Guy Ziser Wild Orchid Property Ltd 9 Hampstead West 224 Iverson Road London NW6 2HL

24 October 2016

FOI Exemption Section 41/43(2) Private & Confidential

Dear Mr Ziser

767-785 COMMERCIAL ROAD, LONDON, E14 7HG VIABILITY ASSESSMENT

1. INTRODUCTION

Pre-application advice from the Council dated 6 January 2016 noted on page 3 that “the proposal as it stands has attracted objections from the council’s housing team due to the proposal not offering any accommodation which would qualify as affordable housing and the potential loss of opportunity to develop the site for affordable housing.”

A Viability Assessment has therefore been produced to demonstrate the affordable housing contribution if any that the scheme is able to provide viably, as sought by the Council’s ‘Managing Development Document, Development Plan Document’ (April 2013), page 28, paragraph 3.6.

The application site is located on the Commercial Road, bounded by the Limehouse Cut canal to the rear. There are 4 parts to the site, which are summarised as follows:

• Corner Site : 767 Commercial Road is an existing tyre and exhaust centre with associated vehicular parking.

• West Site : 769-775 Commercial Road, a vacant triangular area of cleared land on the western part of the site, with timber hoarding.

• Central Site : 777-783 Commercial Road is occupied by a two storey Grade II listed Victorian warehouse with basement. The warehouse was originally built in 1869 for sail making and chandling before being used for the engineering and manufacture of steam pumps from 1889 to the late 1990s, since when it has been vacant.

[Type text]

• East site : 785 Commercial Road is a more recently constructed building which has been vacant since the 1990s.

A number of uses surround the site, including residential, retail/commercial premises with residential and offices above. The Grade I listed St Anne’s Church lies directly to the south across Commercial Road. Limehouse Town Hall (Grade II listed) is adjacent to the Church.

Limehouse and Westferry rail and DLR stations are relatively close to the site, whilst a number of buses run along Commercial Road. Accordingly, the site has a PTAL rating of 6.

The site will be redeveloped as follows:

• Corner Site : demolition of the existing buildings, then the construction of a 5-6 storey building plus basement to provide Class B1(a) offices at ground and basement levels, 9 Class 3 residential flats above and a public arts feature to the west of the building. Whilst the 9 flats are likely to be rented, at this stage they are assumed to be sold on the open market.

• West Site : construction of a 3-5 storey building plus basement to provide ‘sui generis’ co-living accommodation for young professionals with 72 rented bedspaces along with associated reception, laundry facilities, communal lounges, kitchen/dining rooms, workspaces and manager’s accommodation.

• Central Site : retention, careful restoration and conversion of the Sailmaker’s warehouse buildings into Class B1(a) offices with associated reception, toilets, storage, cafe and meeting rooms.

• East Site : demolition of the existing building behind retained ground and first floor facades, the installation of a second floor facade and the construction of a 3-4 storey building with basement to accommodate ‘sui generis’ co-living accommodation with 64 rented bedspaces, along with reception, laundry facilities, communal lounges, kitchen/dining rooms and manager’s accommodation.

A Viability Assessment is set out in the following Section to justify the affordable housing contribution if any that can be provided as part of a viable scheme.

2. SCHEME VIABILITY

This Viability Assessment is provided on a strictly confidential basis. The inputs and outputs of the financial appraisal are for use only by the London Borough of Tower Hamlets in the evaluation of this Viability Assessment. The inputs and outputs should not be revealed to any third parties.

2 DOUGLAS BIRT CONSULTING FOI Exemption Section 41/43(2) Private & Confidential Company number 8140132 Registered at Companies House, England The applicant considers that the information enclosed and other matters relating to completed and ongoing projects to be exempt from disclosure under the exemptions to the Freedom of Information Act 2000 set out in section 41 (information provided in confidence) and section 43 (2) (information provided in confidence).

The Viability Assessment uses a financial appraisal that has been accepted by the GLA, HCA and London boroughs over the past 10 years or more when considering viability in relation to planning contributions and grant funding.

Each key input to the financial appraisal is covered in turn in the following sub- sections. The financial appraisal is attached to this letter as Appendix 1 .

2.1 Benchmark Value

The scheme has been appraised in 2 parts, as follows:

• 767 Commercial Road (the Corner Site), which was acquired for £1.8m earlier in 2016. Details of the purchase price are attached as Appendix 2 .

• 769-785 Commercial Road (covering the East, West and Corner sites). A Valuation Report for the site in its existing use is attached as Appendix 3 . The Market Value with no hope value has been identified as £8.6m.

At this stage, no hope value has been added to this figure, even though it is accepted by viability in planning guidance (e.g. the GLA Development Appraisal Toolkit Guidance Notes (2015), Section A3.2). However, I understand you reserve the right to include hope value at a later date, as required.

When stamp duty and fees are added to the above figures, a Benchmark Value of £10.866m has been included in the appended financial appraisal.

2.2 Construction Costs

The build cost of £27.36m for the scheme reflects the Detailed Elemental Cost Analysis produced by CHPK which was produced in September 2016 and attached as Appendix 4.

A detailed Specification of Works for the completion of the proposed scheme can also be provided on request.

There are complications in terms of completing the scheme given the site’s location next to the Limehouse Cut canal, which have been incorporated within the Cost Analysis.

In addition, the scheme will bring back into productive use the currently vacant and dilapidated Grade II listed Sailmaker’s buildings (Central Site), with all the complications and risks arising from that. 3 DOUGLAS BIRT CONSULTING FOI Exemption Section 41/43(2) Private & Confidential Company number 8140132 Registered at Companies House, England The scheme is assumed to take 24 months to complete, including site set-up and a period to let and sell the new flats, co-living accommodation and commercial spaces, with an interest rate of 6.75%. In reality it is likely to take longer to fully let the scheme.

2.3 Planning Obligations

£205,550 to cover Council CIL, Mayoral CIL, Section 106 and monitoring fees has been included on this worksheet, as estimated by the planning consultants for the scheme.

2.4 Fees

Professional fees of 10% on build cost and 3% sales and marketing fees are shown on this worksheet.

2.5 Rented Units

136 units will be let to young professionals as co-living accommodation in flats that will have single bedspaces and shared kitchen/dining rooms. There will also be communal lounges, laundry facilities and workspaces available for all residents.

The mix will be as follows:

Single Units Accessible Units Totals • East Site 56 8 64 • West Site 64 8 72 Totals 120 16 136

In addition, there will be a manager’s flat in each of the East and West Sites.

The assumed rents for the single/accessible units and the manager’s flats are as follows:

• Single/accessible units £1,375 per calendar month • Manager’s flats £2,000 per calendar month

Colliers has provided advice on the rent levels of the above units in its letter of 21 September 2016 which is attached as Appendix 5.

Annual rental growth is assumed to be 3.5% per annum.

Management and maintenance costs of 20% and voids/bad debts of 2.5% per annum reflect conservative estimates of the running costs of the scheme over time.

Applying a discount rate of 6.75% per annum over 30 years, the net capitalised value of the rented units is £30.944m.

4 DOUGLAS BIRT CONSULTING FOI Exemption Section 41/43(2) Private & Confidential Company number 8140132 Registered at Companies House, England 2.6 For Sale Units

There are 9 flats above the offices in the Corner Site. Whilst the likelihood is that these flats will also be rented, for the purposes of this exercise they are assumed to be sold.

Colliers (Appendix 5) has estimated that these units would sell for an average value of £665 per sqft.

I have made the same assumption on this worksheet. This produces a gross development value (GDV) of £5.454m for the sale of the 9 flats.

2.7 Ground Rents

Net capitalised ground rents totalling £81,818 have been included for the 9 flats, based on the following calculation:

• £500 per unit per annum x 9 flats @ 5.5% yield including 5.75% purchaser’s costs

2.8 Commercial Units

Colliers has estimated a rent of £33 per sqft, with an 18 month rent-free period and a yield of 6% (Appendix 5).

I have applied the same assumptions as above, although my yield is 5% less 5.75% purchaser’s costs.

The GDV of the commercial (office spaces) that will be located in the Corner and Central Sites is therefore £12.492m.

2.9 Cashflow

The Cashflow shows the revenues and costs relating to the scheme, as described in the preceding paragraphs over the assumed 24 month programme.

Scheme profit of 8.3% on GDV is well below the threshold level of 20% on GDV which was applied in the externally produced ‘Community Infrastructure Levy: Viability Study’ (2013) (e.g. paragraphs 4.30 and 4.32).

The requirement for at least 20% profit on GDV has been reinforced since the result of the Brexit vote was announced and the resulting uncertainty arising from that.

3. CONCLUSIONS

The scheme is unable to generate sufficient profit to enable the threshold level of 20% on GDV to be achieved.

5 DOUGLAS BIRT CONSULTING FOI Exemption Section 41/43(2) Private & Confidential Company number 8140132 Registered at Companies House, England The planning gains arising from the proposed scheme are therefore that a Grade II listed building that is currently vacant and dilapidated will be brought back into productive use, whilst total financial planning contributions of £205,550 will also be made.

In addition, considerable employment will be generated by the scheme in its construction, future occupation and maintenance, as will a New Homes Bonus for the Council.

Without the application scheme, the Sailmaker’s buildings would remain vacant eyesores on this prominent site and would continue to deteriorate further.

Yours sincerely

Dr Douglas Birt Encs.

6 DOUGLAS BIRT CONSULTING FOI Exemption Section 41/43(2) Private & Confidential Company number 8140132 Registered at Companies House, England

APPENDIX 1

The Sailmakers, 767-785 Commercial Road, London, E14 7HG

BENCHMARK VALUE

Element £ Main site 8,600,000 Corner site 1,800,000 Stamp duty 416,000 4% Legal and other costs 50,000 Total land value 10,866,000

Douglas Birt Consulting Ltd October 2016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

CONSTRUCTION COSTS 24 months 01/17-12/18 East Site 10,354,367 West Site 8,994,341 767 Corner Site 4,178,859 Central Site, builder's work 740,000 Central Conservation Area 3,092,620 Construction costs 27,360,187

Douglas Birt Consulting Ltd October 2016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

PLANNING OBLIGATIONS

Section 106 cost £ Council CIL £92,100 Mayoral CIL £87,141 Planning application fees £26,309 Total cost £205,550

Douglas Birt Consulting October 2016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

FEES

Revenue cost Cost 1/17-12/18

Professional fees 10% Marketing cost 3%

Douglas Birt Consulting October 2016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

Rented Units

Year 1 NIA Unit size # units Rent £pu pw Rent £pu pa Rent £pu pw Rent £pu pa Per unit Total Single - East 56 316.21 16,500.00 316.21 16,500.00 18.1 1,014 Single - West 64 316.21 16,500.00 316.21 16,500.00 16.7 1,069 Accessible - East 8 316.21 16,500.00 316.21 16,500.00 19.9 159 Accessible - West 8 316.21 16,500.00 316.21 16,500.00 22.4 179 2 manager's flats 2 459.95 24,000.00 459.95 24,000.00 66.8 134 Total 138 Total 2,554

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 2016.17 2017.18 2018.19 2019.2 2020.21 2021.22 2022.23 2023.24 2024.25 2025.26 2026.27 2027.28 2028.29 Unit size Single - East 0 478,170 989,812 1,024,455 1,060,311 1,097,422 1,135,832 1,175,586 1,216,732 1,259,317 1,303,393 1,349,012 1,396,227 Single - West 0 546,480 1,131,214 1,170,806 1,211,784 1,254,197 1,298,094 1,343,527 1,390,550 1,439,220 1,489,592 1,541,728 1,595,689 Accessible - East 0 68,310 141,402 146,351 151,473 156,775 162,262 167,941 173,819 179,902 186,199 192,716 199,461 Accessible - West 0 68,310 141,402 146,351 151,473 156,775 162,262 167,941 173,819 179,902 186,199 192,716 199,461 2 manager's flats 0 24,840 51,419 53,218 55,081 57,009 59,004 61,069 63,207 65,419 67,709 70,079 72,531 Total Gross Rental Income - 1,186,110 2,455,248 2,541,181 2,630,123 2,722,177 2,817,453 2,916,064 3,018,126 3,123,761 3,233,092 3,346,251 3,463,369 Voids/bad debts 0 29,653 61,381 63,530 65,753 68,054 70,436 72,902 75,453 78,094 80,827 83,656 86,584

TOTAL NET RENTAL INCOME 0 1,156,457 2,393,867 2,477,652 2,564,370 2,654,123 2,747,017 2,843,162 2,942,673 3,045,667 3,152,265 3,262,594 3,376,785

Total discounted income 0 1,078,396 2,081,602 2,009,032 1,938,992 1,871,394 1,806,152 1,743,185 1,682,414 1,623,760 1,567,152 1,512,517 1,459,787 NPV 38,679,962 NPV less M&M 30,943,970 20%

Charging weeks per annum 52.18

Rent index 100% 103.50% 107.12% 110.87% 114.75% 118.77% 122.93% 127.23% 131.68% 136.29% 141.06% 146.00% 151.11%

Rent Increases Yr 1-10 3.5% Yrs 11+ 3.5% Voids and bad debts 2.5%

Discount rate 100% 93.25% 86.96% 81.09% 75.61% 70.51% 65.75% 61.31% 57.17% 53.31% 49.72% 46.36% 43.23%

Discount rate 6.75%

Page 1 Sailmakers, financial appraisal, V2, 041016 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 2029.3 2030.31 2031.32 2032.33 2033.34 2034.35 2035.36 2036.37 2037.38 2038.39 2039.4 2040.41 2041.42 2042.43 2043.44 2044.45 2045.46

1,445,095 1,495,674 1,548,022 1,602,203 1,658,280 1,716,320 1,776,391 1,838,565 1,902,915 1,969,517 2,038,450 2,109,796 2,183,638 2,260,066 2,339,168 2,421,039 2,505,775 1,651,538 1,709,341 1,769,168 1,831,089 1,895,177 1,961,509 2,030,161 2,101,217 2,174,760 2,250,876 2,329,657 2,411,195 2,495,587 2,582,932 2,673,335 2,766,902 2,863,743 206,442 213,668 221,146 228,886 236,897 245,189 253,770 262,652 271,845 281,360 291,207 301,399 311,948 322,867 334,167 345,863 357,968 206,442 213,668 221,146 228,886 236,897 245,189 253,770 262,652 271,845 281,360 291,207 301,399 311,948 322,867 334,167 345,863 357,968 75,070 77,697 80,417 83,231 86,144 89,159 92,280 95,510 98,853 102,313 105,893 109,600 113,436 117,406 121,515 125,768 130,170 3,584,587 3,710,048 3,839,900 3,974,296 4,113,396 4,257,365 4,406,373 4,560,596 4,720,217 4,885,425 5,056,414 5,233,389 5,416,558 5,606,137 5,802,352 6,005,434 6,215,624 89,615 92,751 95,997 99,357 102,835 106,434 110,159 114,015 118,005 122,136 126,410 130,835 135,414 140,153 145,059 150,136 155,391

3,494,973 3,617,297 3,743,902 3,874,939 4,010,561 4,150,931 4,296,214 4,446,581 4,602,212 4,763,289 4,930,004 5,102,554 5,281,144 5,465,984 5,657,293 5,855,298 6,060,234

1,408,895 1,359,778 1,312,372 1,266,620 1,222,462 1,179,844 1,138,712 1,099,014 1,060,699 1,023,721 988,031 953,586 920,341 888,256 857,289 827,402 798,557

156.40% 161.87% 167.53% 173.40% 179.47% 185.75% 192.25% 198.98% 205.94% 213.15% 220.61% 228.33% 236.32% 244.60% 253.16% 262.02% 271.19%

40.31% 37.59% 35.05% 32.69% 30.48% 28.42% 26.51% 24.72% 23.05% 21.49% 20.04% 18.69% 17.43% 16.25% 15.15% 14.13% 13.18%

Page 2 Sailmakers, financial appraisal, V2, 041016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

Flats for Sale £ 7,158 per sqm NIA Value Flat 1 60£ 429,484 Flat 2 55£ 393,693 Flat 3 67£ 479,590 Flat 4 89£ 637,067 Flat 5 93£ 665,700 Flat 6 89£ 637,067 Flat 7 87£ 622,751 Flat 8 87£ 622,751 Flat 9 135£ 966,338 Totals 762 £ 5,454,442

Douglas Birt Consulting Ltd October 2016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

GROUND RENTS

Ground rent pa # units Yield Cap ground rent

£500 9 5.5% 81,818

Douglas Birt Consulting October 2016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

Commercial Revenues

10.764 Purchaser's Less 18 months Uses Sqm Rent/sqm Yield costs rent free GDV A1 - A5 2,027 355.21 5.0% 5.75% 1,080,022 12,492,255 Totals 2,027 12,492,255

Page 1 Sailmakers, financial appraisal, V2, 041016 The Sailmakers, 767-785 Commercial Road, London, E14 7HG

WHOLE SCHEME DISCOUNTED CASHFLOW Project Year 1 Month 1 2 3 4 5 6 7 8 9 10 Calendar Year 2017 LOAN REPAYMENT

Land costs -10,866,000 Section 106 and CIL costs - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 Base build costs -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 - Professional fees -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 Marketing costs 0 0 0 0 0 0 0 0 0 0 Arrangement fees -350,000 Loan brought forward -12,478,573 -13,811,338 -15,151,600 -16,499,401 -17,854,783 -19,217,790 -20,588,463 -21,966,846 -23,352,983 -24,746,917 Loan/deposit interest -70,192 -77,689 -85,228 -92,809 -100,433 -108,100 -115,810 -123,564 -131,361 -139,201 Revenue from rented units For Revenue from sale units Revenue from ground rents Revenue from commercial units Loan interest plus sales revenues -70,192 -77,689 -85,228 -92,809 -100,433 -108,100 -115,810 -123,564 -131,361 -139,201

Scheme Residual Value 4,065,604

Interest rate - Debit 6.75% Interest rate - Credit 2.00%

Scheme profit on GDV 8.3%

Douglas Birt Consulting October 2016 2 3 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2018 2019

- 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 - 8,565 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -1,140,008 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 -114,001 0 0 0 0 0 0 0 0 -928,319 0 0 0 0 0 0

-26,148,691 -27,558,351 -28,975,940 -29,865,147 -30,841,175 -31,822,693 -32,809,732 -33,802,323 -35,728,817 6,698,398 5,928,040 5,153,349 4,374,300 3,590,869 4,065,604 -147,086 -155,016 -162,990 -167,991 -173,482 -179,003 -184,555 -190,138 -200,975 37,678 33,345 28,988 24,605 20,199 22,869 30,943,970 454,537 454,537 454,537 454,537 454,537 454,537 454,537 454,537 454,537 454,537 454,537 454,537 81,818 12,492,255 -147,086 -155,016 373,365 286,545 281,055 275,534 269,982 264,399 43,689,787 492,215 487,882 483,524 479,142 474,735 22,869

Douglas Birt Consulting October 2016

APPENDIX 2

APPENDIX 3

Valuation Report

769 -785 Commercial Road London E14 7HG

SEPTEMBER 2015

Prepared For Prepared By Dragonfly Property Finance Colliers International Valuation UK LLP

TABLE OF CONTENTS

PHOTOGRAPHS EXECUTIVE SUMMARY

ADDRESSES 1 INTRODUCTION 1 STATUS OF VALUER AND CONFLICTS OF INTEREST 1 VALUATION 2 LOCATION 4 DESCRIPTION 5 ACCOMMODATION 6 THE SITE 7 CONDITION 7 DRAINS AND SERVICES 7 ENVIRONMENTAL MATTERS 7 RATING ASSESSMENT 12 TENURE 13 TENANCY 13 COVENANT STATUS OF TENANTS 13 CITY FRINGE OFFICE MARKET REVIEW 13 VALUATION METHODOLOGY 14 PRINCIPAL VALUATION FACTORS 22 PURCHASE PRICE 24 VALUATION METHODOLOGY 24 SUITABILITY FOR SECURITY 26 REINSTATEMENT COST (ON EXISTING) 26 LIABILITY AND PUBLICATION 27

APPENDIX 1: INSTRUCTIONS AND GENERAL ASSUMPTION & DEFINITIONS

APPENDIX 2: LOCATION PLAN

APPENDIX: 3 STREET PLAN

APPENDIX: 4 ORDNANCE SURVEY EXTRACT

APPENDIX: 5 VALUATION PRINTOUT

COLLIERS INTERNATIONAL VALUATION UK LLP 769-785 COMMERCIAL ROAD, LONDON E14 7HG

769-785 COMMERCIAL ROAD, LONDON E14 7HG

Front Elevation

Sample Internal Specification

COLLIERS INTERNATIONAL VALUATION UK LLP 769-785 COMMERCIAL ROAD, LONDON E14 7HG

Sample Internal Specification

Hard Standing Yard to the West of the Main Site

COLLIERS INTERNATIONAL VALUATION UK LLP

EXECUTIVE SUMMARY

PROPERTY

769-785 Commercial Road, London E14 7HG

LOCATION

· The subject property is located in Limehouse, a district in east London, in the London Borough of Tower Hamlets.

· Limehouse is approximately 1 mile north of Canary Wharf, 2.50 miles east of City of London and 4 miles east of Central London. Limehouse is on the northern bank of the River Thames opposite Rotherhithe and between Ratcliff to the west and Millwall to the east.

· The subject property is located on the north side of Commercial Road, close to the junction of St Anne Street to the east, Salmon Lane to the west and Newell Street and Three Colt Street to the south.

· The property immediately abuts Limehouse Cut to the north which is a canal that connects Limehouse Basin to the River Thames.

· The property immediately abuts Commercial Road to the south which forms part of the A13, a major trunk road which provides direct access to the City of London to the west and Southend- On-Sea to the east.

· Commercial Road itself is characterised as offering commercial retail units operated by local operators at ground floor with residential self-contained accommodation over upper parts in the main.

· In terms of transport links the property is approximately 0.5 miles to the east of Limehouse DLR and Overground Station which provides access to the City of London (via Bank) and connecting services to Canary Wharf and Fenchurch Street.

· Canary Wharf Underground Station (Jubilee Line) is 1 mile to the south east providing access to Central London and London Waterloo of particular note.

DESCRIPTION

· The property comprises three elements, an empty hard standing yard at 769 to 775 Commercial Road (site at west end), two office and workshops structures known as the Sailmakers Loft at 777 to 783 Commercial Road (Grade II listed building located in the middle of the site) and a third office and workshop structure at 785 Commercial Road (buildings located on the east end of the site).

· Total size: 37,999 sq ft (3,530.16 sq m).

COLLIERS INTERNATIONAL VALUATION UK LLP

· We are aware of the borrowers intention to carry out modernisation/remediation works to the Grade II listed element of the property (777-783 Commercial Road) to create office space and associated exhibition hall accommodation centred around the central atrium of the building.

· It is understood the intention for the remaining unlisted element of the property (785 Commercial Road) is for it to be demolished to create a House of Multiple Occupancy (HMO) scheme comprising 110 units to incorporate the open hard standing site to the western end of the site (769-775 Commercial Road).

· Taking into account no formal planning is in place in terms of the proposed HMO scheme, we have not valued the respective element of the property on this basis.

TENURE

· Freehold (assumed).

TENANCY

· N/A - The property is vacant and non-income producing at present.

· We are however aware 769-775 Commercial Road is occupied by the adjacent developer on an informal license basis. We are not aware that any rent is currently being paid. We would recommend that your solicitors verify that vacant possession can be achieved in the short-term.

COVENANT STATUS OF THE TENANT

· N/A - The property is vacant and non-income producing at present.

MARKET RENT

· £1,025,000 per annum in terms of the proposed retained element of the subject property (777- 783 & 785 Commercial Road).

MARKET VALUE

We are of the opinion that the Market Value of the freehold interest in the subject property as at the date of valuation as instructed with hope value excluded is £8,600,000 (Eight Million Six Hundred Thousand Pounds).

We confirm that our valuations are net of standard purchaser’s acquisition costs based on 5.8% in terms of the property.

Our valuation is subject to the attached General Assumptions and Definitions, which form Appendix 1 hereto.

COLLIERS INTERNATIONAL VALUATION UK LLP

OPEN MARKET VALUE (ASSUMING A MAXIMUM OF 180 DAYS TO MARKET AND COMPLETE A SALE OF THE PROPERTY)

We are further of the opinion the Market Value of the subject property as at the date of valuation, assuming a maximum of 180 days to market and complete a sale of the property as instructed with hope value excluded is £8,600,000 (Eight Million Six Hundred Thousand Pounds).

OPEN MARKET VALUE (ASSUMING A MAXIMUM OF 90 DAYS TO MARKET AND COMPLETE A SALE OF THE PROPERTY)

We are further of the opinion the Market Value of the subject property as at the date of valuation, assuming a maximum of 90 days to market and complete a sale of the property and as instructed with hope value excluded is £8,600,000 (Eight Million Six Hundred Thousand Pounds).

Due to the London location, the current buoyant occupational, investor and developer markets, the lot size, and the recent competitive bidding on the property, we are of the opinion the property has good liquidity at the present time.

COLLIERS INTERNATIONAL VALUATION UK LLP OUR REF : 769785CR/PK 50 George Street | DDI +44 20 7344 6761 London W1U 7GA | MAIN + 44 20 7935 4499 United Kingdom FAX +44 20 7344 6539 EMAIL [email protected]

21 st August 2015

Addressee:

Dragonfly Property Finance 4th Floor, 20 Old Bailey London EC4M 7AN

For t he Attention of: Victoria Barnard

Dear Sirs PROPERTY: 769-785 COMMERCIAL ROAD, LONDON, E14 7HG CUSTOMER: WILD ORCHID PROPERTIES LIMITED

ADDRESSES

(a) Dragonfly Finance S.àr.l, as Security Afgent for itself and for Fern Trading Limited as Orginial Lender (together the Finance Parties) together with their successors and assigns.”

(b) Each person which becomes a party to the Facility Agreement as Lender in accordance with the terms of the Facility Agreement and its transferees, successors or assignees, (together the "Beneficiaries" ).

INTRODUCTION

In accordance with your instruction letter dated 20 th August 2015, a copy of which is attached as Appendix 1 , we have pleasure in presenting our report containing our opinion of the Market Value, as at today’s date, of the above property, together with salient comments and opinions. We understand that the report is required to assist you in providing a loan facility.

STATUS OF VALUER AND CONFLICTS OF INTEREST

The property has been valued by Lucinda Lee-Bapty MRICS and Patrick Kearon MRICS who both fall within the requirements as to competence as set out in PS 2.3 of the RICS Valuation – Professional Standards (Incorporating the International Valuation Standards) January 2014 prepared by the Royal Institution of Chartered Surveyors and who are both valuers registered in accordance with the RICS Valuer Registration Scheme (VRS).

Colliers International is the licensed trading name of Colliers International Property Advisers UK LLP which is a limited liability partnership registered in England and Wales with registered number OC385143. Our registered office is at 50 George Street, London W1U 7GA.

We confirm that Colliers International complies with the requirements of independence and objectivity under PS 2.4 and that we have no conflict of interest in acting on your behalf in this matter. We confirm that we have undertaken the valuations acting as “independent” valuers, qualified for the purposes of this valuation.

In accordance with VPGA 2.3.4, we can confirm we have valued other assets for yourself and other lending institutions with the same borrower in place within the last 3 years.

The property was inspected on 21 st August 2015 by Patrick Kearon MRICS in connection with this exercise.

Our General Assumptions and Definitions to which our valuations are subject, forms Appendix 1 to this report.

We are pleased to report as follows:

VALUATION

MARKET VALUE

We are of the opinion that the Market Value of the freehold interest in the subject property as at the date of valuation as instructed with hope value excluded is £8,600,000 (Eight Million Six Hundred Thousand Pounds).

We confirm that our valuations are net of standard purchaser’s acquisition costs bas ed on 5.8% in terms of the commercial element of the property.

Our valuation is subject to the attached General Assumptions and Definitions, which form Appendix 1 hereto.

OPEN MARKET VALUE (ASSUMING A MAXIMUM OF 180 DAYS TO MARKET AND COMPLETE A SALE OF THE PROPERTY)

We are further of the opinion the Market Value of the subject property as at the date of valuation, assuming a maximum of 180 days to market and complete a sale of the property as instructed with hope value excluded is £8,600,000 (Eight Million Six Hundred Thousand Pounds).

OPEN MARKET VALUE (ASSUMING A MAXIMUM OF 90 DAYS TO MARKET AND COMPLETE A SALE OF THE PROPERTY)

We are further of the opinion the Market Value of the subject property as at the date of valuation, assuming a maximum of 90 days to market and complete a sale of the property as instructed with hope value excluded is £8,600,000 (Eight Million Six Hundred Thousand Pounds).

Due to the London location, the current buoyant occupational, investor and developer markets and the lot size, we are of the opinion the property has good liquidity at the present time.

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SOURCES OF INFORMATION

We have relied upon the following information for the purposes of the valuation:

· Pre-planning advice document prepared by BP Partnership Ltd. · Floor areas as provided by the borrower (as produced by the borrowers architect Krause Architects, dated 1 st September 2015).

Unless stated otherwise, we have assumed that the information provided is accurate and that we have been supplied with all the information that has a material effect upon the value of the property.

Furthermore, we have assumed that any information supplied can, if necessary, be verified. Should any of the information provided be found to be inaccurate or incomplete there could be a variation in value.

We recommend that should any further reports or audits relating, inter alia, to condition, legal or environmental issues become available, then copies should be forwarded to us in order that we may comment upon their impact on value.

BASIS OF VALUE

The values stated in this report represent our objective opinion of Market Value in accordance with the definition set out below as at the date of valuation. Each valuation assumes that the Property has been properly marketed and that exchange of contracts took place on this date.

Market Value is defined as follows:

‘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’

No allowance has been made for either the costs of realisation or for taxation which might arise on a disposal. Our values are, however, net of standard purchaser’s costs .

The opinion of Market Rent reported has been derived in accordance with the definition set out below:

‘The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on app ropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’

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LOCATION

The subject property is located in Limehouse, a district in east London, in the London Borough of Tower Hamlets. Limehouse is approximately 1 mile north of Canary Wharf, 2.50 miles east of City of London and 4 miles east of Central London. Limehouse is on the northern bank of the River Thames opposite Rotherhithe and between Ratcliff to the west and Millwall to the east.

Limehouse stretches from Limehouse Basin in the west to the edge of the former Chinatown in Pennyfields in the east; and from the Thames in the south to the Victory Bridge at the junction of Ben Jonson Road and Rhodeswell Road in the north.

The area gives its name to Limehouse Reach, a section of the Thames which runs south to Millwall after making a right-angled bend at Cuckold's Point, Rotherhithe. The west-to-east section upstream of Cuckold's Point is properly called the Lower Pool.

The location of the town is shown in the attached plans at Appendix 2.

SITUATION AND COMMUNICATION

The subject property is located on the north side of Commercial Road, close to the junction of St Anne Street to the east, Salmon Lane to the west and Newell Street and Three Colt Street to the south. The property immediately abuts Limehouse Cut to the north which is a canal that connects Limehouse Basin to the River Thames.

The property immediately abuts Commercial Road to the south which forms part of the A13, a major trunk road which provides direct access to the City of London to the west and Southend-On- Sea to the east. Immediately adjacent to the subject property to the east a new 160 unit residential scheme is in the process of being developed by City & Docklands called Canary Gateway set to complete in Q3 2016. Immediately adjacent to the property to the west is a small triangular triangular shaped site with a tyre repair shop on it.

Commercial Road itself is characterised as offering commercial retail units operated by local operators at ground floor with residential self-contained accommodation over upper parts in the main. The area as a whole is predominantly characterised as residential with a number of new developments either completed or in the process of construction. The most notable commercial occupier in the immediate vicinity is Royal Mail which occupies a number of warehouses and associated yard to the west forming part of a delivery office for the area.

In terms of transport links the property is approximately 0.5 miles to the east of Limehouse DLR and Overground Station which provides access to the City of London (via Bank) and connecting services to Canary Wharf and Fenchurch Street. Canary Wharf Underground Station (Jubilee Line) is 1 mile to the south east providing access to Central London and London Waterloo in particular. London City Airport is approximately 5 miles to the east, accessed via road or DLR.

A street plan showing the location of the property is attached at Appendix 3 .

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DESCRIPTION

EXISTING

The property comprises three elements, an empty hard standing yard at 769 to 775 Commercial Road (site at west end), two office and workshops structures known as the Sailmakers Loft at 777 to 783 Commercial Road (Grade II listed building located in the middle of the site) and a third office and workshop structure at 785 Commercial Road (buildings located on the east end of the site).

Please refer to the photographic site plan below in conjunction with the description above which illustrates the principal 3 elements to the subject property, as derived from a pre-application undertaken on behalf of the borrower by BP Partnership Ltd.

Source: BP Partnership Ltd

769-775 Commercial Road

The following element of the site is currently a hard standing yard currently utilised on an informal basis by City & Docklands for storage in connection with the development taking place immediately adjacent to the site to the west. We understand that full vacant possession can be achieved in the short-term.

777-783 & 785 Commercial Road

The subject property comprises a part 3 storey, part 2 storey Grade II listed buildings which are of traditional framed construction to the front with brick elevations and traditional single glazed frontages (777-783 Commercial Road). The rear element of the property of principle warehouse use is a traditional metal framed structure with redundant pitched roofs with corrugated metal or

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asphalt finishing. An element of the roof is understood to have been replaced within the last 2 years taking into account water damage. The eastern section of the site which is part occupied by redundant warehouse accommodation is not listed but is of a similar internal specification to the remaining accommodation (785 Commercial Road).

Internally the property is configured to provide a 3 storey block comprising cellular rooms which were understood to have been used for administration purposes when the property was occupied. Behind the block each of them links through to large two storey workshop structures. The workshops at 779 to 785 are galleried whilst the one at 777 has two full floors of open space. Internally the property is in a derelict state of repair with either exposed cement or timber flooring. The property includes many of the original features and specifications, including timber trusses, steel frames, gantries, galleried aisles and a redundant crane system. Elements of the upper floors could not be inspected taking into account physical obsolescence in elements of the timber flooring. Part of the ground floor is informally utilised as by the adjacent developer as a site office.

We understand the property has not formally been occupied for over 20 years and therefore is in a state of disrepair in need of modernisation/reconfiguration which is reflected in our valuation accordingly.

PROPOSED

We are aware of the borrowers intention to carry out modernisation/remediation works to the Grade II listed element of the property (777-783 Commercial Road) to create office space and associated exhibition hall accommodation centred around the central atrium of the building.

It is understood the intention for the remaining unlisted element of the property (785 Commercial Road) is for it to be demolished to create a House of Multiple Occupancy (HMO) scheme comprising 110 units to incorporate the open hard standing site to the western end of the site (769- 775 Commercial Road). The HMO scheme will include communal dining/kitchenette facilities as well as building mangers office accommodation and ancillary office accommodation which could be let separately.

Taking into account formal planning has not been granted, we have not valued the property with the above taken into account.

ACCOMMODATION

As instructed, we have relied upon floor areas as provided by the borrower (as produced by the borrowers architect Krause Architects, dated 1 st September 2015), which are assumed to be on a Gross Internal Area Basis, in accordance with the latest version of the RICS Code of Measuring Practice, as detailed below:

Floor Si ze (sqm) Size (sq ft) LGF 249.35 2,684 Ground Floor 1,630.78 17,554 First Floor 1,374.12 14,791

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Floor Si ze (sqm) Size (sq ft) Second Floor 275.91 2,970 Total 3,530.16 37,999

THE SITE

The property occupies a roughly triangular shaped site which is broadly level. The site is shown for identification purposes only, outlined in red on the Ordnance Survey extract attached at Appendix 4. We calculate that the total site area extends to 0.675 acres (0.27 hectares).

In terms of 769-775 Commercial Road (open plot of vacant land), the apportioned site value equates to 0.184 acres.

CONDITION

We have not undertaken a building survey of the property as this was outside of the scope of our instruction and we have not inspected the woodwork or other parts of the structures which are covered, unexposed or inaccessible. The borrower has made us aware verbally that a structural survey has been undertaken which concluded the report is structurally sound (however have not been provided with the report) and relied on this for the purposes of our valuation. We would comment that the property is currently in a derelict state of repair in need of extensive modernisation, the cost of which has been factored into our valuation accordingly.

We recommend that should any building surveys become available then copies should be provided to us in order that we may comment upon their findings.

DRAINS AND SERVICES

We have assumed that all mains services are provided to the properties including gas, water, electricity and that there is connection to mains drains. We did not test any of these services or the services within the buildings at the time of our inspection as this was beyond the scope of our instructions.

ENVIRONMENTAL MATTERS

LAND

The Environment Act 1995 contains provisions requiring local authorities to identify contaminated land, together with the power to serve ‘remediation notices’ specifying remedial action to be carried out. Such notices are to be served on the party that caused or knowingly permitted the contamination, but if this party cannot be traced, they may otherwise be served on the current owner or occupier of the land. Whilst the proposals took effect from 1st April 2000, it would appear that, at the current time, local authorities primarily concentrate on sites where contamination is on- going.

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The property has been historically used for warehouse/industrial purposes (originally built by Caird & Rayner – designers and manufacturers of steam pumps) and therefore, the potential for past contamination in our opinion is average. At the time of our inspection, there were no obvious signs of environmental issues. In our opinion, the majority of investors would assume that the likelihood of material contamination was average, for the purpose of our valuation, we have assumed that the property is not adversely affected by contamination to any material extent, however would recommend an environmental report is commissioned.

However, we would recommend an environmental assessment report is commissioned and the resultant report provided to us to enable us to comment on whether our opinion of Market Value is adversely affected as a result.

FLOODING

The River Thames

The River Thames is England’s longest river, and flows through central London. The Property is located approximately 0.5 miles directly north of the River Thames. The River Thames has a floodplain of approximately 896 sq km, and affected areas include, but are not limited to, parts of Southwark, Westminster, Hammersmith and Fulham, Wandsworth, Kensington and Chelsea, the City and Canary Wharf. Fortunately London is protected by an unbroken line of flood defences stretching from Teddington in the west through to the Thames Barrier in the south east.

The subject Property is situated immediately adjacent to the Limehouse Cut Canal and is 0.4 miles north of the River Thames. However the property within an area categorised by the Environment Agency as having a very low risk of flooding with from rivers and the sea, a likelihood of flooding in any given year of less than 0.1%.

It is important to note that flood defences do not completely stop the chance of flooding as they can be overtopped or fail. In addition, flooding can occur at any time and in any place from sources such as surface water run-off, rising ground water levels, burst mains, drainage and sewer overflows.

However, there is an established property market in this location and, on balance we have formed the view that prospective purchasers and occupiers would regard the potential threat of flooding as a commercial risk; one with which other occupiers in the area appear comfortable.

However, we are unable to warrant to this effect and in the unlikely event of a major flood we consider that this would be likely to affect the property’s lettability and saleability in the short/medium term.

In arriving at our valuation we have assumed that the building is capable of being insured by reputable insurers at reasonable market rates. If, for any reason, insurance would be difficult to obtain or would be subject to an abnormally high premium, it may have an effect on value

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SUSTAINABILITY

We have not been provided with any reports in this regard and have not made any allowances for any potential costs of complying with legislation.

ASBESTOS

Whilst we are not aware of the existence of either asbestos at the property or an Asbestos Management Plan (in accordance with the Control of Asbestos Regulations (CAR) 2012), we have assumed that steps have been taken to comply with the regulations.

We recommend that any reports on asbestos at the property should be forwarded to us in order that we may comment upon their findings.

PLANNING

PLANNING POLICY

The subject property is located within the jurisdiction of the London Borough of Tower Hamlets. The council’s planning guidance consists of a series of documen ts that provides an approach to managing development.

The Development Plan for Tower Hamlets is comprised of the London Plan (produced by the Mayor of London), Local Plan and Neighbourhood Plans.

The Development Plan is also influenced by the National Planning Policy Framework (NPPF), which sets out strategic policies for development and growth within England.

Tower Hamlets Local Plan consists of the Core Strategy and Managing Development Document (MDD). Together these documents provide spatial policies, development management policies and site allocations to guide and manage development in the borough.

The Core Strategy was adopted by Full Council on September 15, 2010. The MDD was adopted by full council on April 17, 2013.

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With reference to the Local Development Framework, the property is located in a designated ‘regeneration area’ and located within a Central Activity Zone.

Included within the Core Strategy of Tower Hamlets isa summary of the vision for Limehouse in particular, which includes the following detail:

‘There will continue to be medium levels of growth in this area, with old industrial sites being redeveloped for residential or mixed-use, including local economic opportunities for enterprise and small and medium businesses’.

LISTED/CONSERVATION AREA

The subject property is located within St Anne’s Conservation Area. 777 -783 Commercial Road is confirmed as being Grade II listed, however, the structures of 785 Commercial are not mentioned in the listing. We are not aware of any Highway proposals in the immediate vicinity which will affect our opinion of Market Value.

From speaking to the local planning officer, it cannot be confirmed whether 785 Commercial Road is listed. For the purposes of valuation, we have assumed the property would form part of the Grade II listing and therefore would have to be retained and therefore could not be demolished.

PLANNING HISTORY

With reference to the London Borough of Tower Hamlets planning portal website, we are aware of the following planning history in relation to the subject property:

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Address Application No. Decision Date Comments Erection of a 28m x 7m externally illuminated 777 -785 vinyl banner advertisement for a temporary Commercial PA/14/02368 Permit 21/08/2014 18 month pe riod on the upper floors front Road, E14 elevation of property. 777-785 Retention of illuminated poster panel on Commercial PA/10/00247 Refused 30/04/2010 flank wall. Road, E14 Erection of Two x 96 sheet and one x mega 6 internally illuminated advertisement 777 Commercial PA/09/00541 Refused 28/05/2009 hoarding displays with associated loose Road, E14 weave vinyl safety screen for a proposed period of two years. Demolition of existing buildings and Site at 769 To redevelopment by the erection of 115 flats, 785, Commercial PA/00/01885 Refused 13/02/2003 1935 sq. metres of ground floor space for Road, London A1, A2 or B1 use and a basement car park. Demolition of all existing buildings to 769 -785 facilitate redevelopment to provide 115 flats Commercial PA/00/01887 Refused 13/02/2003 and 1935 sq.metres of A1, A2 and B1 space Road, E14 with a basement car park.

We are aware the borrower has submitted a pre-application in line with the description detailed within the ‘proposed description’ element of this report , in essence to reinstate the Grade II listed element of the property to provide office accommodation and associated exhibition space with the remaining unlisted element of the property and hard standing land to be redeveloped to provide a 110 unit HMO scheme.

Whilst planning has not been granted in line with the borrowers proposals as at the date of valuation, we have nevertheless reached our opinion of Market Value for the property on the basis that the Grade II listed element of the building would be modernised to create B1 office space and associated exhibition space with the cost to do so, explicitly factored in.

HISTORIC PRE-APPLICATION

We have been provided with a historic pre-application in relation to the subject property which relates to ‘ Conversion of ex isting Grade II listed Sailmaker’s loft to mix of uses and development of residential on adjoining sites’ , dated 19 th February 2013.

The planning officer concludes with the following comments made, in summary:

- The proposed restoration of the two Grade II listed Sailmakers Warehouse to provide mix of commercial uses (retail, office, restaurant, gallery and private events) is supported. - Officers are of the opinion that the proximity of the proposed residential use at building A and the adjacent residential development approved under planning ref PA/11/01120 could result in undue overlooking, loss of privacy and poor daylight and sunlight levels.

LOCAL PLANNING OFFICER CORRESPONDENCE

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We have had verbal correspondence with Jane Jin (on 28 th September 2015), the local planning officer for Tower Hamlets (East) which includes the subject property. In summary, our findings from the correspondence are detailed below:

- Residential development is supported/positively viewed on brownfield sites (which includes the subject property). - Any redevelopment/change of use needs to justify the loss of employment. - Although the property is located outside the ‘preferred office location’ zone, if the property is configured to provide office accommodation to cater to the SME market, such a proposal is likely to be positively viewed. - It cannot be confirmed whether 785 Commercial Road is included within the listing status of 777-783 Commercial Road.

PLANNING – CONCLUSIONS

Our interpretation of the planning history, pre-application history and conversations had with the local planning officer would suggest that a mixed use development located at the subject property would not be discouraged.

For the purposes of valuation, we have valued the property adopting the following approach:

Ref Add ress Description - existing Method of Valuation 1 777-783 Grade II listed building · Residual valuation on the basis of Commercial Road (middle) providing B1 office space. 2 · Residual valuation on the basis of 785 Commercial Office and workshop structure providing B1 office. space included within Road (east) – potentially listed. 777-783 Commercial Road. 3 769-775 Open plot of land to the (west · Comparable (land sales). Commercial Road of the site)

Further detail on our approach will be provided below.

RATING ASSESSMENT

Upon enquiry of the Valuation Office Agency (VOA), we were advised that the property is assessed for non-domestic rating purposes as follows:

Address Description Rateable Value Advert W Of 767, Commercial Road, London, E14 7HG Advertising Right and Premises £3,300

The remaining elements of the property are de-listed taking into account their condition.

RATES PAYABLE

The current Uniform Business Rate is 49.3 pence per £1 of rateable value. The rates payable in 2014/2015 are therefore £1,626.90.

Due to the current condition of the property, we understand rates are not payable for the buildings located on the site and the property is listed.

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If however it is found that the landlord is currently incurring non-recoverable costs, our opinion of Market Value will potentially be adversely affected.

TENURE

We understand that the property is held Freehold .

Our valuation is formed on the assumption that the title is held free from rent, charge or other outgoings and that there are no unusual, onerous or restrictive covenants in the titles which are likely to affect the values.

We have not been provided with a Report on Title for the property. We have assumed that your solicitors will be preparing one on your behalf, and we recommend that a copy is forwarded to us in order that we may comment upon its findings.

TENANCY

The property is vacant and non-income producing at present.

We are however aware 769-775 Commercial Road is occupied by the adjacent developer on an informal license basis. We are not aware that any rent is currently being paid. We would strongly recommend your solicitors verify vacant possession can be achieved in the short-term..

Due to the current condition of the property and taking into account the property is to be extensively modernised imminently, we understand rates are not payable for the property.

SUMMARY – INCOME ANALYSIS

The current net income from the subject premises is £0 per annum.

Taking into account the property is to be extensively modernised/developed in the short/medium term, we have assumed rates are not payable for the property and the landlord is therefore not incurring non-recoverable costs.

COVENANT STATUS OF TENANTS

Non-applicable. No formal tenancy/lease agreement is in place.

CITY FRINGE OFFICE MARKET REVIEW

Only three sub-markets now offer refurbished Grade A space at rents below £40.00 per sq ft – Docklands, east City fringe and Stratford which is making such locations ever more attractive to incoming occupiers.

Throughout most parts of the Central London office market landlords have increased quoting rents by, typically, circa £2.50 and £7.50 per sq ft per annum since Q2 2014 with office space in the City, east City fringe and South Bank recording increases at the higher end of the rental range. Contrast

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the ‘s uper-prime’ office market in St James’s and Mayfair where quoting rents for Grade A space have risen by over £20.00 per sq ft during the last 12 months.

The promotion of the area around Old Street roundabout, rebranded “Silicon Roundabout”, as a hub for start-up technology companies has been reinforced by the likes of Google and Microsoft setting up coworking/incubator centres in the area which offer young companies the opportunity to lease space on easy in / easy out short term leases / desk sharing agreements which are specifically intended to encourage the sharing and development of ideas. Boutique investment funds specialising in the fledging tech sector are also setting up offices in the area to be closer to their client base. The emergence of the following office sub-market is positively affecting office rents in certain fringe locations including Limehouse.

VALUATION METHODOLOGY

We have valued the property as 2 separate elements, broken down as follows:

Ref Address Description - existing Method of Va luation 1 777-783 Grade II listed building · Residual valuation on the basis of providing Commercial Road (middle) B1 office space. 2 · Residual valuation on the basis of providing 785 Commercial Office and workshop structure B1 office. space included within 777-783 Road (east) – potentially listed. Commercial Road. 3 769-775 Open plot of land to the (west · Comparable (land sales). Commercial Road of the site)

(1 & 2) 777-783 & 785 COMMERCIAL ROAD – RESIDUAL VALUATION

Taking into account the extensive modernisation works that would need to take place in order to create new B1 office space, we have adopted the residual method of valuation for the following element of the property.

We draw your attention to the fact that residual valuations rely upon a large number of subjective inputs and relatively small changes in some of the inputs can result in a considerable difference in the final valuation figure. Thus, small changes in market conditions can also create a disproportionate change in value.

Nevertheless, we believe that the inputs that we have made are reasonable for a development of this kind, but clearly all prospective purchasers would adopt inputs that were specific to their own situations.

In providing a loan that is intended to fund the development costs we would recommend that the Bank instruct their own quantity and project monitoring surveyors and have the above figures independently verified. The Bank need to protect their security and the appointment of a project monitor, directly on their behalf, will provide an early indication of any potential problems during the development period. As an alternative, the Bank should seek to get the Borrower’s professional team to warrant advice on the proposed costs to the Bank.

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To reiterate the point on construction costs, as valuation surveyors, we are not qualified to provide advice on such costs and the Bank needs to obtain independent advice on this matter. Costs are a major influence on a residual valuation and changes in costs can have a major impact on the residual figure.

GROSS DEVELOPMENT VALUE

In reaching our opinion of Gross Development Value for the respective element of the subject property, we have given consideration to the following rental comparable evidence in the first instance:

Office Rental Comparable Evidence and Considerations - 777-783 Commercial Road

In reaching our opinion of Market Rent for the office element of the subject property (on the assumption works are completed to provide a Grade A office accommodation), we have given consideration to the following rental comparable evidence:

Rent pa. Rent per Address Date Comments sq ft · First floor office space taken on a 5 year lease with tenant option to break in year 3. · Metropolitan Wharf is a Grade II Listed Victorian riverside converted warehouse Unit 306 Metropolitan building, arranged over eight floors, which Wharf, 70 Wapping Wall, Jun-15 £83,040 £30.00 includes the basement level. The property Canary Wharf, E1 provides predominantly office accommodation, with retail space on the ground floor. The property is located on Wapping Wall close to Wapping Station. · Tecno Spa has taken the first-floor office space within Suite 1.02 on a 5 year lease at subject to a tenant only option to break in year 3. · The property comprises a listed warehouse building converted to provide a variety of office suites arranged over seven floors. Period features have been retained to include Suit 1.01 -1.02 New exposed brickwork, cast iron columns, and Loom House, 101 Back Mar-15 £38,550 £37.50 high levels of natural daylight. The building Church Lane, E1 has an impressive entrance hall and central atrium, with two glass wall climbing lifts, a goods delivery/loading bay, bicycle racks and five car parks in the immediate area with one located in Back Church Lane. Additional specifications include raised timber access floors, strip lighting and cast iron columns.

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Rent pa. Rent per Address Date Comments sq ft · Ground floor office space within suite G5 taken on a five-year lease subject to a rent review and option to break in year 3. · The property comprises a listed warehouse building converted to provide a variety of office suites arranged over seven floors. Period features have been retained to include New Loom House, 101 exposed brickwork, cast iron columns, and Dec-14 £42,124 £34.50 Back Church Lane, E1 high levels of natural daylight. The building has an impressive entrance hall and central atrium, with two glass wall climbing lifts, a goods delivery/loading bay, bicycle racks and five car parks in the immediate area with one located in Back Church Lane. Additional specifications include raised timber access floors, strip lighting and cast iron columns. · Bright North Ltd has taken 5th floor office space within Suite 5.04 on a five-year lease, subject to an option to break in year 3. · The property comprises a listed warehouse building converted to provide a variety of office suites arranged over seven floors. Period features have been retained to include Suite 5.04 New Loom exposed brickwork, cast iron colu mns, and House, 101 Back Church Nov-14 £61,890 £30.00 high levels of natural daylight. The building Lane, E1 has an impressive entrance hall and central atrium, with two glass wall climbing lifts, a goods delivery/loading bay, bicycle racks and five car parks in the immediate area with one located in Back Church Lane. Additional specifications include raised timber access floors, strip lighting and cast iron columns. · Darkstorm Trading Limited has taken 5th floor office space within suite 5.06 on a 5 year lease subject to an option to break in year 3. · The property comprises a listed warehouse building converted to provide a variety of office suites arranged over seven floors. Period features have been retained to include Suite 5.06 New Loom exposed brickwor k, cast iron columns, and House, 101 Back Church Oct-14 £87,181 £34.50 high levels of natural daylight. The building Lane, E1 has an impressive entrance hall and central atrium, with two glass wall climbing lifts, a goods delivery/loading bay, bicycle racks and five car parks in the immediate area with one located in Back Church Lane. Additional specifications include raised timber access floors, strip lighting and cast iron columns.

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Rent pa. Rent per Address Date Comments sq ft · Techspace took the first to sixth floors on a 5 year lease with 3 months rent free and tenant option to break in year 5. · The property comprises a building of concrete frame construction with a ceramic fascia. The property is arranged over eight floors including basement and offers office space on 38 -40 Commercial Road, Aug-14 £441,000 £21.00 the upper floors and retail space on the E1 ground floor and basement level. · Less desirable aesthetic look to building – 1970’s construction. · Located closer to Central London. · Agents note that if marketed today, they would expect a rent of closer to £29.50 per sq ft to be achieved. · Fourth floor office space taken on a 5 year lease with 6 months at half rent with a further 2 months at half rent should the tenant not exercise the break clause. Tenant option to break in year 3. Unit 409 Metropolitan · Metropolitan Wharf is a Grade II Listed Wharf, 70 Wapping Wall, Apr-14 £40,014 £18.00 Victorian riverside converted warehouse Canary Wharf, E1 building, arranged over eight floors, which includes the basement level. The property provides predominantly office accommodation, with retail space on the ground floor. The property is located on Wapping Wall close to Wapping Station.

The comparable evidence detailed above reflects a rental value range of between £18.00 and £37.50 per sq ft. Key factors affecting the rental value achieved include specification, size, location and date.

The comparable evidence located within Metropolitan Wharf is located to the south east of the subject property within a Grade II listed building which is equally distant from transport links. In the main office suites have let to media/tech occupiers, a similar target tenant mix to that expected to occupy the proposed renovated office scheme. The marketing agent of the transaction which took place within Unit 409 of the development is understood to be an anomaly and the current tone for the development is approximately £30.00 per sq ft. We are of the view the subject property is located in what would be regarded as an inferior micro location as compared to the comparable and therefore would expect the comparable to transact at a premium as compared to the subject property.

Transactions which have taken place within New Loom House on Back Church Lane reflect a rental value range of between £30.00 and £37.50 per sq ft. Again, the comparables are located within a Grade II listed building internally configured to provide office suite accommodation. We would expect the subject property to be completed to a similar specification, however would

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 17 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

anticipate the subject property transacting at a discount, taking into account the proximity of the comparable building to the City of London.

38-40 Commercial Road is located on the same road as the subject property, however is dissimilar in many respects; located closer to Aldgate and the City of London (which would reflect a premium) and the external aesthetics and internal specification are inferior as compared to the subject property (which would reflect a discount). The marketing agents have commented that if it were to be marketed as at the date of valuation, they would expect to achieve closer to £30.00 per sq ft which is a clear illustration of the rental growth realised in City Fringe locations of recent.

With the following taken into account, we have applied a rental value of £28.00 per sq ft to the ground to second floors and £14.00 to the lower ground floor space, leading to an opinion of Market Rent for the respective element of £1,026,396 per annum, say £1,025,000 per annum.

Relettability Prospects

We are of the view that upon development completion, we would expect the property to let within a 12 month marketing period with a further 6 months tenant incentive agreed. We would however expect the property to be marketed prior to development completion in order to reduce the potential letting void and anticipate the property to re-let on a multi-let basis to SME sized media/tech oriented office occupiers.

In reaching our opinion of Gross Development Value for the respective element of the subject property, we have capitalised our opinion of Market Rent (outlined above) with reference to the investment comparable evidence detailed below: Cal Val per Address Date Sale Price NIY Comments sq ft 51 · Self-contained freehold warehouse style Derbyshire office building on the eastern City f ringe. Street, Mar-15 £4,500,000 3.24% £405.00 · Business units let on annual licenses. Bethnal Green, · Fully let office investment, with future London, E2 residential conversion potential. · Multi let freehold ‘warehouse style’ office and day nursery. · Let to 2 ten ants producing an income of 1-4 Floral £140,318 per annum. Place, Feb-15 £3,850,000 5.86% £403.00 Short unexpired lease term (sub-1 year). London, N1 · · Premium taking into account the potential latent value held in residential redevelopment. Suncourt · Multi-let mixed use investment let to House, 18- medium sized companies with a WAULT 26 Essex Dec-14 £17,500,000 5.61% £652.00 of 5.57 years to expiry. Road, · Grade A spec development located in a Angel, N1 more central location.

Seatem · Freehold, fully let to two tena nts with a House, 39 WAULT of approximately 5 years. Jun-14 £2.43m 5.31% £276.00 Moreland · Top two floors sold on long leases. St, EC1V · Slightly reversionary.

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The comparable evidence detailed above reflects a yield range of between 3.24% and 5.86%. A number of the comparable transactions are located in similar East London fringes. The exception to this is Seatem House and Suncourt House which is located in a more central location which would attribute a premium.

The comparable evidence of 51 Derbyshire Street and 1-4 Floral Place include a premium taking into account the potential latent value held in the assets in terms of potential change of use to residential.

We are of the view the most salient evidence relates to Suncourt House which is multi-let to SME sized companies with a similar WAULT to what we would expect to be achieved at the subject property. However taking into account the comparable is more centrally located, we are of the view the subject property would transact at a discount as compared to the comparable.

We have assumed the property is let on a new FRI lease with a 5 year lease term certain with 6 months rent free. With the comparable evidence and the following assumptions taken into account, we have applied a capitalisation rate of 6.25%, leading to a Gross Development Value for the respective element of £16,060,223, say £16,060,000 (Sixteen Million and Sixty Thousand Pounds), which equates to approximately £400.00 per sq ft on an overall basis which is in line with the comparable evidence detailed above.

We can confirm we have applied purchasers costs at 5.80% to our opinion of Gross Development Value.

CONSTRUCTION COSTS

We have assessed the likely construction costs with reference to BCIS. BCIS provides a median construction cost rate of approximately £70.00 per sq ft. The following figure has been reached on the basis of conversion to B1 office taking place within the London Borough of Tower Hamlets over 3-5 storeys to include air conditioning (all factors of which are true in the case of the proposed modernisation works to take place at the subject property). Taking into account the complexities of the modernisation works to take place as a result of at least part of the property being Grade II listed and therefore a level of preservation and reinstatement having to take place, we have applied a 40% increase in costs to reflect the complexities of the modernisation works that would need to take place, equating to £120.00 per sq ft and an overall figure of £5,066,533.

Professional Fees

In terms of professional fees, we have applied 12% of construction fees. Although the following element of the property is not a new development and an existing structure is in place, the complexities surrounding the Grade II listing and respective preservation and restoration works that would need to take place have been duly reflected. The weighting of costs is (as conventionally) weighted towards architects fees which represent 6.00% of the overall construction costs. In line with market practice, we have applied a contingency of 5.00% of constructions costs which is in line with market practice.

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Development Period

On the development period we have adopted 3 months pre construction period and 12 months in which to complete construction. We have assumed the respective element of the property is marketed prior to development completion and factored in a further 6 month letting void upon development completion to reflect tenant incentives.

Finance

On finance we have adopted a rate of 5.50%. The interest payment is calculated, as part of the Argus developer software, based upon 100% of the “costs”. We are aware that the Bank will only be lending a percentage of the costs, but the Borrower’s equity is not without cost and there is either a lost opportunity cost if the Borrower uses their own funds, or a rate to pay to equity investors if funds are borrowed.

Marketing & Letting Fees

The residual appraisal allows £60,000 for marketing, with standard fees of 10% for agency and 0.50% for legals which are in line with standard market practice.

Developers Profit

We have adopt ed a developer’s profit at 17.50% on GDV. A level of risk has to be attributed to the fact the subject property is at the very least part Grade II listed which will mean inherent levels of risk in terms of any type of refurbishment that is to take place. The development is however only in the form of modernisation works rather than new development which would reflect a lower level of risk. Relative buoyancy seen in the commercial property market at present and in particular Greater London would lower the level of risk a developer/investor would attribute to such a development/refurbishment opportunity.

A summary of our residual appraisal is detailed below:

Gross Development Value £16,060,000 Stamp Duty 4.00% Construction Costs £5,066,533 Professional Fees 12% of construction costs Disposal Fees £227,697 Finance Rate 6.50% Marketing & Letting £167,772 Contingency 5.00% Project Timescale 15 months including 12 months construction Profit on GDV 17.50% Residual Value £5,249,958, say £5,250,000

With the following taken into account, we are of the opinion the Residual Value/Market Value for 777-783 & 785 Commercial Road is £5,249,958, say £5,250,000 (Five Million Two Hundred and Fifty Thousand Pounds) .

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The level of construction costs would have a material impact on the derived site value in any appraisal and the Bank should ensure that any development works are subject to a fixed priced tender or independently verified before any loans for development works are released. We reserve the right to amend our valuation if the costs are amended upon formal assessment by the Bank’s Quantity Surveyor / Project Monitoring Surveyor.

We have been advised by the Borrower that the proposed scheme will be completed to a high specification, with similar high quality finishes found in nearby developments which have achieved high rental levels. To confirm, in providing our opinions of value, we have assumed a high specification of works with complete conformity to planning and building regulations.

(3) 769-775 COMMERCIAL ROAD – VACANT POSSESSION LAND SALES COMPARABLE EVIDENCE

Taking into account the vacant nature of the open plot of land, we have given principle consideration to vacant possession land sales evidence as detailed below: Size sq Price p er Address Date Price Comments ft acre · Vacant warehouse which has received a historic positive response to a pre- 3-7 Caroline application to demolish existing and Street, Mar -15 3,941 £1,100,000 £21,153,846 redevelop to provide a 4 storey Limehouse, residential scheme. E1 · Lo cated 2 minutes from a Limehouse. · Located on a mixed use road. · Former car park and associated buildings and former laundrette sold to 32 Lawn developer without planning by Camden Road, Sep-14 25,700 £11,000,000 £18,644,068 Council. London,

NW3 · Located in a more desirable location, however would be classed as dated evidence. · Disused factory/workshop located on a 3-4 Vine narrow turning off Whitechapel Road. Court, Feb-14 3,000 £837,000 £12,292,537 · Located within proximity. London, E1 · No historic planning r elated to the site. · Dated transaction

The comparable evidence detailed above illustrates a sales per acre range of between approximately £12,000,000 and £21,000,000 per acre. The comparable evidence is similar to the subject property in terms of no formal planning being in place for the redevelopment to either commercial or residential.

32 Lawn Road in our opinion is slightly distorted evidence on the basis of being located in a more desirable location and being a dated transaction. In addition, although planning was not in place for redevelopment, the site was purchased from Camden Council which would increase the feasibility that planning would be granted for a change of use to residential. We have therefore discounted the evidence.

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 21 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

3-4 Vine Court is located within reasonable proximity of the subject property, however includes an existing building on site. The property does not include any pre-application or formal planning in terms of a change of use and is a dated transaction. We are therefore of the opinion the comparable would transact at a discount as compared to the subject property.

The comparable transaction of 3-7 Caroline Street in our opinion is the most comparable evidence on the basis of location and date. The comparable (similar to the subject property) has had a positive response to a pre-application encompassing residential redevelopment. The property however in our opinion reflects a slight premium in terms of the proximity to Limehouse DLR Station.

We are aware a formal offer has been made (and have been provided with the formal offer letter, dated 4 th August 2015) for the respective element of the property for £3,350,000, which equates to approximately £18,200,000 per acre. The offer has been made on an unconditional basis to planning being granted for a change of use to residential. We are aware that the offer has been made by Burlington Partners (an arm of Aitch Group) who are a residential developer. The borrower has made us aware that the respective party bid to purchase the entire site, however were outbid by the borrower.

Although not a completed transaction, we are of the view the most salient evidence relates to the most recent offer made in respect of the following element of the subject property, as underpinned by the most salient open market evidence of 3-7 Caroline Street.

We are therefore of the opinion the Market Value for the following element of the subject property is £3,350,000 (Three Million Three Hundred and Fifty Thousand Pounds).

SUMMARY

With the following taken into account, we are of the opinion the Market Value for the subject property in its entirety is £8,600,000 (Eight Million Six Hundred Thousand Pounds), which can be broken down as follows:

Address Market Value 777-783 & 785 Commercial Road £5,250,000 769-775 Commercial Road £3,350,000 TOTAL £8,600,000

PRINCIPAL VALUATION FACTORS

We set out below our analysis of the most important characteristics of the property:

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Principal Valuation Factors The Location · The subject property is located in Limehouse, a district in east London, in the London Borough of Tower Hamlets. · Limehouse is approximately 1 mile north of Canary Wharf, 2.50 miles east of City of London and 4 miles east of Central London. Limehouse is on the northern bank of the River Thames opposite Rotherhithe and between Ratcliff to the west and Millwall to the east. · The subject property is located on the north side of Commercial Road, close to the junction of St Anne Street to the east, Salmon Lane to the west and Newell Street and Three Colt Street to the south. · The property immediately abuts Limehouse Cut to the north which is a canal that connects Limehouse Basin to the River Thames. · The property immediately abuts Commercial Road to the south which forms part of the A13, a major trunk road which provides direct acc ess to the City of London to the west and Southend-On-Sea to the east. · Commercial Road itself is characterised as offering commercial retail units operated by local operators at ground floor with residential self-contained accommodation over upper parts in the main. · In terms of transport links the property is approximately 0.5 miles to the east of Limehouse DLR and Overground Station which provides access to the City of London (via Bank) and connecting services to Canary Wharf and Fenchurch Street. · Canary Wharf Underground Station (Jubilee Line) is 1 mile to the south east providing access to Central London and London Waterloo in particular. London City Airport is approximately 5 miles to the east, accessed via road or DLR. The Property · The property comprises three elements, an empty hard standing yard at 769 to 775 Commercial Road (site at west end), two office and workshops structures known as the Sailmakers Loft at 777 to 783 Commercial Road (Grade II listed building located in the middle of the site) a nd a third office and workshop structure at 785 Commercial Road (buildings located on the east end of the site). · We are aware of the borrowers intention to carry out modernisation/remediation works to the Grade II listed element of the property (777-783 Commercial Road) to create office space and associated exhibition hall accommodation centred around the central atrium of the building. · It is understood the intention for the remaining unlisted element of the property (785 Commercial Road) is for it to be d emolished to create a House of Multiple Occupancy (HMO) scheme comprising 11 0 units to incorporate the open hard standing site to the western end of the site (769-775 Commercial Road). Tenure · Freehold (assumed).

· N/A – The property is vacant.

The Lease s · We are however aware 769-775 Commercial Road is occupied by the adjacent developer on an informal license basis. We are not aware that any rent is currently being paid. We would recommend the following is verified. The Tenant s · N/A – The property is vacant.

Strengths · The property is located within proximity of transport links including Limehouse DLR. Station. · The property is held with full vacant possession enabling redevelopment/modernisation works to take place in the short-term. · The property possesses s ignificant latent value subject to planning being granted for a change of use to create a new mixed-use development.

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 23 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

Principal Valuation Factors Weaknesses · The property is vacant and non-income producing. · The property is in need of redevelopment which will mean incurring constructio n costs. Opportunities · Carry out necessary modernisation works and market the property to create an income producing office development in terms of the Grade II listed element of the property in particular. · Apply for planning permission in order to create a new mixed use site. · Commence the marketing of the property prior/whilst modernisation/remediation works take place to reduce void periods upon modernisation works completion.

Threats · Development works take place and the property remains vacant for a period of time leading to the landlord incurring non-recoverable costs in the form of empty rates liability. · Government cut backs affecting the wider economy. · Economic uncertainty.

PURCHASE PRICE

We understand the borrower exchanged on the property on 29th May 2015 and is set to complete on 29th October 2015 at a purchase price of £8,600,000.

It is understood from the borrower that the property was marketed to selected parties; Aitch Group (a residential developer) and another private developer from an Indian background were among the parties who bid on the property.

It is understood Aitch Group approached the borrower in terms of the proposed purchase of 769- 775 Commercial Road (open plot of land to the west) through a mutual agent of the borrowers who has acted for both parties in separate transactions. We understand that a number of bids were received around the level of our valuation, our borrower was chosen due to the unconditional nature of their offer and the proven track record to perform

Taking into account the property was marketed to a number of parties and a competitive bidding process was administered, we are of the view the purchase price is in line with the Red Book definition of ‘Market Value’ and therefore our opinion of Market Value is underp inned by the recent purchase of the property.

We understand that although the purchase price has been agreed, the sale had not yet completed at the time of our inspection. We would stress that our Report is addressed to the Bank strictly for the purpose of loan security only. In the circumstances, our Report is not to be taken as purchase advice or a recommendation to purchase. Accordingly, this Report must not be used for the purpose of supporting the purchase price. For the avoidance of doubt, we accept no liability whatsoever for any use of this Report which is outside the stated purposes for which we have prepared this Report.

VALUATION METHODOLOGY

For the purposes of valuation, we have valued the property adopting the following approach:

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 24 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

Ref Addre ss Description - existing Method of Valuation 777-783 Grade II listed building · Residual valuation on the basis of providing B1 office 1 Commercial Road (middle) space. 785 Commercial Office and workshop structure · Residual valuation on the basis of providing B1 office. 2 Road (east) – potentially listed. space included within 777-783 Commercial Road. 769-775 Open plot of land to the (west 3 · Comparable (land sales). Commercial Road of the site)

(1 & 2) 777-783 & 785 COMMERCIAL ROAD – RESIDUAL VALUATION

Taking into account the extensive modernisation works that would need to take place in order to create new B1 office space, we have adopted the residual method of valuation for the following element of the property.

With all deductions taken into account, we are of the opinion the Residual Value/Market Value for 777-783 & 785 Commercial Road is £5,249,958, say £5,250,000 (Five Million Two Hundred and Fifty Thousand Pounds) .

A summary of our residual appraisal is detailed below:

Gross Development Value £16,060,000 Stamp Duty 4.00% Construction Costs £5,066,533 Professional Fees 12% of construction costs Disposal Fees £227,697 Finance Rate 6.50% Marketing & Letting £167,772 Contingency 5.00% Project Timescale 15 months including 12 months construction Profit on GDV 17.50% Residual Value £5,249,958, say £5,250,000

The level of construction costs would have a material impact on the derived site value in any appraisal and the Bank should ensure that any development works are subject to a fixed priced tender or independently verified before any loans for development works are released. We reserve the right to amend our valuation if the costs are amended upon formal assessment by the Bank’s Quantity Surveyor / Project Monitoring Surveyor.

We have been advised by the Borrower that the proposed scheme will be completed to a high specification, with similar high quality finishes found in nearby developments which have achieved high rental levels. To confirm, in providing our opinions of value, we have assumed a high specification of works with complete conformity to planning and building regulations.

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 25 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

(3) 769-775 COMMERCIAL ROAD – VACANT POSSESSION LAND SALES COMPARABLE EVIDENCE

Taking into account the vacant nature of the open plot of land, we have given principle consideration to vacant possession land sales evidence.

Although not a completed transaction, we are of the view the most salient evidence relates to the most recent offer made in respect of the following element of the subject property, as underpinned by the most salient open market evidence of 3-7 Caroline Street.

We are therefore of the opinion the Market Value for the following element of the subject property is £3,350,000 (Three Million Three Hundred and Fifty Thousand Pounds).

SUMMARY

With the following taken into account, we are of the opinion the Market Value for the subject property in its entirety is ass instructred excluding hope value £8,600,000 (Eight Million Six Hundred Thousand Pounds), which can be broken down as follows:

Address Mar ket Value 777-783 & 785 Commercial Road £5,250,000 769-775 Commercial Road £3,350,000 TOTAL £8,600,000

SUITABILITY FOR SECURITY

On the basis of the information provided and subject to the comments contained within this report and normal prudent loan criteria, 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.

REINSTATEMENT COST (ON EXISTING)

Having given the matter careful consideration, we are of the opinion that the reinstatement value for insurance purposes, on a day one basis, including costs of demolition, architect’s and surveyor’s fees but exclusive of VAT, is £4,230,000 (which relates to the building as it currently stands).

This figure has been produced by a general practice surveyor based upon the inspection for valuation purposes and the information contained within the current edition of the Building Cost Information Service published by the Royal Institution of Chartered Surveyors. Should you wish to rely on this figure, we recommend that an insurance valuation is obtained from a building or quantity surveyor.

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 26 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

LIABILITY AND PUBLICATION

This report is issued for your own use, and that of your professional advisers, for the specific purpose to which it refers. We do not accept responsibility to any third party for the whole or any part of its contents.

Neither the whole nor any part of this valuation, or any reference thereto, may be included in any published document, circular or statement or disclosed in any way without our previous written consent to the form and context in which it may appear.

For the avoidance of doubt, this report is provided by Colliers International Valuation UK LLP and no partner, member or employee assumes any personal responsibility for it nor shall owe a duty of care in respect of it.

The Beneficiaries may disclose the report (without reliance): (a) where disclosure is requested or required by law or in respect of legal proceedings in connection with the report; (b) where disclosure is requested or required by the mandatory rules or regulations of any competent supervisory or regulatory body of any Beneficiary; (c) to any affiliates of any Beneficiary; (d) to their respective agents or advisers, or any of them, in connection with the loan and/or hedging transactions under the Facility Agreement; (e) to any financial institution or other entity in connection with the loan and/or hedging transactions under the Facility Agreement, and their respective advisers; and (f) to future owners, or prospective purchasers, of any loan and/or hedging transaction under and/or of any property financed under the Facility Agreement. The Beneficiaries may also make reference to the report, and include all or part of the report, in any offering materials or on-going investor reporting materials.

Yours faithfully

Lucinda Lee-Bapty BSc MRICS Patrick Kearon BSc (Hons) MRICS Director Surveyor RICS Registered Valuer RICS Registered Valuer For Colliers International Valuation UK LLP For Colliers International Valuation UK LLP

COLLIERS INTERNATIONAL VALUATION UK LLP PAGE 27 OF 27 769-785 COMMERCIAL ROAD, LONDON E14 7HG

APPENDIX 1: INSTRUCTIONS AND GENERAL ASSUMPTION & DEFINITIONS

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GENERAL ASSUMPTIONS & DEFINITIONS

The valuations have been prepared in accordance with the RICS Valuation – Professional Standards (Incorporating the International Valuation Standards) January 2014 prepared by the Royal Institution of Chartered Surveyors.

The valuations have been prepared by a suitably qualified valuer, as defined by PS 2.3 of the Professional Standards, on the basis set out below unless any variations have been specifically referred to under the heading “Special Remarks”:

MARKET VALUE (MV) Valuations based on Market Value, have been prepared in accordance with VPS 4.1.2 of the Professional Standards issued by The Royal Institution of Chartered Surveyors, which is defined as follows:

‘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’.

The interpretative commentary on Market Value, as published by the International Valuation Standards Council (IVSC), has been applied.

FAIR VALUE Valuations based on Fair Value shall adopt one of the two definitions in accordance with VPS 4.1.5 of the Professional Standards.

1. The definition adopted by International Valuation Standards (IVS) in IVS Framework paragraph 38. ‘The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties ’. 2. The definition adopted by the International Accounting Standards Board (IASB) in IFRS 13. ‘The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date ’. It is important to recognise that the two definitions of Fair Value are not the same. Valuations prepared for financial reporting purposes under IFRS require the adoption of the IASB definition and IFRS 13 will apply. The guidance in IFRS 13 includes: ‘The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. A fair value measurement requires an entity to determine all the following: (a) the particular asset or liability that is the subject of the measurement (consistently with its unit of account)

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(b) for a non-financial asset, the valuation premise that is appropriate for the measurement (consistently with its highest and best use) (c) the principal (or most advantageous) market for the asset or liability (d) the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised. The references in IFRS 13 to market participants and a sale make it clear that for most practical purposes, Fair Value is consistent with the concept of Market Value.

FAIR VALUE IN ACCORDANCE WITH FRS 102

For valuations prepared for the purposes of UK Generally Accepted Accounting Principles (UK GAAP) we have provided an opinion of Fair Value as defined within FRS 102. This is defined as follows:

“The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction .” For most practical purposes, the concept of knowledgeable, willing parties and an “arm’s length transaction” mean that this definition of Fair Value is accepted to be reasonably consistent with the concept of Market Value and Fair Value adopted by the IASB in accordance with IFRS 13.

EXISTING USE VALUE (EUV)

If we have provided an opinion of Existing Use Value this has been arrived at in accordance with UKVS 1.3 of the Professional Standards, which is defined as follows:

‘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 wherein the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business and disregarding potential alternative uses and any other characteristics of the asset that would cause its Market Value to differ from that needed to replace the remaining service potential at least cost.’

This basis ignores any element of hope value for an alternative use, any value attributable to goodwill and any possible increase in value due to special investment or financial transactions (such as sale and leaseback) which would leave the owner with a different interest from the one which is valued. However, it includes any value attributable to any possibilities of extensions or further buildings on undeveloped land or redevelopment of existing buildings (all for the existing planning use) providing such construction can be undertaken without major interruption to the continuing business.

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DEPRECIATED REPLACEMENT COST (DRC)

If we have provided a valuation based on Depreciated Replacement Cost, as set out in UKGN 2.2.3 of the Professional Standards, this has been arrived at in accordance with the definition settled by the International Valuation Standards Committee as follows:

‘The current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation’.

International Accounting Standards stipulate that DRC may be used as a basis for reporting the value of Specialised Property in Financial Statements. DRC is recognised as a basis only for this purpose. For other purposes DRC may be used as a method to support a valuation reported on another basis.

INVESTMENT VALUE (OR WORTH)

Where we have been instructed provide valuations based on Investment Value or Worth, we have done so in accordance with VPS 4.1.4 of the Professional Standards issued by the Royal Institution of Chartered Surveyors, which is the definition settled by IVSC:

‘Investment value is the value of an asset to the owner or a prospective owner for individual investment or operational objectives’ .

This is an entity-specific basis of value. Although the value of an asset to the owner may be the same as the amount that could be realised from its sale to another party, this basis of value reflects the benefits received by an entity from holding the asset and, therefore, does not necessarily involve a hypothetical exchange. Investment value reflects the circumstances and financial objectives of the entity for which the valuation is being produced. It is often used for measuring investment performance. Differences between the investment value of an asset and its market value provide the motivation for buyers or sellers to enter the marketplace.

MARKET RENT (MR)

Valuations based on Market Rent (MR), as set out in VPS 4.1.3 of the Professional Standards, adopt the definition as settled by the International Valuation Standards Committee which is as follows:

‘The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on ap propriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion .’

MR will vary significantly according to the terms of the assumed lease contract. The appropriate lease terms will normally reflect current practice in the market in which the property is situated, although for certain purposes unusual terms may need to be stipulated. Matters such as the duration of the lease, the frequency of rent reviews, and the responsibilities of the parties for maintenance and outgoings, will all impact on MR. In certain States, statutory factors may either restrict the terms that may be agreed, or influence the impact of terms in the contract. These need to be taken into account where appropriate. The principal lease terms that are assumed when providing MR will be clearly stated in the report.

COLLIERS INTERNATIONAL VALUATION UK LLP

Rental values are provided for the purpose described in this report and are not to be relied upon by any third party for any other purpose.

RENTAL ASSESSMENT

Unless stated otherwise within the report, our valuations have been based upon the assumption that the rent is to be assessed upon the premises as existing at the date of our inspection.

BUILDING REINSTATEMENT COST (BRC)

If we have prepared a BRC we will not have carried out a detailed cost appraisal and the figures should therefore be considered for guidance purposes only and thus should not be relied upon as the basis from which premiums are calculated for obtaining building insurance.

PURCHASE AND SALE COSTS

No allowance has been made for legal fees or any other costs or expenses which would be incurred on the sale of the property.

We have however, where appropriate and in accordance with market practice for the asset type, made deductions to reflect purchasers’ acquisition costs. Trading related properties, however, are usually valued without deducting the costs of purchase.

Where appropriate, purchasers’ costs in England and Wales are based on 2.80% for properties with a value between £150,001 and £250,000; 4.80% for properties with a value between £250,001 and £500,000 and 5.80% for properties with a value in excess of £500,000.

In respect of residential property, Stamp Duty Land Tax is charged at increasing rates for each portion of the price. There will be no payment for the first £125,000 of the property value; 2% will be charged on the next £125,000; 5% on the next £675,000; 10% on the next £575,000; 12% on the remaining value (above £1,500,000). In addition a purchaser would expect to pay the standard 1.80% agents and solicitors costs.

Stamp duty on residential properties over £500,000 which are bought via a company is payable at 15% giving purchasers’ acquisition costs of 16.8%.

For commercial properties in Scotland purchaser’s acquisition costs are calculated at 1.8% for professional fees together with Land and Buildings Transaction Tax (LBTT - Equivalent of Stamp Duty Land Tax in England and Wales). This is a progressive tax which is applied to commercial land and buildings and is determined by reference to percentage of the Market Value. Up to and including £150,000, the LBTT rate is 0%, between £150,001 and £350,000 the rate applicable to this proportion is 3%, and any amount above £350,000 is charged at 4.5%.

In respect of residential property in Scotland, LBTT is charged at increasing rates for each portion of the price. There will be no payment for the first £145,000 of the property value; 2% will be charged on the next portion up to £250,000; 5% on the portion between £250,000 and £325,000; 10% on the next portion between £325,000 and £750,000; and 12% on the remaining value (above £750,000). In addition a purchaser would expect to pay the standard 1.80% agents and solicitors costs.

COLLIERS INTERNATIONAL VALUATION UK LLP

It should be noted, however, that for properties of an unusually large lot size it is common market practice that a purchaser would not expect to pay the standard 1.80% agents and solicitors costs. Accordingly, we may consider in these instances that it is appropriate to adopt a reduced rate.

MEASUREMENTS

Where we have measured the property, measurements and floor areas have been arrived at in accordance with the current edition of the Code of Measuring Practice issued by the Royal Institution of Chartered Surveyors.

Although every reasonable care has been taken to ensure the accuracy of the surveys there may be occasions when due to tenant’s fittings, or due to restricted access professional e stimations may have been made.

Floor areas are provided for the purpose described in this report and are not to be relied upon by any third party for any other purpose.

SITE PLAN AND AREA

Where a site area and or site plan has been provided this is for indicative purposes only and should not be relied upon. We recommend that a solicitors Report on Title be obtained and that the site boundaries we have assumed are verified and if any questions of doubt arise the matter to be raised with us so that we may review our valuation.

CONDITION

Unless otherwise stated within the report, we have not carried out a building survey, nor have we inspected the woodwork or other parts of the structures which are covered, unexposed or inaccessible and we are, therefore, unable to report that such parts of the property are free from rot, beetle or other defects.

Where we have noticed items of disrepair during the course of our inspections, they have been reflected in our valuations, unless otherwise stated.

We have assumed that none of the materials commonly considered deleterious as set out in the British Property Federation and British Council of Offices’ sponsored report “Good Practice in the Selection of Construction Materials”, ar e included within the property. These include, inter alia, the following:

· High alumina cement concrete

· Asbestos

· Calcium chloride as a drying agent

· Wood wool slabs as permanent shuttering

· Polystyrene and polyurethane used as insulation in cladding

COLLIERS INTERNATIONAL VALUATION UK LLP

None of the services, drainage or service installations was tested and we are, therefore, unable to report upon their condition.

ENVIRONMENTAL MATTERS

Unless otherwise stated within the report, we have not carried out soil, geological or other tests or surveys in order to ascertain the site conditions or other environmental conditions of the property. Unless stated to the contrary within the report, our valuation assumes that there are no unusual ground conditions, contamination, pollutants or any other substances that may be environmentally harmful.

FIXTURES AND FITTINGS

In arriving at our opinions of value we have disregarded the value of all process related plant, machinery, fixtures and fittings and those items which are in the nature of tenants’ trade fittings and equipment. We have had regar d to landlords’ fixtures such as lifts, escalators, central heating and air conditioning forming an integral part of the buildings.

Where properties are valued as an operational entity and includes the fixtures and fittings, it is assumed that these are not subject to any hire purchase or lease agreements or any other claim on title. No equipment or fixtures and fittings have been tested in respect of Electrical Equipment Regulations and Gas Safety Regulations and we assume that where appropriate all such equipment meets the necessary legislation. Unless otherwise specifically mentioned the valuation excludes any value attributable to plant and machinery.

TENURE, LETTINGS AND REPORTS ON TITLE AND/OR TENANCIES

Unless otherwise stated, we have not inspected the title deeds, leases and related legal documents and, unless otherwise disclosed to us, we have assumed that there are no onerous or restrictive covenants in the titles or leases which would affect the value.

Where we have not been supplied with leases, unless we have been advised to the contrary, we have assumed that all the leases are on a full repairing and insuring basis and that all rents are reviewed in an upwards direction only, at the intervals notified to us, to the full open market value.

We have assumed that no questions of doubt arise as to the interpretation of the provisions within the leases giving effect to the rent reviews.

We have disregarded any inter-company lettings and have arrived at our valuations of such accommodation on the basis of vacant possession.

If a solicitors’ Report on Title and/or Tenancies has been provided to us, our valuation will have regard to the matters therein. In the event that a Report on Title and/or Tenancies is to be prepared, we recommend that a copy is provided to us in order that we may consider whether any of the matters therein have an effect upon our opinion of value.

COLLIERS INTERNATIONAL VALUATION UK LLP

COVENANT STATUS OF THE TENANT/TENANTS

In the case of property that is let, our opinion of value is based on our assessment of the investment market’s perception of the covenant strength of the tenant(s). This has been arrived at in our capacity as valuation surveyors on the basis of information that is publically available. We are not accountants or financial experts and we have not undertaken a detailed investigation into the financial status of the tenants. We have, however, reviewed where possible third party commentary, 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 market’s general perception of their creditworthiness.

If the covenant status of the tenant(s) is critical to the valuation we recommend that you make your own detailed enquiries as to the financial viability of the tenant(s) and if your conclusions differ from our own, provide us with a copy of the report in order that we may consider whether our valuation should be revised.

ARREARS

We have assumed that all rents and other payments payable by virtue of the leases have been paid to date. If there are any rent or other arrears, we recommend that we should be informed in order that we may consider whether our valuation should be revised.

TAXATION

Whilst we have had regard to the general effects of taxation on market value, we have not taken into account any liability for tax which may arise on a disposal, whether actual or notional, and neither have we made any deduction for Capital Gains Tax, Valued Added Tax or any other tax.

MORTGAGES

We have disregarded the existence of any mortgages, debentures or other charges to which the properties may be subject.

OPERATIONAL ENTITIES

Where the properties are valued as an operational entity and reference has been made to the trading history or trading potential of the property, reliance has been placed on information supplied to us. Should this information subsequently prove to be inaccurate or unreliable, the valuations reported could be adversely affected.

LOCAL AUTHORITIES, STATUTORY UNDERTAKERS AND LEGAL SEARCHES

We have not made any formal searches or enquiries in respect of the property and are therefore unable to accept any responsibility in this connection. We have, however, made informal enquiries of the local planning authority in whose areas the property is situated as to whether or not they are

COLLIERS INTERNATIONAL VALUATION UK LLP

affected by planning proposals. We have not received a written reply and, accordingly, have had to rely upon information obtained verbally.

We have assumed that all consents, licences and permissions including, inter alia, fire certificates, enabling the property to be put to the uses ascertained at the date of our inspection have been obtained and that there are not outstanding works or conditions required by lessors or statutory, local or other competent authorities.

ENERGY PERFORMANCE CERTIFICATES

The European Energy Performance Directive requires that whenever buildings are constructed, sold or let, they are to be certified in terms of their energy performance and given an energy efficiency rating. In the UK, Energy Performance Certificates (EPC’s) are now compulsory for the sale or letting of all commercial and residential properties.

In arriving at our opinion of value, unless we have been provided with an EPC or EPC’s with regard to the property or properties, we have assumed that if an EPC or EPC’s were to have been available, its rating would not have had a detrimental impact up on our opinion of the property’s market rent and or capital value.

DEFECTIVE PREMISES ACT, HEALTH & SAFETY AT WORK ACT AND DISABILITY AT WORK ACT

Our valuations do not take account of any rights, obligations or liabilities, whether prospective or accrued, under the Defective Premises Act, 1972. Unless advised to the contrary, we have assumed that the properties comply with, and will continue to comply with, the current Health & Safety and Disability legislation.

INSURANCE

In arriving at our valuation we have assumed that the building is capable of being insured by reputable insurers at reasonable market rates. If, for any reason, insurance would be difficult to obtain or would be subject to an abnormally high premium, it may have an effect on value.

ALTERNATIVE INVESTMENT FUNDS

Please note that, in the event that our appointment is from an entity to which the European Parliament and Council Directive 2011/61/EU (‘the AIFMD’), which relates to Alternative Investment Fund Managers (‘AIFM’), applies, our instructions are solely limited to providing recommendations on the value of particular property assets (subject to the assumptions set out in our valuation report) and we are therefore not determining the net asset value of either the Fund or the individual properties within the Fund. Accordingly, we are not acting as an ‘external valuer’ (as defined under the AIFMD) but a re providing our service in the capacity of a ‘valuation advisor’ to the AIFM.

COLLIERS INTERNATIONAL VALUATION UK LLP

LIABILITY CAP

We confirm that the liability of the Valuer (Colliers International) is limited to £5m (Five Million Pounds Sterling), or such lesser figure as agreed, for any single case of damages caused by simple negligence, irrespective of the legal reason. A single case of damages is defined as the total sum of all the damage claims of all persons entitled to claim, which arise from one and the same professional error (offence). In the case of damages suffered from several offences brought about by the same technical error within the scope of several coherent services of a similar nature, the Valuer can similarly only be held liable for an amount of £5m (or such lesser sum as agreed).

STANDARD TERMS OF BUSINESS

We confirm that this valuation report has been provided in accordance with our Standard Terms of Business.

COLLIERS INTERNATIONAL VALUATION UK LLP

APPENDIX 2: LOCATION PLAN

COLLIERS INTERNATIONALINTERNATION AL VALUATION UK LLP PAGE 29 OF 27 769769-785-785 COMMERCIAL ROAD,ROA D, LONDON E14 7HG 769-785 Commercial Road London E14 7HG

Ordnance Survey © Crown Copyright 2015. All rights reserved. Licence number 100022432. Plotted Scale - 1:35000

APPENDIX: 3 STREET PLAN

COLLIERS INTERNATIONALINTERNATION AL VALUATION UK LLP PAGE 30 OF 27 769769-785-785 COMMERCIAL ROAD, LONDON E14 7HG 769-785 Commercial Road London E14 7HG

Ordnance Survey © Crown Copyright 2015. All rights reserved. Licence number 100022432. Plotted Scale - 1:7500

APPENDIX: 4 ORDNANCE SURVEY EXTRACT

COLLIERS INTERNATIONALINTERNATION AL VALUATION UK LLLLPP PAGE 31 OF 27 769769-785-785 COMMERCIAL ROAD,ROA D, LONDON E14 7HG 769-785 Commercial Road London E14 7HG

2 Southwater Close 3 7 7

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T Ordnance Survey © Crown Copyright 2015. All rights reserved. Licence number 100022432. Plotted Scale - 1:1250

APPENDIX: 5 VALUATION PRINTOUT

COLLIERS INTERNATIONALINTERNATION AL VALUATION UK LLP PAGE 33 OF 27 769769-785-785 COMMERCIAL ROAD,ROA D, LONDON E14 7HG APPRAISAL SUMMARY COLLIERS INTERNATIONAL 769-785 Commercial Road

Summary Appraisal for Phase 1 Existing Listed building

REVENUE

Rental Area Summary Initial Net Rent Units ft² Rate ft² MRV/Unit at Sale Listed Buliding GF/FF/2F 1 35,315 £28.00 £988,820 988,820 Listed building - LGF 1 2,684 £14.00 £37,576 37,576 Totals 2 37,999 1,026,396

Investment Valuation Listed Buliding GF/FF/2F Current Rent 988,820 YP @ 6.2500% 16.0000 15,821,120 Rent Free (988,820) YP 0y 6m @ 6.2500% 0.4777 PV 5y @ 6.2500% 0.7385 (348,856) 15,472,264 Listed building - LGF Current Rent 37,576 YP @ 6.2500% 16.0000 601,216 Rent Free (37,576) YP 0y 6m @ 6.2500% 0.4777 PV 5y @ 6.2500% 0.7385 (13,257) 587,959 16,060,223

GROSS DEVELOPMENT VALUE 16,060,223 Purchaser's Costs 5.80% (880,428) NET DEVELOPMENT VALUE 15,179,795

NET REALISATION 15,179,795

OUTLAY

ACQUISITION COSTS Residualised Price 5,249,958 Stamp Duty 4.00% 209,998 Agent Fee 1.00% 52,500 Legal Fee 0.50% 26,250 5,538,706 CONSTRUCTION COSTS Construction ft² Rate ft² Cost Listed Buliding GF/FF/2F 39,239 £120.00 4,708,667 Listed building - LGF 2,982 £120.00 357,867 Totals 42,221 5,066,533 5,066,533

Contingency 5.00% 253,327 253,327

PROFESSIONAL FEES Architect 6.00% 303,992 Quantity Surveyor 2.00% 101,331 Structural Engineer 2.00% 101,331 Mech./Elec.Engineer 1.00% 50,665 Project Manager 1.00% 50,665 607,984 MARKETING & LETTING Marketing 60,000 Letting Agent Fee 10.00% 102,640 Letting Legal Fee 0.50% 5,132 167,772 DISPOSAL FEES

File: \\Client\G$\50 George Street\CLIENT\Dragonfly Finance\Ziser Family - Commerical Road, London\09 Valuations (inc. Calculations)\Commercial Road - site value.wcfx ARGUS Developer Version: 5.00.001 Date: 02/10/2015 APPRAISAL SUMMARY COLLIERS INTERNATIONAL 769-785 Commercial Road Sales Agent Fee 1.00% 151,798 Sales Legal Fee 0.50% 75,899 227,697 FINANCE Debit Rate 5.500% Credit Rate 0.000% (Nominal) Land 364,592 Construction 142,646 Total Finance Cost 507,238

TOTAL COSTS 12,369,256

PROFIT 2,810,539

Performance Measures Profit on Cost% 22.72% Profit on GDV% 17.50% Profit on NDV% 18.52% Development Yield% (on Rent) 8.30% Equivalent Yield% (Nominal) 6.25% Equivalent Yield% (True) 6.50%

IRR 32.89%

Rent Cover 2 yrs 9 mths Profit Erosion (finance rate 5.500%) 3 yrs 9 mths

File: \\Client\G$\50 George Street\CLIENT\Dragonfly Finance\Ziser Family - Commerical Road, London\09 Valuations (inc. Calculations)\Commercial Road - site value.wcfx ARGUS Developer Version: 5.00.001 Date: 02/10/2015

CONTACT DETAILS Colliers International Valuation UK LLP Valuation & Advisory Services 50 George Street London W1U 7GA www.colliers.com/uk

APPENDIX 4

The Sailmakers, 767-785 Commercial Road, London E14 7HG

Summary of Costs

East Site £ 10,354,367

West Site £ 8,994,341 767 Corner Site £ 4,178,859

Central Site - Front Part - Builders Work£ 740,000

Central Conservation Area ( Including M @ E )£ 3,092,620

Total £ 27,360,187

Figures exclude VAT and Professional Fees

Corner Site

The Sailmakers, 767 Commercial Road, London E14 7HG

Detailed (Elemental) Cost Analysis

FLOOR AREA: 1,295 m2 Total Contract Sum Exc. Fees: £4,178,859

BILL/ELEMENT Cost Analysis Element Total Cost Cost per m2 Unit Quantity Unit Rate GIFA

1 SUBSTRUCTURE 360,500 278 206m2 1750

2 SUPERSTRUCTURE a Frame 336,250 260 1345m2 250 b Upper Floors 269,000 208 1345m2 200 c Roof 61,250 47 245m2 250 d Stairs 72,500 56 10Nr 7250 e External Walls 399,900 309 1333m2 300 f Windows & External Doors 108,000 83 270m2 400 g Internal Walls & Partitions 75,000 58 1250m2 60 h Internal Doors 73,000 56 73Nr 1000 Total Superstructure 1,394,900

3 INTERNAL FINISHES a Wall Finishes 86,100 66 2460m2 35 b Floor Finishes 45,325 35 1295m2 35 c Ceiling Finishes 32,375 25 1295m2 25 Total Finishes 163,800

4 FITTINGS & FURNITURE 259,000 200 1295m2 200

5 SERVICES a Sanitary Appliances 90,000 69 9Nr 10000 b Services Equipment 0 0 0 inc 0 c Disposal Installation 0 0 1295 inc 0 d Water Installation 0 0 1295 inc 0 e Heat Source 0 0 0 inc 0 f Space Heating 180,000 139 9no 20000 g Ventilation System 0 0 1295 inc 0 h Electrical Installation 180,000 139 9no 20000 i Electrical Substation 150,000 116 1no 150000 j Lift & Conveyors 120,000 93 4Nr 30000 k Protective Installation 32,375 25 1295m2 25 l Communications Installations 32,375 25 1295m2 25 m Special Installations 19,425 15 1295m2 15 n BWIC with Services 103,600 80 1295m2 80 o Offices M@E 50,505 39 1295m2 39 Total Services 958,280

Total Building 3,136,480

Corner Site

The Sailmakers, 767 Commercial Road, London E14 7HG

Detailed (Elemental) Cost Analysis

FLOOR AREA: 1,295 m2 Total Contract Sum Exc. Fees: £4,178,859

BILL/ELEMENT Cost Analysis Element Total Cost Cost per m2 Unit Quantity Unit Rate GIFA 6 EXTERNAL WORKS a Site Prep Works 25,000 19 1 item 25000 b Pavings, roadworks, etc 125,000 97 1 item 125000 c Soft Landscaping and Planting 15,000 12 1 item 15000 d Drainage 75,000 58 1 item 75000 e Works to existing walls 25,000 19 1 item 25000 f External Statuory Services 50,000 39 1 item 50000 g Temporary Support for Ex. Structures 15,000 12 1 item 25000 h Demolition 75,000 58 1 item 75000 i Canal and River Trust Contribution 21,060 16 1 item 21060 Total External Works 426,060

Total (excl. Prelims and Contingencies) 3,562,540

7 Preliminaries @ 15% 534,381 % excl. Contingencies Total 4,096,921

8 Contingencies @ 2% 81,938 % excl. Preliminaries

Contract Sum (excl. fees) 4,178,859

9 Fees % of contact Sum

Total Contract Sum Excluding Fees 4,178,859

Cost per m 2: - Building 3,227

West Site

The Sailmakers, 769-775 Commercial Road, London E14 7HG

Detailed (Elemental) Cost Analysis

FLOOR AREA: 2,894 m2 Total Contract Sum Exc. Fees: £8,994,341

BILL/ELEMENT Cost Analysis Element Total Cost Cost per m2 Unit Quantity Unit Rate GIFA

1 SUBSTRUCTURE 1,113,000 385 636m2 1750

2 SUPERSTRUCTURE a Frame 723,500 250 2894m2 250 b Upper Floors 578,800 200 2894m2 200 c Roof 135,750 47 543m2 250 d Stairs 145,000 50 20Nr 7250 e External Walls 665,100 230 2217m2 300 f Windows & External Doors 170,400 59 426m2 400 g Internal Walls & Partitions 217,620 75 3627m2 60 h Internal Doors 213,000 74 213Nr 1000 Total Superstructure 2,849,170

3 INTERNAL FINISHES a Wall Finishes 331,415 115 9469m2 35 b Floor Finishes 101,290 35 2894m2 35 c Ceiling Finishes 72,350 25 2894m2 25 Total Finishes 505,055

4 FITTINGS & FURNITURE 578,800 200 2894m2 200

5 SERVICES a Sanitary Appliances 72,000 25 72Nr 1000 b Services Equipment 0 0 0 inc 0 c Disposal Installation 0 0 2894 inc 0 d Water Installation 0 0 2894 inc 0 e Heat Source 0 0 0 inc 0 f Space Heating 720,000 249 72no 10000 g CHP Installation 95,000 33 1inc 95000 h Electrical Installation 720,000 249 72no 10000 i Fuel Installation 0 0 2894 inc 0 j Lift & Conveyors 150,000 52 5Nr 30000 k Protective Installation 72,350 25 2894m2 25 l Communications Installations 72,350 25 2894m2 25 m Special Installations 43,410 15 2894m2 15 n BWIC with Services 231,520 80 2894m2 80 o Manage of services 0 0 2894 m2 0 Total Services 2,176,630

Total Building 7,222,655

West Site

The Sailmakers, 769-775 Commercial Road, London E14 7HG

Detailed (Elemental) Cost Analysis

FLOOR AREA: 2,894 m2 Total Contract Sum Exc. Fees: £8,994,341

BILL/ELEMENT Cost Analysis Element Total Cost Cost per m2 Unit Quantity Unit Rate GIFA 6 EXTERNAL WORKS a Site Prep Works 38,160 13 636m2 60 b Pavings etc 975 0 39m2 25 c Soft Landscaping and Planting 8,400 3 84m2 100 d Drainage 125,000 43 1 item 125000 e Works to existing walls 75,000 26 1 item 75000 f External Statuory Services 50,000 17 1 item 50000 g Temporary Support for Ex. Structures 75,000 26 1 item 75000 h Demolition 50,000 17 1 item 50000 i Canal and River Trust Contribution 22,620 8 1 item 22620 Total External Works 445,155

Total (excl. Prelims and Contingencies) 7,667,810

7 Preliminaries @ 15% 1,150,172 % excl. Contingencies Total 8,817,982

8 Contingencies @ 2% 176,360 % excl. Preliminaries

Contract Sum (excl. fees) 8,994,341

9 Fees % of contact Sum

Total Contract Sum Excluding Fees 8,994,341

Cost per m 2: - Building 3,108 East Site

The Sailmakers, 785 Commercial Road, London E14 7HG

Detailed ( Elemental ) Cost Analysis

FLOOR AREA: 3,128 m2 Total Contract Sum Exc. Fees: £10,354,367

BILL/ELEMENT Cost Analysis Element Total Cost Cost per m2 Unit Quantity Unit Rate GIFA

1 SUBSTRUCTURE 1,463,532 468 931m2 1572

2 SUPERSTRUCTURE a Frame 782,000 250 3,128m2 250 b Upper Floor 625,600 200 3,128m2 200 c Roof 171,000 55 684m2 250 d Stairs 203,000 65 28Nr 7250 e External Walls 507,000 162 1690m2 300 f Windows & External Doors 128,000 41 320m2 400 g Internal Walls & Partitions 180,360 58 3006m2 60 h Internal Doors 210,000 52 210Nr 1000 Total Superstructure 2,806,960

3 INTERNAL FINISHES a Wall Finishes 270,620 87 7732m2 35 b Floor Finishes 109,480 35 3,128m2 35 c Ceiling Finishes 78,200 25 3,128m2 25 Total Finishes 458,300

4 FITTINGS & FURNITURE 654,200 209 3271m2 200

5 SERVICES a Sanitary Appliances 64,000 20 64Nr 1000 b Services Equipment 0 0 3,128 inc 0 c Disposal Installation 0 0 3,128 inc 0 d Water Installation 0 0 3,128 inc 0 e Heat Source 0 0 3,128 inc 0 f Space Heating 640,000 205 64no 10000 g CHP Installation 95,000 30 1no 95000 h Electrical Installation 640,000 205 64no 10000 i Fuel Installation 0 0 3,128 m2 0 j Lift & Conveyors 150,000 48 5Nr 30000 k Protective Installation 78,200 25 3,128m2 25 l Communications Installations 78,200 25 3,128m2 25 m Special Installations 46,920 15 3,128m2 15 n BWIC with Services 250,240 80 3,128m2 80 o Manage of services 0 0 3,128 inc 0 Total Services 2,042,560

Total Building 7,425,552 East Site

The Sailmakers, 785 Commercial Road, London E14 7HG

Detailed ( Elemental ) Cost Analysis

FLOOR AREA: 3,128 m2 Total Contract Sum Exc. Fees: £10,354,367

BILL/ELEMENT Cost Analysis Element Total Cost Cost per m2 Unit Quantity Unit Rate GIFA 6 EXTERNAL WORKS a Site Prep Works 50,000 16 1 item 50000 b Pavings,cycle enclosure,etc 5,000 2 1 item 5000 c Soft Landscaping and Planting 10,000 3 1 item 10000 d Drainage 125,000 40 1 item 125000 e Works to existing walls 150,000 48 1 item 150000 f External Statuory Services 50,000 16 1 item 50000 g Temporary Support for Internal Flank Wall 150,000 48 1 item 150000 h Demolition 850,000 272 1 item 850000 i Canal and River Trust Contribution 11,700 4 1 item 11700 Total External Works 1,401,700

Total (excl. Prelims and Contingencies) 8,827,252

7 Preliminaries @ 15% 1,324,088 % excl. Contingencies Total 10,151,340

8 Contingencies @ 2% 203,027 % excl. Preliminaries

Contract Sum (excl. fees) 10,354,367

9 Fees Fees Excluded % of contact Sum

Total Contract Sum excluding fees 10,354,367

Cost per m 2: - Building 3,310

APPENDIX 5

Our Ref RAINBOW/SAILMAKERS 50 George Street DDI +44 207 344 6761 London W1U 7GA MAIN +44 20 7935 4499 EMAIL [email protected] www.colliers.com/uk

21 st September 2016

Rainbow Properties Limited 9 Hampstead West 224 Iverson Road London NW6 2HL

FAO: Guy Ziser

Dear Sirs

THE PROPERTY: 769-785 COMMERCIAL ROAD, LONDON E14 7HG THE BORROWER: RAINBOW PROPERTIES LIMITED

INTRODUCTION

In accordance with the signed terms of engagement dated 9th September 2016, a copy of which is attached as Appendix 1 , we have pleasure in presenting our opinion of the Gross Development Value, as at today’s date, of the above property, together with salient comments and opinions. We understand that the report is required to assist with a planning viability study.

STATUS OF VALUER AND CONFLICTS OF INTEREST

The property has been valued by Patrick Kearon MRICS and Lucinda Lee-Bapty MRICS who both fall within the requirements as to competence as set out in PS 2.3 of the RICS Valuation – Professional Standards (Incorporating the International Valuation Standards) January 2014 prepared by the Royal Institution of Chartered Surveyors and who are both valuers registered in accordance with the RICS Valuer Registration Scheme (VRS).

We confirm that Colliers International complies with the requirements of independence and objectivity under PS 2.4 and that we have no conflict of interest in acting on your behalf in this matter. We confirm that we have undertaken the valuations acting as “independent” valuers, qualified for the purposes of this valuation.

In accordance with VPGA 2.3.4, we can confirm we have valued the property on behalf of a lending institution for secured lending purposes. We do not however from our perspective perceive this as a conflict.

Our General Assumptions and Definitions to which our valuations are subject, forms Appendix 1 to this report.

We are pleased to report as follows:

Colliers International is the licensed trading name of Colliers International Property Advisers UK LLP which is a limited liability partnership registered in England and Wales with registered number OC385143. Our registered office is at 50 George Street, London W1U 7GA.

BASIS OF VALUE

The values stated in this report represent our objective opinion of Gross Development Value in accordance with the definition set out below as at the date of valuation. Each valuation assumes that the Property has been properly marketed and that exchange of contracts took place on this date.

Gross Development Value is defined as follows:

‘The aggregate Market Value of the proposed development assessed on the special assumption that the development is complete as at the date of valuation in the market conditions prevailing at that date ’.

SOURCES OF INFORMATION

We have relied upon the information provided to us, which is identified, together with the source, in the relevant sections of this report.

Unless stated otherwise, we have assumed that the information provided is accurate and that we have been supplied with all the information that has a material effect upon the value of the property.

Furthermore, we have assumed that any information supplied can, if necessary, be verified. Should any of the information provided be found to be inaccurate or incomplete there could be a variation in value.

We recommend that should any further reports or audits relating, inter alia, to condition, legal or environmental issues become available, then copies should be forwarded to us in order that we may comment upon their impact on value.

SPECIAL ASSUMPTIONS

VALUATION CERTAINTY FOLLOWING THE EU REFERENDUM RESULT

Following the Referendum held on 23 June 2016 concerning the UK’s membership of the EU, a decision was taken to exit. We are now in a period of uncertainty in relation to many factors that impact the property investment and letting markets.

Since the Referendum date it has not been possible to gauge the effect of this decision by reference to transactions in the market place.

The probability of our opinion of value coinciding with the price achieved, were there to be a sale, has reduced. We would, therefore, recommend that the valuation is kept under regular review and that specific market advice is obtained should you wish to effect a disposal.

Therefore, in accordance with VPGA 9.2.6 of the Red Book less certainty can currently be attached to our opinions of value, and you should reflect this in any decisions taken.

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THE TIMING OF OUR REPORT AND VALUATION

This report and valuation has been issued after the EU Referendum decision. However, the market transactions we have referenced in preparing the valuation were completed prior to that date. As such, the supporting evidence reflects the political, economic and market conditions prior to 23 June 2016.

As at the date of this report, the full implications of the Referendum vote on real estate are still uncertain, and transactional evidence remains limited. Motivations for acquisitions and disposals vary according to sectors, markets and risk appetite. We consider that the property markets will continue to evolve as supply, demand and pricing adjusts to the new conditions. All market participants should be mindful of this and exercise caution when making financial decisions. Accordingly, we refer you to our comments above regarding valuation certainty, and recommend that the values reported herein are kept under regular review.

Accordingly, we refer you to our comments above regarding valuation certainty, and recommend that the values reported herein are kept under regular review. Given the current market conditions, we reserve the right to alter our opinion of value as reported in the event that market sentiment or evidence should become available between the date of our draft advice and issue of the final report and valuation.

ASSESSMENT OF GROSS DEVELOPMENT VALUE

Our assessment of the Gross Development Value is based upon todays values. It should be borne in mind that the development process will take some considerable time. Firstly, there is the tendering process and subsequently the period of construction. In all, this may be expected to take a total of 18-24 months. Accordingly, the completed self-contained flats and office accommodation may be sold into a very different market to that which exists today.

VALUATION

GROSS DEVELOPMENT VALUE

We are of the opinion that the Gross Development Value of the freehold interest in the subject property as at the date of valuation is £47,340,000 (Forty-Seven million Three Hundred and Forty Thousand Pounds) , which can be broken down as follows:

Element GDV Comments MR - £33/sq ft, 18 month current letting void, assumed to relet on new 10 year leases, capitalised @ 6%. Equates Corner and Central - commercial £9,275,000.00 to approximately £435 per sq ft MR - between £1,485 and £2,100 pcm, blended cap val of Corner - residential £5,265,000.00 approximately £665 per sq ft (3.75% GIY) West site - HMO £17,150,000.00 MR - £1,375, blended cap val of between £635 and £700 per sq ft (6.85% GIY) East site - HMO £15,650,000.00 TOTAL £47,340,000.00

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Yours faithfully

Patrick Kearon MRICS Director RICS Registered Valuer Colliers International Valuation UK LLP

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APPENDIX 1: APPOINTMENT CORRESPONDENCE AND GENERAL ASSUMPTIONS AND DEFINITIONS

GENERAL ASSUMPTIONS & DEFINITIONS

The valuations have been prepared in accordance with the RICS Valuation – Professional Standards (Incorporating the International Valuation Standards) January 2014 prepared by the Royal Institution of Chartered Surveyors.

The valuations have been prepared by a suitably qualified valuer, as defined by PS 2.3 of the Professional Standards, on the basis set out below unless any variations have been specifically referred to under the heading “Special Remarks” :

MARKET VALUE (MV)

Valuations based on Market Value, have been prepared in accordance with VPS 4.1.2 of the Professional Standards issued by The Royal Institution of Chartered Surveyors, which is defined as follows:

‘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 ’.

The interpretative commentary on Market Value, as published by the International Valuation

Standards Council (IVSC), has been applied.

FAIR VALUE

Valuations based on Fair Value shall adopt one of the two definitions in accordance with VPS 4.1.5 of the Professional Standards.

1. The definition adopted by International Valuation Standards (IVS) in IVS Framework paragraph 38.

‘The estimated price for the transfer of an asset or liability between identified knowledgeable and willing parties that reflects the respective interests of those parties’.

2. The definition adopted by the International Accounting Standards Board (IASB) in IFRS 13.

‘The price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date’.

It is important to recognise that the two definitions of Fair Value are not the same. Valuations prepared for financial reporting purposes under IFRS require the adoption of the IASB definition and IFRS 13 will apply.

The guidance in IFRS 13 includes:

‘The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. A fair value measurement requires an entity to determine all the following:

COLLIERS INTERNATIONAL VALUATION UK LLP (a) the particular asset or liability that is the subject of the measurement (consistently with its unit of account) (b) for a non-financial asset, the valuation premise that is appropriate for the measurement (consistently with its highest and best use) (c) the principal (or most advantageous) market for the asset or liability (d) the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised.

The references in IFRS 13 to market participants and a sale make it clear that for most practical purposes, Fair Value is consistent with the concept of Market Value.

FAIR VALUE IN ACCORDANCE WITH FRS 102

For valuations prepared for the purposes of UK Generally Accepted Accounting Principles (UK GAAP) we have provided an opinion of Fair Value as defined within FRS 102. This is defined as follows:

“The amount for which an asset could be exchanged, a liability settled, or an equity instrument granted could be exchanged, between knowledgeable, willing parties in an arm’s length transaction.”

For most practical purposes, the concept of knowledgeable, willing parties and an “arm’s length transaction ” mean that this definition of Fair Value is accepted to be reasonably consistent with the concept of Market Value and Fair Value adopted by the IASB in accordance with IFRS 13.

EXISTING USE VALUE (EUV)

If we have provided an opinion of Existing Use Value this has been arrived at in accordance with UKVS 1.3 of the Professional Standards, which is defined as follows:

‘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 wherein the parties had acted knowledgeably, prudently and without compulsion, assuming that the buyer is granted vacant possession of all parts of the asset required by the business and disregarding potential alternative uses and any other characteristics of the asset that would cause its Market Value to differ from that needed to replace the remaining service potential at least cost.’

This basis ignores any element of hope value for an alternative use, any value attributable to goodwill and any possible increase in value due to special investment or financial transactions (such as sale and leaseback) which would leave the owner with a different interest from the one which is valued. However, it includes any value attributable to any possibilities of extensions or further buildings on undeveloped land or redevelopment of existing buildings (all for the existing planning use) providing such construction can be undertaken without major interruption to the continuing business.

COLLIERS INTERNATIONAL VALUATION UK LLP DEPRECIATED REPLACEMENT COST (DRC)

If we have provided a valuation based on Depreciated Replacement Cost, as set out in UKGN 2.2.3 of the Professional Standards, this has been arrived at in accordance with the definition settled by the International Valuation Standards Committee as follows:

‘The current cost of replacing an asset with its modern equivalent asset less deductions for physical deterioration and all relevant forms of obsolescence and optimisation ’.

International Accounting Standards stipulate that DRC may be used as a basis for reporting the value of Specialised Property in Financial Statements. DRC is recognised as a basis only for this purpose. For other purposes DRC may be used as a method to support a valuation reported on another basis.

INVESTMENT VALUE (OR WORTH)

Where we have been instructed provide valuations based on Investment Value or Worth, we have done so in accordance with VPS 4.1.4 of the Professional Standards issued by the Royal Institution of Chartered Surveyors, which is the definition settled by IVSC:

‘Investment value is the value of an asset to the owner or a prospective owner for individual investment or operational objectives’.

This is an entity-specific basis of value. Although the value of an asset to the owner may be the same as the amount that could be realised from its sale to another party, this basis of value reflects the benefits received by an entity from holding the asset and, therefore, does not necessarily involve a hypothetical exchange. Investment value reflects the circumstances and financial objectives of the entity for which the valuation is being produced. It is often used for measuring investment performance. Differences between the investment value of an asset and its market value provide the motivation for buyers or sellers to enter the marketplace.

MARKET RENT (MR)

Valuations based on Market Rent (MR), as set out in VPS 4.1.3 of the Professional Standards, adopt the definition as settled by the International Valuation Standards Committee which is as follows:

‘The estimated amount for which an interest in real property should be leased on the valuation date between a willing lessor and a willing lessee on appropriate lease terms in an arm’s length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’

MR will vary significantly according to the terms of the assumed lease contract. The appropriate lease terms will normally reflect current practice in the market in which the property is situated, although for certain purposes unusual terms may need to be stipulated. Matters such as the duration of the lease, the frequency of rent reviews, and the responsibilities of the parties for maintenance and outgoings, will all impact on MR. In certain States, statutory factors may either restrict the terms that may be agreed, or influence the impact of terms in the contract. These need to be taken into account where appropriate. The principal lease terms that are assumed when providing MR will be clearly stated in the report.

COLLIERS INTERNATIONAL VALUATION UK LLP Rental values are provided for the purpose described in this report and are not to be relied upon by any third party for any other purpose.

RENTAL ASSESSMENT

Unless stated otherwise within the report, our valuations have been based upon the assumption that the rent is to be assessed upon the premises as existing at the date of our inspection.

BUILDING REINSTATEMENT COST (BRC)

If we have prepared a BRC we will not have carried out a detailed cost appraisal and the figures should therefore be considered for guidance purposes only and thus should not be relied upon as the basis from which premiums are calculated for obtaining building insurance.

PURCHASE AND SALE COSTS

No allowance has been made for legal fees or any other costs or expenses which would be inc urred on the sale of the property.

We have however, where appropriate and in accordance with market practice for the asset type, made deductions to reflect purchasers’ acquisition costs. Trading related properties, however, are usually valued without deducting the costs of purchase.

Where appropriate, purchasers’ costs in England , Wales and Northern Ireland are calculated at 1.8% for professional fees inclusive of VAT together with Stamp Duty Land Tax calculated as follows:

Up to £150,000 0% The next £100,000 (the portion from £150,001 to £250,000) 2% The remaining amount (the portion above £250,000) 5%

In respect of residential property, Stamp Duty Land Tax is charged at increasing rates for each portion of the price. There will be no payment for the first £125,000 of the property value; 2% will be charged on the next £125,000; 5% on the next £675,000; 10% on the next £575,000; 12% on the remaining value (above £1,500,000). In addition a purchaser would expect to pay the standard 1.80% agents and solicitors costs inclusive of VAT.

Stamp duty on residential properties over £500,000 which are bought via a company is payable at 15% giving purchasers’ acquisition costs of 16.8%.

For commercial properties in Scotland purchaser’s acquisition costs are calc ulated at 1.8% for professional fees inclusive of VAT together with Land and Buildings Transaction Tax (LBTT - Equivalent of Stamp Duty Land Tax in England and Wales). This is a progressive tax which is applied to commercial land and buildings and is determined by reference to percentage of the Market Value. Up to and including £150,000, the LBTT rate is 0%, between £150,001 and £350,000 the rate applicable to this proportion is 3%, and any amount above £350,000 is charged at 4.5%.

In respect of residential property in Scotland, LBTT is charged at increasing rates for each portion of the price. There will be no payment for the first £145,000 of the property value; 2% will be charged on the next portion up to £250,000; 5% on the portion between £250,000 and £325,000; 10% on the

COLLIERS INTERNATIONAL VALUATION UK LLP next portion between £325,000 and £750,000; and 12% on the remaining value (above £750,000). In addition a purchaser would expect to pay the standard 1.80% agents and solicitors costs inclusive of VAT.

It should be noted, however, that for properties of an unusually large lot size it is common market practice that a purchaser would not expect to pay the standard 1.80% agents and solicitors costs inclusive of VAT. Accordingly, we may consider in these instances that it is appropriate to adopt a reduced rate.

MEASUREMENTS

Where we have measured the property, measurements and floor areas have been arrived at in accordance with the current edition of RICS Property Measurement issued by the Royal Institution of Chartered Surveyors.

Accordingly, where appropriate, measurements have been taken, and floor areas calculated in accordance with either the Code of Measuring Practice or in the case of office properties, the International Property Measurement Standards (IPMS) both of which currently form part of RICS Property Measurement.

In arriving at our opinions of Market Rent and Market Value for office properties we have adopted the appropriate floor area basis for our valuation depending upon the basis used in the analysis of the comparable transactions. However, in cases where the basis of analysis of a comparable is uncertain we have adopted a default assumption that the areas and the analysis are on a Net Internal Area basis.

Although every reasonable care has been taken to ensure the accuracy of the surveys there may be occasions when due to tenant’s fittings, or due to restricted access professional estimations may have been made.

We draw attention to the fact that under the IPMS (in the case of office properties), subjective assessments need to be made as part of the floor area calculations. These assessments include assessment of the position of the Internal Dominant Face of the wall, identification of Limited Use Areas and measurements taken to the centreline of a dividing wall within a multi-let building. The subjective nature of these measurements may result in greater uncertainty over the accuracy of the adopted floor areas.

Floor area and measurement tolerances can vary, but the subjective elements of the IPMS can be expected to lead to variations in accuracy much greater than the currently accepted “Industry Standard” tolerance of 1% - 2% which might normally be anticipated. Accordingly, this could lead to a greater uncertainty affecting the Market Rent and Market Value that would normally be expected.

We recommend that where possible, the client should provide us with detailed floor plans against which we can check our measuring inputs.

Floor areas set out in our report are provided for the purpose described herein and are not to be relied upon by any third party for any other purpose.

COLLIERS INTERNATIONAL VALUATION UK LLP In the event that a specialist measuring exercise is undertaken for the property then we recommend that a copy should be forwarded to us in order that we may be able to comment upon whether there may be an impact on the reported value.

SITE PLAN AND AREA

Where a site area and or site plan has been provided this is for indicative purposes only and should not be relied upon. We recommend that a solicitors Report on Title be obtained and that the site boundaries we have assumed are verified and if any questions of doubt arise the matter to be raised with us so that we may review our valuation.

CONDITION

Unless otherwise stated within the report, we have not carried out a building survey, nor have we inspected the woodwork or other parts of the structures which are covered, unexposed or inaccessible and we are, therefore, unable to report that such parts of the property are free from rot, beetle or other defects.

Where we have noticed items of disrepair during the course of our inspections, they have been reflected in our valuations, unless otherwise stated.

We have assumed that none of the materials commonly considered deleterious as set out in the British Property Feder ation and British Council of Offices’ sponsored report “Good Practice in the Selection of Construction Materials”, are included within the property. These include, inter alia, the following:

· High alumina cement concrete · Asbestos · Calcium chloride as a drying agent · Wood wool slabs as permanent shuttering · Polystyrene and polyurethane used as insulation in cladding

None of the services, drainage or service installations was tested and we are, therefore, unable to report upon their condition.

ENVIRONMENTAL MATTERS

Unless otherwise stated within the report, we have not carried out soil, geological or other tests or surveys in order to ascertain the site conditions or other environmental conditions of the property. Unless stated to the contrary within the report, our valuation assumes that there are no unusual ground conditions, contamination, pollutants or any other substances that may be environmentally harmful.

FIXTURES AND FITTINGS

In arriving at our opinions of value we have disregarded the value of all process related plant, machinery, fixtures and fittings and those items which are in the nature of tenants’ trade fittings and

COLLIERS INTERNATIONAL VALUATION UK LLP equipment. We have had regard to landlords’ fixtures such as lifts, escalators, central heating and air conditioning forming an integral part of the buildings.

Where properties are valued as an operational entity and includes the fixtures and fittings, it is assumed that these are not subject to any hire purchase or lease agreements or any other claim on title. No equipment or fixtures and fittings have been tested in respect of Electrical Equipment Regulations and Gas Safety Regulations and we assume that where appropriate all such equipment meets the necessary legislation. Unless otherwise specifically mentioned the valuation excludes any value attributable to plant and machinery.

TENURE, LETTINGS AND REPORTS ON TITLE AND/OR TENANCIES

Unless otherwise stated, we have not inspected the title deeds, leases and related legal documents and, unless otherwise disclosed to us, we have assumed that there are no onerous or restrictive covenants in the titles or leases which would affect the value.

Where we have not been supplied with leases, unless we have been advised to the contrary, we have assumed that all the leases are on a full repairing and insuring basis and that all rents are reviewed in an upwards direction only, at the intervals notified to us, to the full open market value.

We have assumed that no questions of doubt arise as to the interpretation of the provisions within the leases giving effect to the rent reviews.

We have disregarded any inter-company lettings and have arrived at our valuations of such accommodation on the basis of vacant possession.

If a solicitors’ Report on Title and/or Tenancies has been provided to us, our valuation will have regard to the matters therein. In the event that a Report on Title and/or Tenancies is to be prepared, we recommend that a copy is provided to us in order that we may consider whether any of the matters therein have an effect upon our opinion of value.

COVENANT STATUS OF THE TENANT/TENANTS

In the case of property that is let, our opinion of value is based on our assessment of the investment market’s perception of the covenant strength of the tenant(s). This has been arrived at in our capacity as valuation surveyors on the basis of information that is publically available. We are not accountants or financial experts and we have not undertaken a detailed investigation into the financial status of the tenants. We have, however, reviewed where possible third party commentary, 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 market’s general perception of their creditworthiness.

If the covenant status of the tenant(s) is critical to the valuation we recommend that you make your own detailed enquiries as to the financial viability of the tenant(s) and if your conclusions differ from our own, provide us with a copy of the report in order that we may consider whether our valuation should be revised.

COLLIERS INTERNATIONAL VALUATION UK LLP ARREARS

We have assumed that all rents and other payments payable by virtue of the leases have been paid to date. If there are any rent or other arrears, we recommend that we should be informed in order that we may consider whether our valuation should be revised.

TAXATION

Whilst we have had regard to the general effects of taxation on market value, we have not taken into account any liability for tax which may arise on a disposal, whether actual or notional, and neither have we made any deduction for Capital Gains Tax, Valued Added Tax or any other tax.

MORTGAGES

We have disregarded the existence of any mortgages, debentures or other charges to which the properties may be subject.

OPERATIONAL ENTITIES

Where the properties are valued as an operational entity and reference has been made to the trading history or trading potential of the property, reliance has been placed on information supplied to us. Should this information subsequently prove to be inaccurate or unreliable, the valuations reported could be adversely affected.

LOCAL AUTHORITIES, STATUTORY UNDERTAKERS AND LEGAL SEARCHES

We have not made any formal searches or enquiries in respect of the property and are therefore unable to accept any responsibility in this connection. We have, however, made informal enquiries of the local planning authority in whose areas the property is situated as to whether or not they are affected by planning proposals. We have not received a written reply and, accordingly, have had to rely upon information obtained verbally.

We have assumed that all consents, licences and permissions including, inter alia, fire certificates, enabling the property to be put to the uses ascertained at the date of our inspection have been obtained and that there are not outstanding works or conditions required by lessors or statutory, local or other competent authorities.

ENERGY PERFORMANCE CERTIFICATES

The European Energy Performance Directive requires that whenever buildings are constructed, sold or let, they are to be certified in terms of their energy performance and given an energy efficiency rating. In the UK, Energy Performance Certificates (EPC’s) are now compulsory for the sale or letting of all commercial and residential properties.

In arriving at our opinion of value, unless we have been provided with an EPC or EPC’s with regard to the property or properties, we have assumed that if an EPC or EPC’s were to have been available, its rating would not have had a detrimental impact upon our opinion of the property’s mar ket rent and or capital value.

COLLIERS INTERNATIONAL VALUATION UK LLP THE SMOKE AND CARBON MONOXIDE ALARM (ENGLAND) REGULATIONS 2015

Part 2, Regulation 4 of The Smoke and Carbon Monoxide Alarm (England) Regulations 2015 i came into effect from 1 October 2015.

Any premises occupied under an Assured Shorthold Tenancy (within the meaning of Chapter 2 of Part 1 of the Housing Act 1988) must have working smoke and carbon dioxide alarms. It is the landlord’s responsibility to ensure these are fitted and chec ked before every new tenancy.

Where we have inspected residential accommodation as part of our valuation, we have not tested any alarms or installations as this is beyond the scope of our instructions. Accordingly, unless advised to the contrary, we have assumed that the property complies with, and will continue to comply with, the legislation.

DEFECTIVE PREMISES ACT, HEALTH & SAFETY AT WORK ACT AND DISABILITY AT WORK ACT

Our valuations do not take account of any rights, obligations or liabilities, whether prospective or accrued, under the Defective Premises Act, 1972. Unless advised to the contrary, we have assumed that the properties comply with, and will continue to comply with, the current Health & Safety and Disability legislation.

INSURANCE

In arriving at our valuation we have assumed that the building is capable of being insured by reputable insurers at reasonable market rates. If, for any reason, insurance would be difficult to obtain or would be subject to an abnormally high premium, it may have an effect on value.

ALTERNATIVE INVESTMENT FUNDS

Please note that, in the event that our appointment is from an entity to which the European Parliament and Council Directive 2011/61/EU (‘the AI FMD’), which relates to Alternative Investment Fund Managers (‘AIFM’), applies, our instructions are solely limited to p roviding recommendations on the value of particular property assets (subject to the assumptions set out in our valuation report) and we are therefore not determining the net asset value of either the Fund or the individual properties within the Fund. Accordingly, we are not acting as an ‘external valuer’ (as defined under the AIFMD) but are providing our service in the capacity of a ‘valuation advisor’ to the AIFM.

LIABILITY CAP

We confirm that the liability of the Valuer (Colliers International) is limited to £1m (One Million Pounds Sterling), or such lesser figure as agreed, for any single case of damages caused by simple negligence, irrespective of the legal reason. A single case of damages is defined as the total sum of all the damage claims of all persons entitled to claim, which arise from one and the same professional error (offence). In the case of damages suffered from several offences brought about by the same technical error within the scope of several coherent services of a similar nature, the Valuer can similarly only be held liable for an amount of £1m (or such lesser sum as agreed).

COLLIERS INTERNATIONAL VALUATION UK LLP STANDARD TERMS OF BUSINESS

We confirm that this valuation report has been provided in accordance with our Standard Terms of Business.

COLLIERS INTERNATIONAL VALUATION UK LLP