Repair  For the purposes of the provision of our Services, we will not undertake a structural survey of the Property, a specific test of the services, a specific investigation as to the possible use of deleterious materials or techniques, a specific site survey, and/or an environmental assessment. A detailed inspection will not be made, therefore, of the fabric of any part of the Property, nor of the drainage, electrical, heating or plumbing systems, nor of any plant and machinery at the Property. We will not inspect those parts of the Property, which are covered, unexposed or inaccessible: Such parts will be assumed to be in good condition and repair. Our advice is therefore subject to any material defects which a subsequent detailed investigation might show.  The Services will be provided on the assumption that: the building and services are free of major defect; no deleterious materials or techniques have been used; the site and ground conditions are satisfactory; and the property has not been affected by environmental contamination.  Any issues identified or drawn to our attention, during the course of any inspection by us of the Property and the surrounding area and/or on our making any further enquiries (including the review of any third party survey or report prepared by an appropriately qualified professional and made available to us), that a competent surveyor might reasonably expect to have an effect, adverse or otherwise, on its assessment of the Property, has been reflected in the advice given to the Client.  We will advise the Client if we consider that further investigation is necessary.

2. Deleterious & Hazardous Materials  We are unable to state whether or not High Alumina Cement Concrete Calcium Chloride Additive, Woodwool Permanent Shuttering, Asbestos or other deleterious materials have been used in the construction/improvement or alteration of the Property. Our Services are provided on the assumption that they have not been used unless specifically advised to you and that there are no other material defects which a detailed structural investigation might reveal.  In the absence of information to the contrary, the provision of our Services is based on the assumption that such deleterious and hazardous materials have not been used unless specifically advised to you and that there are no other material defects which a detailed structural investigation might reveal.  Notwithstanding the comments above, it is likely that the cement fibre cladding sheets to the roofs and walls of some buildings and property constructed prior to 1999 contain asbestos in common with most other cladding sheets used in buildings of this age until 1999 when the use of asbestos for this purpose was discontinued.  The Control of Asbestos at Work Regulations 2002 introduced a new duty for people responsible for the maintenance of non-domestic premises to produce a register of materials either containing or presumed to contain asbestos.

3. Contamination, Asbestos and Other Hazardous Materials  The Property and its value may be affected by any of the following: (a) the presence of asbestos, materials containing asbestos, or other hazardous materials; (b) contamination associated with such materials; and/or (c) contamination in other respects.  Identification of all of those is highly specialised work, as is identification of their condition and stability, and of any resulting or related risks. Strutt & Parker have neither the qualifications, nor the expertise, nor any appropriate accreditation, to be able to carry out any such work. We are not aware of the existence, content or results of any environmental audit or other environmental investigations or soil survey which may have been carried out on the Property and which may have drawn attention to any contamination or possibility of contamination. We are also not aware of the existence, content or results of any report, risk assessment, or other investigation which may have been carried out on the Property and which may have drawn attention to the presence of any asbestos, of any substance containing asbestos, or of any other hazardous material at the Property, or to any risk or possibility of this.  As a result of all these factors, the provision of our Services is based on the assumption that no contamination exists, and that no asbestos, no substance containing asbestos, and no other hazardous material is present at the Property.  You should seek specialist advice on these issues. We reserve the right to amend our advice should such specialist advice reveal the presence or likely risks from an asbestos or contamination.  We suggest in making their enquiries that your legal advisers should ascertain whether the Property or any part of it has ever been the subject of any use which might result in it being contaminated. You should give full consideration to the results and implications of those enquiries before you enter into any legal commitment.  In undertaking our work, we will assume that no contaminative or potentially contaminative uses have ever been carried out on the Property or any neighbouring land.  We will not carry out any investigations into past or present uses, either of the Property or of any neighbouring property or land, to establish whether there is any contamination or potential for contamination to the Property from these uses or sites. We have therefore assumed that none exists. However, should it subsequently be established that contamination, seepage or pollution exists at the Property or on any neighbouring land, or that the Property has been or is being put to a contaminative use, this might materially impact the advice we give.  We are not 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 have drawn attention to any contamination or the possibility of such contamination.

4. Environmental Audits  We strongly recommend that your solicitor should make appropriate enquiries. If adverse issues arise, we should be advised in time to reconsider our advice if necessary and before any reliance is placed upon it.

5. Fixtures and Fittings  All items in the nature of tenant’s fixtures and fittings, plant and machinery except where specifically remarked upon are excluded from our advice.

6. Pests and Diseases  No investigation has been carried out into any infestation of any part of the Property of notifiable diseases or pests.

7. Title Deeds/Tenure  We have assumed unless informed to the contrary that the Property has a good and marketable title, that all documentation is satisfactorily drawn and that there are no encumbrances, restrictions, easements or other outgoings of an onerous nature which would have a material effect on our advice. Where we have seen documentation, we recommend that reliance should not be placed on our interpretation without verification by your solicitors.  Where we are supplied with copies of the occupational leases this will be stated in any advice given and the provision of the Services is on the assumption that these interests are not subject to any easements, wayleaves, restrictive covenants, tenancies or encumbrances other than those notified to us.  Where we are not provided with Licences to Assign, Sublet, Deeds of Variation or rent review memoranda we have relied upon information supplied to us.  We have not made any specific enquiries as to the financial standing of actual or prospective tenants other than those a competent surveyor would make when appraising the Property

8. Local Authority Information  Our advice is provided on the basis that the buildings and the uses to which they are put are authorised by planning permission or have become established under the Town and Country Act 1990. We believe that the information we have been provided with is correct but cannot accept liability for either incorrect information or material omissions in the information supplied to us.  We assume that there are no adverse planning or highway proposals affecting the Property.

9. Plans  The plans are for identification purposes only.

10. VAT  Our advice makes no provision for the payment of Value Added Tax. If all or part of the Property is a taxable supply, it is assumed that the tax will be recovered by the purchaser and therefore the value would not be reduced. In the event of the Property being sold, this may not be the case.

11. Comparable Evidence  Unless otherwise stated we may not have inspected internally or externally the properties referred to in our advice which are considered to be comparable market transactions either in terms of rental or capital value.

12. Stamp Duty  Our valuation is exclusive of Stamp Duty Land Tax

13. Sources of Information  Any information in supplied by us regarding Council Tax/Uniform Business Rates, planning and highways is obtained either orally or in writing from the Local Authorities. We believe it to be correct and will rely on the information supplied by them in preparing our advice to you, but we cannot accept liability for any incorrect information from these sources. We will similarly believe to be correct and rely upon information provided by you or your lawyers and we do not accept any liability for any assumptions made in connection with that information.

14. Soil Analysis and Site Conditions  We will not be responsible for any investigations into the existence or otherwise of any issues concerning soil stability, mining, geographical conditions, contaminated land or pollution including potential land, air or water contamination in respect of the Property or any adjoining property. Unless we are instructed by the vendor/you to arrange specialist reports then the vendor/you will be responsible for making his/your enquiries in this regard and in the absence of any advice to the contrary, we will be entitled to assume that no contaminated land exists at the Property or in adjoining or nearby land and that there are no dangerous materials in the vicinity of the Property.

15. Minerals  For the purpose of providing our advice to you we assume that there is good title to any mineral rights described.

16. Grants  Unless referred to specifically in our advice to you, we have not taken account of any grants or other subsidies which may have been received or may be available in respect of the Property nor any liability to repay such sums which may arise on disposal.

17. Mortgage and Financial Encumbrance  No allowance is made for the existence of any mortgage or other similar financial encumbrance on or over the Property.

18. Archaeology  No account has been taken of any additional costs of delays, which may be caused as a result of archaeological excavations or recording, which may be required. We reserve the right to alter our advice if such works materially affect the Property in any way.

19. Insurance  Capital values quoted are not appropriate for insurance purposes, which should be calculated on a re-instatement or indemnity basis.  Where required, any indication of re-instatement costs for insurance purposes will be provided by reference to the Building Cost Information Service (BCIS) Rebuilding Cost Index and adjusted as appropriate to the Property. No reliance should be placed on this. Separate professional advice should be sought in respect of building costs of the Property.  Unless expressly advised to the contrary we assume that appropriate insurance cover is and will continue to be available on commercially acceptable terms.  Our advice is on the basis that the Property is insured against risks of loss or damage including damage caused by Acts of Terrorism as defined by the 2000 Terrorism Act. We assume that the insurer, with whom cover has been placed, is reinsured by the Government backed insurer, Pool Reinsurance Company Limited.  Our advice is given on the assumption that the Property is insured against damage by flood and rising water table.

20. Taxation & Costs of Sale  No allowance is made for any liability which might arise upon a disposal or deemed disposal in respect of Capital Gains Tax and other tax impositions, and our advice is gross of costs of realisation.  Our figures do allow for purchaser’s acquisition costs at the amount stated in our advice to you.

21. Measurement and Areas  All measurements set out in our advice to you are carried out in accordance with the current Code of Measuring Practice issued by RICS unless specifically stated that we have relied on another source.  In the case of retail premises, we assume that where floor areas are quoted In Terms of Zone A (ITZA), the appropriate zone depths are in accordance with the market practice for the towns and cities concerned.

22. Disposals  We will be entitled to make the following assumptions, which we will be under no duty to verify, when instructed to market a Property: - all information provided by you and/or your professional advisers regarding the Property is complete and correct; - information provided as to the extent of an ownership of the Property is complete and correct and that there are no encumbrances or unduly onerous or unusual easements, restrictions, outgoings or conditions, attached to the Property save as specifically advised to Strutt & Parker; and - the Property has been constructed, and is occupied, in accordance with valid planning, building regulations and all other necessary approvals.

 Whilst every care is taken in the preparation of property details to meet the requirements of the Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Misleading Marketing Regulations 2008 you are required to advise us, in writing, at once if any aspect of the Property particulars we supply is, or later becomes, inaccurate or in any way misleading.

 We will have no management role or responsibility in relation to the Property. In particular, you will be responsible for making such security arrangements for the Property as you shall deem appropriate.

 We accept no liability or responsibility for the maintenance or repair of or for any damage to the Property while unoccupied. If the Property is vacant and adverse weather conditions are likely, frost damage may occur to water and heating systems and sanitary appliances. You are strongly recommended to take all necessary action to protect the Property from such risks, and to ensure that adequate insurance cover is in force.

 It is not our policy to provide any services for financial gain, either direct through a connected person, to a prospective purchaser or tenant in respect of a property we are marketing, until unconditional contracts have been exchanged. We will notify you if the prospective purchaser or tenant requests us to act on its behalf in respect of the Property.

23. Acquisitions  Our Standard Commercial Terms of Business apply in like manner (mutatis mutandis) to purchases or lease acquisitions as to sales or lettings. Whilst we will use all reasonable care and skill in identifying and negotiating the acquisition of a Property to suit your requirements, you shall be solely responsible for determining whether the Property is suitable and for carrying out any enquiries necessary for this purpose. We will not be responsible for making any local search, enquiries of local or any other authorities or investigation of title regarding the Property. Unless specifically instructed, we will not be responsible for undertaking a structural survey of any building, or for undertaking ground surveys, or for testing any services supplied to the Property.

24. References  Where we introduce a tenant or assignee for a lease of the Property, where appropriate, references will be taken up and supplied to you. We are not responsible for the interpretation of any references or accounts obtained, and it is for you or your accountants to satisfy yourself/themselves as to the financial strength of the proposed tenant or assignee.

25. Defective Premises Act 1972 and Health and Safety at Work Act 1974  We have assumed that no rights, obligations or liabilities, under the Defective Premises Act 1972 or the Health and Safety at Work Act 1974 have accrued or are prospective and that the Property has the benefit of a valid Fire Certificate and that any particular requirements of the Fire Officer or the various Local Authorities have been complied with.

26. Statutory Notices and Regulations  Our advice is on the basis that the premises (and any works thereto) comply with all relevant statutory and EU regulations, including enactments relating to fire regulations, access and use by disabled persons and control and remedial measures for asbestos in the workplace  Save as notified to us by yourselves or your advisors we assume no rights, obligations or liabilities under the Defective Premises Act 1972 or the Health and Safety At Work Act 1974 have accrued or are prospective and that the Property has the benefit of a valid Fire Certificate and that any particular requirements of the Fire Officer or the various Local Authorities have been complied with.  Our advice must not be treated by a purchaser as a survey of premises and the plant and equipment on it for the purposes of assessing risk to Health and Safety within the scope of the 1974 Act and its Regulations. Our advice is based on the assumption that no further work is needed to ensure compliance with the Act and Regulations.

27. Outstanding Debts  Where construction works are in hand or have been completed recently we do not make any allowance for any liability already incurred but not discharged in respect of completed works, or obligations in favour of contractors, sub-contractors or any member of the professional or design team.  No allowance is made or due account taken for any arrears of rent, service charge or any other outstanding disputes unless specifically stated.

Strutt & Parker LLP Schedule of Exclusion Clauses February 2015

STRUTT & PARKER LLP STANDARD COMMERCIAL TERMS OF BUSINESS

1. Application These Commercial Terms of Business and our Engagement Letter set out the basis on which we shall provide you with Services and also contain certain information which we are required by the Royal Institution of Chartered Surveyors (“RICS”) and by legislation to give you. In the event of any conflict between these Standard Commercial Terms of

Business and our Engagement Letter, the terms of the Engagement Letter shall prevail. 2. Interpretation In these terms: "Agreement" has the meaning as set out in the Engagement Letter. "Commission" or "Fee" means the remuneration payable by you to us for the Services, as detailed in the Engagement Letter and in accordance with the terms of the Agreement. "Completion" means the date on which a transaction effecting a sale or letting of the Property, whether by way of acquisition or disposal is made, as the context requires. "Confidential Information" means any confidential information, matter, data, know-how, documents, secrets, dealings, transactions or affairs (however recorded or preserved), whether directly or indirectly disclosed to us by you or your employees, officer, representatives or advisors, whether before, on or after the date of our Engagement Letter, concerning the provision of the Services. "Engagement Letter" means our letter or other communication to you setting out the basis on which we shall carry out a particular matter for you. "the firm" "we" "our" and "us" mean Strutt & Parker LLP, a limited liability partnership registered in England and Wales (with registered number OC334522) which operates in association with the Strutt & Parker general partnership as part of the Strutt & Parker Group. "Instructions" means your instructions as set out in the Engagement Letter. "Property" means the property or interest in property, as defined in the Engagement Letter in respect of which you have engaged us to provide the Services. "Services" means the work carried out by us as specified within the Agreement and in particular under the scope of your instructions as described in our Engagement Letter. ""we", "us" and "our" means Strutt & Parker LLP. "you" and "your" means our Client, as defined in the Engagement Letter. 3. Events which give rise to Commission being payable 3.1 Sole Selling Rights: you will be liable to pay Commission to us, in addition to any other costs or charges agreed, in each of the following circumstances: (i) if unconditional contracts for the sale of the Property are exchanged in the period during which we have sole selling rights, even if the purchaser was not found by us but by another agent or by any other person, including yourself; or (ii) if unconditional contracts for the sale of the Property are exchanged after the expiry of the period during which we have sole selling rights but to a purchaser who was introduced to you during that period by any person or with whom we or any sub-agent had negotiations about the Property during that period, or who received particulars of the Property from us or any sub-agent during that period. 1.2 Joint Sole Selling Rights: you will be liable to pay Commission to us, in addition to any other costs or charges agreed, where either of the circumstances described in clause 3.1 (i) and (ii) above occur and where: (i) an introduction was made by; (ii) any negotiations were conducted by; or (iii) any particulars were received from, the other agent having joint sole selling rights with us. 3.3 For the purpose of clause 3.1 (i) and (ii): a person who has exchanged contracts is a purchaser whether or not he completes the purchase; and unconditional contracts include all unconditional contracts made with a purchaser whether or not the contract is legally enforceable. 3.4 In the case of a conditional contract, an unconditional contract will be deemed to have been exchanged on the date of the satisfaction of the last condition or, if earlier, on the date of Completion notwithstanding any conditions which remain to be satisfied. If any matter proceeds straight to Completion, this is to be treated as exchange of unconditional contracts. 3.5 Refund of Fees: We will not be liable to refund to you all or any part of any Fees paid in accordance with the Agreement in the event that, for any reason whatsoever, the contract shall not be completed. 3.6 The provisions of these Standard Commercial Terms of Business shall apply in like manner upon the exchange of contracts for the grant of a lease (which term shall include such other occupational arrangements as pre-lets, licences, etc.), as they shall apply to contracts of sale. 4. Calculating the Commission and the time for its payment 4.1 The Commission payable by you is specified in our Engagement Letter and is a percentage of the total of the gross sale price at which contracts are exchanged for the sale or Purchase of the Property and any related furniture, fittings and fixtures, or, in the case of a letting, on the first full year’s annual agreed rent, together with VAT in addition. The Commission will be earned by us and become owing by you upon the fulfilment of one of the conditions set out under 'Sole Selling Rights' or 'Joint Sole Selling Rights', as applicable and as set out in Clause 3. 4.2 This Clause 4 applies notwithstanding any withdrawal of your instructions from us. As we are acting on your instructions you are responsible for the payment of the Commission and other sums referred to in the Agreement, notwithstanding that you individually may not be the owner or sole owner of the Property. 4.3 Pre-sales/pre-lets: Where we achieve a pre-sale or a pre-let of a building which is to be constructed, completed or refurbished, the agreed proportion of anticipated Fees will be payable on exchange of contracts or agreement for lease, with the balance payable on Completion of the sale or lease or upon Completion by the purchaser/tenant, whichever is the earlier. In this paragraph, the expression ‘pre-sale’ and ‘pre-let’ shall mean the exchange of contracts for a sale of or grant of a lease over the Property prior to the completion of the works of construction, Completion or refurbishment. In the event that the works to the Property are not completed in accordance with the terms of the contract and in consequence the purchaser or tenant refuses to complete the sale or lease, the full Fees will still be payable, as if the contract has been completed in accordance with its terms, and shall become due and payable at the time when the contract is terminated. However, we retain the discretion to waive all or part of our Fee, if we think fit to do so. 4.4 Leases: Where Fees are based on a percentage of one year’s annual rent, this will be the average annual rent achieved, calculated from the rent commencement date until the first rent review, ignoring any rent-free or concessionary rental period. Where an existing lease is to be assigned or acquired then, in addition to the Fee calculated on the basis of the passing rent, there will be a Fee charged at the rate specified in the Engagement Letter on any positive or negative premium given or received. 4.5 We will not require actual settlement by you of the Commission until after presentation of an invoice and, unless otherwise specified in our Engagement Letter or otherwise agreed in writing, not earlier than the date of Completion if that takes place within eight weeks of exchange of contracts or the date eight weeks after exchange of contracts in all other cases (whether or not Completion takes place). 4.6 Where a capital receipt is to be obtained from a Property, we reserve the right to require you to authorise your solicitors to deduct our Commission together with any costs plus VAT payable hereunder from the sale proceeds and to remit the same directly to us on Completion. 4.7 Professional Work: In the case of rent reviews, lease renewals and rating appeals, Fees will become due on a binding agreement being reached as to the revised rent or rateable value. For the purposes of this paragraph a ‘binding agreement’ shall mean: (i) for rent reviews, either exchange of open correspondence or third part determination or completion of rent review memoranda; (ii) for lease renewals, completion of the new lease; and (iii) for rating appeals, the earlier of execution by us on your behalf of the Valuation Office Agency ("VOA")’s Agreement Form or VOA Notice. Unless specifically agreed otherwise, where Fees for rating appeals are calculated as a percentage of the estimated saving in rates payable, this will assume that full occupied rates have been payable throughout the duration of the relevant VOA Rating List, whether or not you have been in rateable occupation for that period. 4.8 In the event that a rent review or lease renewal cannot be settled by negotiation, an additional Fee will become due based upon the time expended in preparing and presenting, in the case of a rent review, submissions/representations to a third party or attending an Oral Hearing; and, in the case of a lease renewal, evidence to the Court. Such additional Fees will be calculated from the earlier of the third party/Court issuing directions or our attendance at a preliminary meeting. 4.9 Abortive Fees: Unless agreed otherwise, where we agree heads of terms in accordance with your instructions and solicitors are instructed for the acquisition or disposal (whether freehold or leasehold) of the Property but you subsequently withdraw from that transaction, we will be entitled to recover from you a fee equal to 50% of the full Fee that would have become due on the acquisition or disposal of that Property. In the event that instructions are withdrawn for any reason in the case of any Professional Work not expressly referred to in Clause 4.7, we will be entitled to recover from you a Time Charge Fee in accordance with Clause 5, based upon the time expended up until the point at which instructions are terminated by you in writing to us. 5. Time Charge Fees 5.1 In these Standard Commercial Terms of Business a "Time Charge Fee" means the hourly charging rate of the partner(s) or employee(s) involved multiplied by the number of hours spent by that person on the work in question. Time Charge Fees are reviewed annually on 1 May and are subject to VAT. You may at any time request details of the relevant charging rates applicable to the work we are doing for you. 5.2 We will charge a Time Charge Fee for work carried out for you unless, in advance of carrying out the work, we have specified in writing to you that a Commission or some other Fee will be charged. 5.3 Subject to Clause 4.9, where for any reason the work is not completed or instructions are withdrawn you will pay to us

a Time Charge Fee for time spent by us on the work up to the time when work ceased. 6. Invoices, time for payment and interest 6.1 Any account of Fees, marketing costs or other disbursements and VAT is due by the date of Completion or the date eight weeks after exchange of contracts, whichever is earlier. Any account for expenditure and VAT is due in full within 28 days of dispatch to you. 6.2 In the event that any invoice has not been paid in full by you in accordance with Clause 6.1, we may charge interest on the unpaid amount at the rate of four per cent per annum above Barclays Bank Plc base rate from time to time from the date of delivery. Such interest shall be compounded every six months from the date of delivery of the invoice. 6.3 If we instruct solicitors in connection with any failure by you to pay any account for Commission or expenditure and VAT when due, you will reimburse us the amount of costs and disbursements (exclusive of VAT) thereby incurred by us, whether before or after the issue of proceedings. 6.4 Please notify us whenever you send funds to us and the purpose for which they are being sent. If funds are sent in a currency other than sterling they shall be converted into sterling unless you notify us in advance that they are not to be

converted. Any exchange risk and bank charges (including any levied by our bankers) will be yours. 7. Marketing and other out-of-pocket expenses 7.1 In addition to any Commission earned, and whether or not a sale or letting is achieved, you will pay our authorised marketing expenses in full, which will be payable immediately on the date of the first advertisement. If at this time actual costs are not known, an estimate (based on our experience of current costs for such advertising and other items) will be used and, subject to Clause 7.2, any differences will be adjusted in the next account or on termination of our instructions. Any subsequently authorised expenditure will be invoiced as incurred and payable immediately on invoice. 7.2 The cost of all advertising and associated art work will be quoted as accurately as possible to you in advance, taking into consideration all discounts available to Strutt & Parker. Whilst every effort is made to provide accurate production costs for artwork, photography, printing, film, etc., these can only be approximate estimates and the final cost may vary. 7.3 With regard to the cost of brochures and printed particulars, the sums quoted elsewhere in these Standard Commercial Terms of Business and/or our Engagement Letter are the amounts which you shall be charged, or less if applicable. Where changes are made to artwork, or other advertising material which are not errors by suppliers, Strutt & Parker will pass on to you any additional charge made by the supplier for such corrections. 7.4 We reserve the right, where marketing costs would involve substantial financial outlay, to require payment of a deposit on account from you to cover such costs. Any surplus sums shall be repaid to you, without interest, once all accounts have been finalised and settled. Alternatively, you may, at your discretion, place orders directly with the suppliers. Strutt & Parker reserves the right to issue further invoices, where marketing costs exceed the deposit held, and such invoices become due for payment when issued. 7.5 Travel and other proper expenses and the cost of incidental services incurred or provided by Strutt & Parker will be charged to you at cost (or if not precisely ascertainable, at estimated cost) to Strutt & Parker. Car mileage will be charged at 50 pence per mile. 7.6 VAT is payable on all accounts and invoices for Fees and marketing expenses. Unless otherwise stated, estimated expenses do not include VAT. 7.7 Unless otherwise agreed in writing between you and us, all travel and out-of-pocket expenses incurred by us in the performance of the Services for you are repayable by you to us in addition to Fees or Commissions charged by us. Out-of-pocket expenses charged will include an allowance for postage, stationery and telephone costs.

7.8 We may invoice you for repayment of out-of-pocket expenses at any time after they have been incurred by us. 8. Performance of Services 8.1 We shall use reasonable skill and care in providing the Services to you and unless a specific timescale is agreed we shall provide the Services to you in a reasonable time. Unless any specific method of providing the Services to you has been agreed between you and us in writing, we will provide the Services to you in such manner as we consider to be appropriate. 8.2 We may sub-contract any incidental part or parts of any of the Services to be supplied to you, such as the preparation of plans, photography, advertising or courier services. With the exception of such incidental tasks, we will not sub- contract any part of the Services to be performed for you without your express prior consent. 8.3 We will be entitled to determine the location at which to supply the Services and will be entitled to determine that different individuals within our organisation based in different locations should supply different parts of the Services for you. 9. Scope of Services 9.1 You have instructed us to provide the Services. 9.2 In the event that you wish to alter your instructions to us after we have commenced work on the supply of the Services for you, we will be entitled to refuse to accept such altered instructions but if we do refuse to accept such instructions, we will cease to supply the Services originally specified and will be entitled to a Time Charge Fee for Services supplied up until that time. 9.3 We will not be responsible to you for the work of any other professional adviser or contractor from whom you might

seek to obtain goods or services whether or not instructed by us on your behalf. 10. Advice 10.1 We will not accept any liability for any valuation given orally and not confirmed in a formal written report which states the basis and purpose of the valuation, the assumptions on which it is based and any limitations as to the matters which it takes into account. You agree that you will not rely on any valuation or survey given orally unless and until it is so confirmed in writing. 10.2 If we give you any other advice orally and you wish to rely on it for any purpose you must first ask for and receive that advice from us in writing before relying on it. 10.3 We will not be under any obligation to update any advice, report or valuation to take account of events occurring or information received after the advice, report or valuation has been delivered in final written form. 10.4 Subject to Clause 16, if we express an opinion or make a forecast concerning future events you agree that we shall only be liable for the direct loss that was caused by our failure to exercise reasonable skill and care when giving that

opinion or making that forecast. 11. Client's commitments 11.1 You will pay us Fees or Commission as expressly agreed or as specified in these Standard Commercial Terms of Business. 11.2 In addition to Fees or Commission, you will pay us all disbursements and other costs as referred to in Clause 7 above and any applicable VAT on all Fees or Commission, disbursements and costs at the rate in force from time to time. 11.3 If you engage us to perform the Services but subsequently instruct us to perform additional services you will pay to us a fee or commission for such additional services as well as the Fees or Commission for the original Services. 11.4 It will be your responsibility to ensure that adequate access is provided for us and our representatives to any land and buildings and to any deeds, documents, plans, drawings, models or information, whether stored in hard copy or in an

electronically retrievable form, which we may require in order to supply the Services to you. 12. Use of email Unless you request us not to do so you agree that we may communicate with you and others in connection with your work by email to any email address provided to us for that purpose. In doing so you acknowledge and accept the risks inherent in this form of communication particularly of its unauthorised interception and of its not reaching the intended recipient. Please notify us in writing if you do not consent to the use of email. 13. Energy Performance Certificates ("EPCs") 13.1 We are required to comply with the Energy Performance of Buildings (England and Wales) Regulations 2012, as amended and where applicable. We may instruct a third party to prepare an EPC on your behalf. In addition to any commission earned, and whether or not a sale or a letting (as appropriate) is achieved, you will pay us the cost of any such EPC on the date on which the third party is instructed. If at this time the actual cost is not known, an estimate (based on our experience of the current costs for EPCs) will be used and, subject to the provisions of Clause 14, any differences will be adjusted in the next account or on termination of our instructions. 13.2 The costs of EPCs will be quoted as accurately as possible to you in advance, taking into consideration all discounts available to us. Whilst every effort is made to provide accurate quotations, these can only be approximate estimates and the final cost may vary. 13.3 VAT is payable on all accounts and invoices for EPC fees. Unless otherwise stated, estimated expenses do not include VAT. 14. Withdrawal from a ready, willing and able purchaser 14.1 A 'ready, willing and able purchaser' means one who is prepared and is able to exchange unconditional contracts for the purchase of the Property ("Ready Purchaser"). 14.2 Subject to Clause 14.3, you will be liable to pay Commission to us at the rate of 0.5 per cent of the price accepted by the Ready Purchaser before your withdrawal, or a fixed fee as may specified in the Engagement Letter (in addition to the marketing and any other expenses agreed to be paid) if: (i) a Ready Purchaser is introduced to you by us (or by the other agent having Joint Sole Selling Rights with us or by any sub-agent); (ii) heads of terms are agreed in accordance with your instructions; (iii) you subsequently withdraw; and (iv) unconditional contracts for sale are not exchanged with a Ready Purchaser. Such half percentage or fixed fee Commission shall be subject to VAT. 14.3 The provisions of Clause 14.2 shall not apply in circumstances where: (i) your withdrawal is caused by a bereavement, serious illness or other such personal situation beyond your reasonable control, which would make a disposal of the Property at the time inappropriate; or (ii) we are entitled to and receive payment of full Commission from you by reason of the actual sale of the Property to another person. 15. Copyright, confidentiality and third party rights 15.1 Copyright and other intellectual property rights in any original material (including correspondence), document, drawing, plan, model or report produced by us for you shall remain vested in us and we grant to you only a non-exclusive, non-assignable licence to use any such copyright work only for the purposes for which it was prepared. We may also provide copies of other material, the copyright and/or intellectual property rights in which may belong to third parties. We do not authorise you to copy or otherwise use any third party material in any manner which might amount to an infringement of the copyright and/or intellectual property rights of any third party. 15.2 Subject to Clause 15.3, we will not disclose any Confidential Information to any third party other than to your other professional advisors and consultants any confidential information we obtain concerning you or your affairs. 15.3 The provisions of Clause 15.2 shall not apply to any Confidential Information that: (a) we reasonably believe we are required to disclose by law or by the requirement of any regulatory body; (b) is or becomes generally available to the public (other than as a result of its disclosure by us in breach of clause 15.2); (c) was available to us on a non- confidential basis before disclosure to us for the purposes of our supply of the Services; (d) was, is or becomes available to us on a non-confidential basis from a person who, so far as we are aware, is not bound by a confidentiality agreement with you or otherwise prohibited from disclosing the information to us; (e) you and we agree in writing is not confidential or may be disclosed; or (f) we may wish to disclose to our professional indemnity insurers or advisers. 15.4 We will accept no liability to any third party to whom or which you may disclose our advice or purport to transfer the benefit of any Services supplied by us or to whom or which you may show any document, drawing, plan, model or report produced by us for you. 16. Exclusions and limitation of liability 16.1 Nothing in this Agreement shall operate so as to exclude or limit either party’s liability for death or personal injury resulting from its negligence. 16.2 Subject to Clauses 16.1, 16.3 and 17, the extent of our liability to you for any loss or damage suffered by you as a direct result of the breach of this Agreement or our negligence shall be limited in the aggregate to the lower of (i) the limit on our professional indemnity insurance cover; (ii) the market value of the Property as at the time of our engagement; PROVIDED THAT we shall only be liable where such loss or damage was a reasonably foreseeable consequence of our breach of this Agreement or our negligence at the date this Agreement for the Services was made between you and us. Our liability to you shall not increase by reason of a shortfall in recovery from any other party, whether that shortfall arises from an agreement between you and them, your difficulty in enforcement, or any other cause. 16.3 We shall not be liable to you whether in contract, tort (including negligence), for breach of statutory duty, or otherwise, arising under or in connection with our provision of the Services for: 16.3.1 any loss or damage suffered by you where such damage or loss resulted from incomplete, inaccurate or erroneous information or instructions provided or made available to us by you or by any third party acting on your behalf; 16.3.2 any loss of damage suffered by you which is specifically excluded under our Schedule of Exclusion Clauses; or 16.3.2 in any event, any loss of profits, account of profits, loss of revenue sale or business, loss of turnover, loss of agreements or contracts, loss of or damage to goodwill, loss or damage to reputation, loss of customers, or liability in relation to any other contract you may have entered into or any indirect or consequential loss or damage. 16.4 All amounts due under this Agreement shall be paid by you in full without any set-off, counterclaim, deduction or withholding (other than any deduction or withholding of tax as may be required by law). 16.5 The limit on our professional indemnity insurance cover varies from time to time and will be disclosed to you upon request (but will not at any time be less than the minimum level of cover required by RICS Rules of Conduct as amended from time to time). If you require us to accept liability in respect of a larger potential loss than that for which we have insurance cover, you must notify such requirement to us in writing and we will ascertain the cost of obtaining (if possible) additional insurance protection and thereafter notify you of the additional fee or charge that would be payable by you to enable us to accept that higher level of liability. 16.6 Whilst a limited liability partnership has members rather than partners, the use of the title “Partner” in the course of our dealings with you denotes a member or senior employee of Strutt & Parker LLP or a partner of the partnership of Strutt & Parker LLP. By accepting the terms of this Agreement you are also agreeing that Strutt & Parker LLP alone will provide the Services to you and you agree not to bring any claim whether in contract, tort, under statute or otherwise against any individual member, employee or consultant of Strutt & Parker LLP. 17. Asbestos and Pollution 17.1 For the purposes of this Agreement, “Asbestos” means any type of asbestos and any substance that contains a type of asbestos (in any form and in any quantity) however and wherever occurring and any form of contamination by asbestos however and wherever occurring; and “Pollution” means pollution or contamination by naturally occurring or man-made substances forces or organisms or any combination of them whether permanent or transitory and however and wherever occurring. 17.2 We are not authorised or qualified to undertake surveys or inspections required under the Control of Asbestos at Work Regulations 2002 as amended and we will not undertake such work. We recommend that you employ an appropriately qualified person to provide such services and that you should ensure you are familiar with the requirements of those Regulations. 17.3 You agree to tell us as soon as possible if you are aware, or become aware, of the presence or potential presence of asbestos or pollution on the Property or in any building or structure on the Property or on/in any adjacent property. 17.4 We are not liable for any loss or damage directly or indirectly arising out of or in any way involving Asbestos or Pollution other than where that loss or damage is caused as a direct and foreseeable result of our negligence or breach of contract at the date this Agreement was made. In any event our liability for such loss or damage involving Asbestos (including the potential existence of Asbestos) or Pollution shall be the lower of: (i) £500,000 and (ii) the value of the relevant part of the Property or interest in the Property in connection with which we have been engaged by you. 17.5 If you should require us to accept liability in respect of a larger potential loss, you must notify such requirement to us and we will ascertain the cost of obtaining (if possible) additional insurance protection and thereafter notify you what additional fee or charge would be payable by you in order to enable us to accept that higher level of liability. 18. Force majeure Neither you nor we shall be liable for any loss or damage which may be suffered by the other as a direct or indirect result of the performance of this agreement being prevented, hindered, delayed or rendered uneconomic by circumstances or events beyond our control including but not limited to Act of God, war, riot, strike, lock out, trade dispute or labour disturbance, accident, breakdown of machinery, fire, flood, storm or act of terrorism. 19. Data protection We have informed the Information Commissioner of the extent to which we process personal data, as defined in the Data Protection Act 1998 ("the DPA") and we will comply with our obligations under the DPA. 20. Storage 20.1 Our practice is to retain our Client files for six years from the date on which the Services were effectively completed. This is the length of time that we are required to do so by the RICS Rules. After this time, Client files may be destroyed in accordance with our archiving policy. Please let us know in writing if you have any objection to this. This does not apply to documents which we reasonably consider to be of continuing significance, estate records or title deeds but does include documents that belong to you. 20.2 Storage of Client files may be provided by third party contractors and you consent to this arrangement. You agree to meet our reasonable costs in accessing your files, at your request, in any off-site facility for reasons which do not relate to on-going work where such files have been archived following the completion of the relevant Services. 20.3 For the purpose of this clause, "file" means any file or documents stored in any format, including physical or electronic and in or on any medium. You acknowledge and accept that your Client files may be stored in a number of different media and formats and accept that there is a risk of damage and/or corruption associated with all systems of file storage. 21. Termination 21.1 Subject to Clause 21.2, unless otherwise expressly agreed by us in writing, either party may terminate the Agreement by giving 28 days' written notice. In such circumstances: i. all unpaid costs and disbursements due to us must be paid immediately, including any such costs which we might otherwise have carried until Completion of sale or letting takes place; ii. we will remain entitled to any Abortive Fees in accordance with Clause 4.9 iii. if you instruct another agent during or after the period of our instruction, this may result in a dual fee liability for you. 21.2 Where our Instructions include management work, either party may terminate the Agreement by giving not less than six months' notice in writing to the other. 21.3 Either of us may terminate this Agreement immediately: 21.3.1 in the event of a material breach, by the other, of the terms of this Agreement (for example by you failing to pay any invoice when due or persistently failing to give us proper instructions); or 21.3.2 in the event that the other becomes insolvent (which for this purpose includes being unable to pay debts as they fall due, entering into any composition or voluntary arrangement with creditors, being the subject of a bankruptcy or winding up order, being presented with a petition for an administration order or the appointment of an administrative receiver or receiver and manager over or in respect of all or any part of your assets). 21.4 The provisions of Clauses 15, 16 and 20 shall survive termination of this Agreement. 21.5 Termination of this Agreement shall not affect any rights which shall have accrued to either us or you prior to such termination. 22. Assignment and variation 22.1 Subject to Clause 22.2, neither party may assign any of its respective rights or obligations under this Agreement to any third party without the prior written consent of the other party. 22.2 You agree that we may assign all of our rights and transfer all of our obligations under this Agreement to: (i) any successor partnership or body corporate (including a limited liability partnership) which succeeds to the business of the firm and that such partnership or body corporate may assume all of the firm’s rights and obligations under this Agreement in our place; or (ii) Strutt & Parker 2007 LLP (a subsidiary company of Strutt & Parker LLP). 22.3 This Agreement may only be varied by an agreement in writing between us and you or by our issuing terms of engagement which expressly supersede the terms of this Agreement and to which you do not object within 28 days of despatch. Your continuing to instruct us after that 28 day period will be deemed to be your acceptance of any such revised terms. 23. Complaints and dispute resolution procedure Our policy is to look at complaints objectively and take a constructive approach to reaching a satisfactory conclusion. Should you have a complaint, you agree in the first instance to contact in writing the Partner of Strutt & Parker who is responsible for the matter concerned. Your complaint will be acknowledged within five working days advising you who is dealing with the complaint and that it will be dealt with in accordance with our complaints handling procedure, as amended from time to time and which is incorporated into the Agreement by reference. A copy of our complaints handling procedure is available on request. 24. Money laundering and compliance 24.1 We may take reasonable action to comply with laws, regulations, sanctions regimes, guidance, our own policies and procedures and any requirement of any regulatory, governmental, taxation or law enforcement body relating to the detection and prevention of money laundering, terrorist financing, tax evasion, fraud, the provision of goods or services to persons subject to economic or trade sanctions, violations or attempted violations of any law, or any attempt to conceal, disguise, convert, transfer or otherwise deal with the proceeds of crime. Neither we nor any of our partners, employees or consultants shall be liable to you or to any third party for any loss arising in connection with any such action which we may take or any delay or failure in providing the Services as a result of our taking any such action. 24.2 To ensure compliance with the anti-money laundering legislation we reserve the right to decline cash receipts in excess of £5,000. We also reserve the right to refuse to pay to any third party money due to you. 25. Entire agreement and non-reliance 25.1 This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements in connection with the subject matter hereof except where expressly agreed in this Agreement. No director, partner, employee or agent of any party to this Agreement is authorised to make any representation or warranty not contained in this Agreement and the parties each acknowledge that, in entering into this Agreement, none of them has relied on any representation or warranty that is not set out or annexed to this Agreement and signed by all the parties. The parties further acknowledge and agree to exclude any right or remedy which would otherwise be available to them in respect of any misrepresentation (whether made innocently or negligently) insofar as any representation or warranty is not set out nor annexed to this Agreement and signed by all the parties. 25.2 Each party, having been given the opportunity to provide the other with any particulars of any statements or representations which it considers have been made and which has induced it to enter into this Agreement, confirms that any such statements or representations are annexed hereto and signed by all the parties. Each party agrees that its only liability in respect of those representations or warranties that are set out in or annexed to this Agreement (whether made innocently or negligently) shall be for breach of contract. 25.3 Should the above exclusion for negligent misrepresentation fail the test of reasonableness applicable to such an exclusion then liability for negligent misrepresentation shall not be excluded. 25.4 Nothing in this Agreement shall limit or exclude either party's liability for fraudulent misrepresentation.

26. Miscellaneous 26.1 By entering into the Agreement, you warrant that you have the authority to give us the instructions detailed in the Engagement Letter and to request the Services. 26.2 Disclosable interests: Strutt & Parker LLP has to disclose any personal interest it might have with the Property (buying or selling). This would include an interest by any connected party such as Strutt & Parker members or employees and members of their families. You should inform us if you become aware of any such interest. 26.3 Consumer Protection from Unfair Trading Regulations 2008 and Business Protection from Misleading Marketing Regulations 2008 (respectively, "the CPRs" and "the BPRs"): Strutt & Parker LLP is responsible under the CPRs and BPRs, as applicable, for any misleading act (e.g. by photograph or by word) or omission about a Client’s Property . Disseminating misleading information or failing to provide material information could give rise to civil and/or criminal liability, whether or not loss is suffered by anyone. You must ensure that both you and any professional advisers instructed by you, answer correctly any queries that we or the purchaser or the purchaser’s professional advisers may have about the Property or your legal title to the Property. You warrant and undertake that all information provided to us or the purchaser or the purchaser’s professional advisers by you or your professional advisers is materially complete, true, accurate and not misleading and you agree to indemnify us for any loss suffered as a result of any such information being materially incomplete, untrue, inaccurate or misleading. You must also inform us promptly of any inaccuracy in any sales particulars or other marketing documentation provided by us relating to the Property. In the unlikely event that there is any dispute between you and us concerning the description of your Property by whatever means, you hereby expressly agree that our views shall prevail. 26.4 Instructions to solicitors: Strutt & Parker LLP requires you to give irrevocable instructions to solicitors who will act for you in the sale or letting of the Property to pay any sums due to us out of the proceeds of the sale on Completion if any such sums are due or outstanding at the time of Completion. You must also tell us immediately if you become aware of any circumstances which might result in the net proceeds of sale being insufficient to pay our Fees and outstanding expenses in full. 26.5 Any notice to be given by us to you shall be deemed properly given if put in writing and sent by personal delivery, first class post or facsimile transmission to your address from which instructions were given to us. Any such notice shall be deemed to have been duly given upon the date on which it was given if sent by personal delivery, twenty four hours after posting if sent by post and upon the date of transmission if sent by facsimile transmission. 26.6 No delay or omission on our part in exercising any right, power or remedy under this Agreement with you shall impair such right, power or remedy or operate as a waiver thereof. 26.7 If at any time any part of the Agreement between you and us is or becomes illegal, invalid or unenforceable in any respect, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision shall be deemed deleted. Any modification or deletion of a provision or part-provision under this clause shall not affect or impair the legality, validity or enforceability of any other parts of the Agreement. 26.8 Except as may otherwise be expressly agreed between the parties in writing, no part of our Agreement shall be enforceable by a third party under the Contracts (Rights of Third Parties) Act 1999 or otherwise. No benefits under our terms are to be conferred by you to any third party. 26.9 This Agreement shall be governed by and construed in accordance with English Law and the parties submit to the exclusive jurisdiction of the English courts.

Strutt & Parker LLP Standard Commercial Terms of Business February 2015