Summary
Property details
Address : City : , the Netherlands
Property : office building / warehouse / retail / residential Size : sq m lfa Parking space : inside / outside parking spaces OF not applicable Tenure : freehold / leasehold interest Land registry : Municipality , section , number(s)
Tenancy details
ValuationNumber of leases Report: Vacancy rate : % WALE : year Rental income : € per year (including theoretical income for vacancy) Market rent : € per year
OrteliuslaanMarket value and yields 1001 - 1003 (odd)
UtrechtValuation date, the Netherlands: 00-00-0000
GIY on rental income : % Market value net € GIY on market rent : % IRR : % Client
Morgan Stanley
Adres Plaats Dossiernummer-01
Pagina 1 van 53
Summary
Property details
Address : Orteliuslaan 1001 - 1003 (odd) City : Utrecht, the Netherlands
Property : office building Size : 3,309 sq m lfa Parking space : 66 outside Tenure : leasehold interest Land registry : Municipality Utrecht, section T, number 1204
Tenancy details
Number of leases : n.a. Vacancy rate : 100% WALE : n.a. Market rent : € 609,540 per year
Market value and yields
Valuation date : 09-08-2019
GIY on rental income : 10.60% Market value net € 5,750,000 GIY on market rent : 10.60% IRR : 7.09%
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Contents
A. Valuation letter ...... 4 B. Assumptions ...... 7 C. Report ...... 11 1. Location ...... 12 2. Accommodation ...... 12 3. Description ...... 12 4. State of repair ...... 13 5. Condition ...... 13 6. Local land registry ...... 14 7. Tenure ...... 14 8. Town planning ...... 15 9. Services ...... 15 10. Environmental issues ...... 15 11. Occupational leases and other agreements ...... 15 12. Special assumptions ...... 15 13. Comments ...... 15 14. Marktanalyse ...... 16 14.1. General market analysis ...... 16 14.2 The Dutch office market ...... 21 14.3. Lokal market analysis ...... 31 15. Market rent and investment analysis ...... 37 15.1. Market rent analysis ...... 37 15.2. Investment analysis ...... 38 16. Estimated market rent ...... 39 17. Valuation methodology ...... 39 18. SWOT analysis ...... 39 19. The property as security for a loan ...... 40 19.1. Security of income ...... 40 19.2. Letting period ...... 40 19.3. Evolution of rental and capital values ...... 40 19.4. Investment demand ...... 41 20. Property rating...... 41 21. Sources ...... 41 D. Appendices ...... 43 I Photographs II Location plan III Land registry extract IV Zoning plan V Calculation
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A. Valuation letter
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Morgan Stanley Savills Valuations Attn Mr. C. Kanwei Claude Debussylaan 48 1082 MD Amsterdam 20 Bank Street, Canary Wharf The Netherlands E14 4AD London United Kingdom P.O. Box 75849 1070 AV Amsterdam The Netherlands
T: +31 (0) 20 301 2000 F: +31 (0) 20 301 2002 Amsterdam, 3 September 2018 www.savills.nl
Dear Mr Kanwei, In accordance with our instruction letter of 3 August 2018, we have prepared a full valuation of the leasehold interest in the property situated at Orteliuslaan 1001 - 1003 (odd) in Utrecht, the Netherlands as at 9 August 2018 for financing purposes. The property was inspected on 9 August 2018 by Frank van Kester RT. We were able to inspect the whole of the property, both externally and internally, but limited to those areas that were easily accessible or visible. We expressly assume for the purposes of this valuation that there have been no material changes to the property since that date. The valuers with MRICS or FRICS qualifications are RICS Registered Valuers. Furthermore, we confirm that the valuers have sufficient current local and national knowledge of the particular market and the skills and understanding to undertake the valuation. The valuers are in a position to provide an objective and unbiased valuation and have no connection or involvement with the subject of the valuation instruction or the party giving the instruction. The valuation has been prepared in accordance with the Royal Institution of Chartered Surveyors’ (‘RICS’) Valuation - Global Standards 2017 (the ‘RICS Red Book’) effective from 1 July 2017. Furthermore the valuation has been prepared in accordance with the standards of the Dutch Register for Real Estate Valuers (Nederlands Register Vastgoed Taxateurs - NRVT). Frank van Kester is registered in the Dutch Register for Real Estate Valuers and specifically in the register for commercial real estate (Kamer Bedrijfsmatig Vastgoed). Frank van Kester is not registered in the separate register for valuers of large commercial real estate (Groot Zakelijk Register). However, in the context of subject property and the specific experience of the valuer in this segment of the property market, the valuer is of the opinion that he has the expertise to perform this valuation and this inspection. Attached to this letter is a document entitled ‘Assumptions’ and the valuation report with appendices.
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Market value The valuation is to be of the market value. Valuation Performance Standard (VPS) 4 - 4 of the Red Book defines Market Value (MV) as: ‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’ With regard to the above and to any additional observations made in the body of our report we are of the opinion that the market value of the leasehold interest in the property, as at 9 August 2018, is as follows:
€ 5,750,000 net (five million seven hundred and fifty thousand euros net)
Market rent The valuation is to be of the market rent. Valuation Performance Standard (VPS) 4 - 5 of the Red Book defines Market Rent (MR) as: ‘The estimated amount for which a property would 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.’ With regard to the above and to any additional observations made in the body of our report we are of the opinion that the total market rent of the property, as at 9 August 2018, is as follows:
€ 609,540 per annum (six hundred nine thousand five hundred and fourty euros per annum)
Yours sincerely,
D. Hendriks MSc MBA FRIS RT drs. A. Tervoort MRE MRICS RT REV RICS Registered Valuer RICS Registered Valuer Savills Valuations Savills Valuations
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B. Assumptions
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Our work is on the basis set out below, unless specifically varied by our report.
1. Constructional and technical condition During our inspection we have formed an opinion of the condition of the building based upon the visible parts. We have assumed that there are no constructional or technical defects. Should you require further information concerning the constructional and technical condition of the property we advise you to carry out a structural survey.
2. Contamination In our valuation we have assumed that the property is not contaminated, that there are no oil tanks or other objects and fuels which can influence the value and that the property does not contain asbestos or any other material which have a negative effect on the value. If subsequently it were discovered that contamination exists, our valuation would need to be revised. Should you require further information concerning any possible contamination we advise you to carry out an environmental survey.
3. Tenure and restrictions We have limited examined the title documents for any clauses, rights of third parties, easements or ground lease conditions. Savills did not make a Report on Title. We advise you to have your legal advisor carry out a title deed investigation. We have assumed that the property is free of mortgages, real rights and attachments.
4. Owners’ association If the valued property concerns an apartment right we did not take into account any consequences which arise from the owners’ association regulations and agreements. Furthermore we have ignored any debts or benefits of the association.
5. Information We have assumed that all information received is correct and complete.
6. Regulations We have assumed that the property is in compliance with all governmental regulations as per valuation date.
7. Local regulations We did not examine local regulations such as ordinances or governmental policies. We have assumed that no negative consequences arise from this or will influence the value. We have examined the zoning plan. Should you require further information concerning local regulations we advise you to discuss this with your legal advisor.
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8. VAT If a tenant is exempted from VAT payment over the rent we have taken into account the VAT loss over the operating costs. Any VAT loss over the construction costs or purchase price is excluded from our valuation. If we received information concerning VAT compensations, we have included it in our valuation. Should you require further information concerning any tax regulations we advise you to discuss this with your tax advisor.
9. Measurements We have assumed that the provided areas are correct and in accordance with NEN 2580. RICS stimulates the use of area measurements that comply with the International Property Measurement Standard. However, in the Netherlands the NEN-2580 measurement standards are the accepted standard for area measurement. Therefore we base our valuations on areas in compliance with the NEN-2580 measurement standards.
10. Plant and machinery We have included in our valuations those items of plant and machinery normally considered to be building related. We did not take into account any plan or machinery that is not building related.
11. Adjustments by tenant We have assumed that at termination of a lease agreement no costs or benefits will follow for the owner of the property due to adjustments from the tenant that were left behind in the leased space.
12. Development properties For properties in course of development we assume that the properties or parts of the properties will be delivered free of constructional or technical defects. For recently completed developments we take no account of any retentions, nor do we make allowances for any outstanding development costs, fees, or other expenditure for which there may be a liability.
13. Valuation date Property values may change substantially over a relatively short period. If you wish to dispose of this property or part thereof, or to accept a charge over it as security for a loan after the valuation date, we strongly advise a further consultation with us. We did not take into account any possible material changes to the property between the date of inspection and the valuation date or between the valuation date and the reporting date.
14. Service charges vacancy We did not take into account any service charges for the owner that may arise at vacancy.
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15. Special purchaser We have excluded from our consideration any special purchaser who, due to special interest or circumstances, may wish to purchase the property or the business.
16. Confidentiality The valuation and the report are for the stated purposes and for the sole and exclusive use of our client. The valuation may not be relied upon by any third party without the expressed and written authorization of Savills Valuations and no responsibility shall be accepted to any such third party whatsoever.
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C. Report
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Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands
1. Location Utrecht is the capital of the province ‘Utrecht’, situated in the centre of the Netherlands near the motorways A2, A12 and A27. Motorway A2 runs from Amsterdam to Maastricht, near the Belgian border. Motorway A12 runs from the west to the east of the Netherlands. Motorway A27 runs from Almere to the south of the Netherlands. In terms of demographics, Utrecht is the fourth city of the Netherlands with approximately 350,000 inhabitants. However, the city is growing fast through massive developments in residential locations. In 2040, the expectations are that Utrecht consist of approximately 440,000 inhabitants (grow of 26,6%). The office market of Utrecht has witnessed, in recent years, a significant boost. The office taken-up in Utrecht region amounted to approximately 125,000 sq m in 2017, lower than in 2016 in which the office taken-up amounted to approximately 175,000 sq m. The total office stock of the Utrecht region, measured in 2018, is approximately 2,800,000 sq m, in which the current supply consist of approximately 200,000 sq m. The vacancy rate of the office market in Utrecht is approximately 6.5%, which is relatively lower than the average vacancy rate of 14% in the Netherlands. Subject property is situated in business park ‘Papendorp’, a green business park with high quality office buildings. Papendorp is primarily an office location, although a few industrial properties are found in the north of the business park. We consider the CBD of Utrecht to be the best office location of Utrecht, followed by office parks Papendorp and Kanaleneiland. The property is situated at a distance of approximately 6 km of the city centre and 1 km from both exit ‘Papendorp’ of motorway A2 and exit ‘Nieuwegein’ of motorway A12. The accessibility by private transport is good. However, the access by public transport is average due to the fact that office park ‘Papendorp’ only accessible is by bus transport. The travel time with bus is 15 minutes to the main railway station of Utrecht. The office park is spacious and contains large offices.. The public environment is well maintained and possess large green areas between the offices. A location plan is attached as Appendix II.
2. Accommodation Subject property has a total floor area of approximately 3,309 sq m of which 3,287 sq m office space and 22 sq m warehouse space. The 66 parking spaces are partly situated underneath the building and partly next to the building. For this valuation we have used the floor areas of the NEN 2580 measurement certificate as prepared by BBN Adviseurs on 9 September 2014. For a summary of the floor areas we refer to the ‘Income’ page in Appendix V. A cadastral plan showing the subject parcel and providing an indication of the foot print of the property, is attached as Appendix III.
3. Description The subject property comprises an office building that was constructed in 2007. It is suitable as a single- tenant as well as a multi-tenant office building. The property consists of three office layers (floors 1- 3). The ground floor comprises the technical installations and storage space. The property has spacious parking facilities. There are 66 parking spaces situated below and next to the building.
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The property comprises two rectangular building volumes which are interconnected with an atrium and main staircase. The main entrance, situated on the first floor, provides access to the reception on the first office floor where a canteen is also found. The main load-bearing structure of the building is concrete. The facades are constructed out of siding and natural stone. The outer wall openings comprise coated aluminium frames. The roof is finished with a bituminous layer and is mostly provided with gravel. Heating is provided through district heating. Cooling is done by one Aermec chiller. The offices are among other things fitted out with ceiling systems with built-in light fittings, horizontal cable ducting, partitioning walls and fire-fighting equipment. In the office one Kone lift is installed with a maximum capacity of 13 persons or 1,000 kg. The building currently has energy label C.
4. State of repair For this valuation we have requested a building survey report. We have received the building survey report written by SGS Search, dated 25 June 2018. We have read the report and the conclusion of their report is as follows: ‘The building dates from 2007. The structural components, the roof and the facade of the building are in reasonable to good condition. The sealant joints between the concrete elements of the car park are still flexible, but the expectations are that they need replacement in medium term. Window glass, glass roof of the atrium, façade panels and frames are slightly contaminated. Several holes in the façade plating have been observed near the main entrance. To prevent further damage this needs to be repaired in the short term. The wooden frame of the company restaurant was painted in 2016 and is in excellent condition. The roof needs replacement in long term (2037) regarding to his theoretical lifespan. The roof edges and the gravel are slightly polluted locally. given the small size of the pollution this can be included in the periodic roof maintenance. The interior is in general in a good condition. The sanitary facilities are well maintained. The carpet in some offices is starting to age and show contamination locally. A few ceiling plates have been removed and damaged/soiled but in general in good condition. The parking garage under the building is in a good condition. The point of attention is the light pollution on the concrete elements and the galvanized steel profiles for the wooden outdoor terrace. The outdoor area and outside parking spaces are regularly maintained and are in good condition. However, the wooden exterior staircases and the wooden outdoor terrace should be painted in the short term. The fire alarm system is at the end of the technical lifespan in 5 years. Partitioning and fire seals are undamaged. The technical installation spaces are located in the parking garage under the office building. The technical installations date back to 2007. Most of them must be (partially) replaced or overhauled in medium term, due to the technical lifespan. The coolers and the pressurized water system must be partly overhauled in medium term, based on their technical lifespan. The electrical distribution looks organized and is well maintained. Generally, the building installations are well maintained by the tenant.’ In accordance with our general assumptions and based on the above, we have assumed that the property has no constructional or technical defects.
5. Condition The property was inspected by us on 9 August 2018. At the time of our inspection the building generally appeared to be in a good condition.
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6. Local land registry The local land registry (‘kadaster en openbare registers’) has informed us the ground lease interest in the property is held by Stichting Anthos Real Estate Custodian, with registered offices in Amsterdam, the Netherlands. The land is owned by the Municipality of Utrecht. It was officially registered as follows:
Cadastral Municipality: Utrecht | Section: T
Number Address Area Sq m Description
1204 Orteliuslaan 1001 - 1003 (odd) 51 a 90 ca 5,190 Activity (offices) parking
Total sq m 5,190
The perpetual ground lease was issued as per 3 April 2006 and has been paid off for an amount of € 2,163,999.66.
7. Tenure We have read the deed of transfer of title dated 3 April 2006, prepared by MR. J.W. Wessels LLM, notary in Amsterdam, the Netherlands. The land is held in leasehold by Stichting Anthos Real Estate Custodian (voorheen Administratiekantoor Fondsen Unie B.V.) The property is recorded in the deed of transfer of title as follows: Municipality Utrecht, section T, number 1098 (later adapted to 1204).
Rights and encumbrances The deed of transfer of title states the following rights and encumbrances: • Pertpetual ground lease was issued on 3 April 2006 and was paid off for the total amount of € 2,163,999.66. • The purchased property is designated for offices with parking facilities with a total gross floor area of 3,500 m². • The purchasing party is obligated to tolerate the establishment and maintenance of mains services for the benefit of (public) utility purposes • The allowed parking ratio is 1: 62,5. Provided that 3,500 sqm office space is allowed, this results in 56 parking spaces. However, the 66 existing parking spaces, have been approved as of 3 December 2012 in the amended ground lease letter. • Park management is applicable for the purchased property. We emphasize that Savills did not make a report on title. We advise you to have your legal advisor carry out a title deed investigation.
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8. Town planning We have made no formal application to the local Planning Authority. However, based on our own investigation of public sources on local planning, we understand that the property falls within the zoning plan ‘ Papendorp’. The Municipal Council adopted the plan on 27 March 2013. According to this zoning plan, the property is designated for ‘office’ purposes. The plan restricts development on the site, among other things, to a maximum height of 15 m and a maximum plot ratio of 33%.
9. Services The property is connected to main supplies of gas, water and electricity and drainage is connected to the main sewer.
10. Environmental issues For this valuation we have requested an environmental report. We have received the environmental report written by SGS Search, dated 19 July 2018. We have read the report and the conclusion of their report is as follows: ‘By means of this historical survey, insight was obtained in the possible presence of soil contamination at the research site. The results of the survey show that no soil threatening activities took place at the research site or in its immediate vicinity. The site is located in the former Papendorp polder which is raised with clean sand based on the conducted soil surveys. Based on the soil quality map the soil at the site is considered to be slightly contaminated as most. Based on the results of the survey, it can be concluded that it is not likely that by continuation of the current use of the site costs or liabilities are attributable to the current owner. In relation to the proposed transfer of ownership of the site and its real estate the possible risks of the measured contaminations are limited’. In accordance with our general assumptions and the above, we have assumed that the property is not contaminated.
11. Occupational leases and other agreements We were informed by the instructing party that the property is currently vacant. Therefore no lease contracts are available.
12. Special assumptions For this valuation we have made no following special assumptions.
13. Comments In addition to our general assumptions the following comment is applicable to this valuation. • We have received the (draft) Legal Due Diligence report (red flag due diligence report) written by Stibbe, dated 21 August 2018. We have read the report and with respect to this valuation there are no particulars.
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14. Marktanalyse
14.1. General market analysis
Dutch economy The Netherlands currently has 17.1 million inhabitants. The bulk of the Dutch population (7.1 million people) lives in the metropolitan area called the ‘Randstad’. This area is located in the west of the Netherlands and consists of its four major cities (Amsterdam, Rotterdam, The Hague and Utrecht).
Additionally, the Randstad accommodates the majority of businesses and companies, the Dutch national airport Schiphol and the port of Rotterdam. Schiphol and the port of Rotterdam are often referred to as ‘Mainports’, due to their great importance to the national economy.
Due to the strategic location of the Netherlands, its excellent infrastructure with the hinterland, and a strong trading spirit, the Netherlands have historically been a trading nation. This image has persisted throughout time, and the economy is still strongly driven by import and export. As a result, the Dutch economy is characterised as an open economy in which there is a strong dependence on global trade and the global economy. That is why the Netherlands perform economically best, when important trading partners do good as well. Though when an international economic downturn occurs, this will also cause a negative effect on the Dutch economy. Major trading partners for the Netherlands are Germany (24.4%), Belgium (11.1%), the United Kingdom (8.4%), France (8.2%), Italy (4.4%) and the United States (4.3%).
World
The world economy is considered as the total of the economic performance of individual countries. Thanks to its open economy, the benefits for the Netherlands are also most favourable when the world economy is growing. The growth of the world economy is based on a number of financial parameters. A few important parameters are listed in the table below to illustrate the growth forecast for 2018.
Parameter 2017 Forecast 2018
World economic growth 3.6% 3.7%
World trade volume growth 4.2% 4.0%
Consumer prices growth 1.7% 1.7%
Unemployment rate 5.8% -
1.4% (dollar) 1.9% (dollar) LIBOR* -0.3% (euro) -0.3% (euro) 0.2% (yen) 0.2% (yen) * ‘London Interbank Offered Rate’ - important international interest rate
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Europe Within the European Union, the European Central Bank (ECB) and the Economic and Monetary Union (EMU) pursue a policy aimed at economic stability and sustainable economic growth. To stimulate the economy during the years of crisis, the decision was made to decrease the long-term interest rate in the Eurozone sharply. This policy has been successful to date as the average Gross Domestic Product (GDP) in Europe grew by 2.6% in 2017. The growth in GDP is expected to continue in 2018 and 2019, with a respective growth of 1.8% and 1.9%. The aim is to keep inflation below the 2% limit, as exceeding this rate could lead to less sustainable growth and even a recession. The Eurozone is experiencing the strongest growth it has seen in over a decade, with high business sentiment in most countries. High consumer confidence boosts producer confidence in the Eurozone. This translates into rising employment rates across Europe (see the following graph).
Graph YoY growth employment rates in European countries 2017
The Netherlands As previously mentioned, the Netherlands has a great interest in a good economic situation for its most important trading partners and the world economy as a whole. This was seen during the global financial crisis in 2008, in which the world economy ended up in a recession. In the second half of 2013, the Dutch economy started to recover again, mainly driven by a growth in world trade and an improving economy of most European countries. Since then, the Dutch economy has recovered strongly to and even above the pre-crisis level. The graph below shows the development of a number of key parameters for the Dutch economy from 2008 to 2018Q1. This also shows the peaks and troughs of the economy known as the business cycle.
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Graph economic parameters Dutch economy 2008 - 2018Q1
Within the Netherlands, the business cycle is tracked by Statistics Netherlands (CBS) with the business cycle tracer. Below, the business cycle tracers of March 2013, 2015, and 2018 are shown. This illustrates that all variables have shifted from the recession quartile to the growth quartile.
Business tracers June 2013, 2015 and 2018
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Forecast The annual GDP growth in 2017 amounted to 3% in the Netherlands. This growth was higher than the average of the Eurozone (2.6%) and of neighbouring countries such as Germany (2.3%), the United Kingdom (1.9%), Belgium (1.6%), and France (2.1%). The Dutch economy is still in the growth phase and, in combination with the prediction of economic growth in Europe, the peak is not yet in sight. The CBS expects that the GDP will grow by more than 3% in 2018. This expectation is underpinned by a solid foundation of many economic factors, such as those previously mentioned. This broad foundation reduces the risk of a (sudden) deterioration of the economic situation.
Effect economy on the real estate market The real estate market benefits greatly from the current economic situation in the Netherlands. This is partly due to the fact that the construction and real estate sector account for around 40% of the Dutch economy. The sharp decrease in long-term interest rates in Europe created a (relatively large) difference between the return on real estate and that of bonds, also known as the yield gap. The following graph shows the difference between the return of the best real estate (prime) and that of Dutch government bonds. Despite a slight increase in long-term interest rates in the past year, the yield gap is still significant.
Graph Yield gap Dutch prime real estate and long-term interest rates 2010 - 2018 Q2
The stable economic situation and the yield gap make the Netherlands an attractive destination for foreign capital. The inflow of foreign capital is large and this is reflected in the (increasing) share of cross-border investments compared to the total investment volume in the Netherlands (see graph below). The share of cross-border investments was 62.1% in 2017. The majority of this foreign capital comes from the United States, Germany and the United Kingdom.
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Graph share cross-border investments in Dutch real estate per country 2017
The economic recovery is also illustrated by the level of activity on the consumer market. The total take-up in the Netherlands showed significant growth in 2015. To date, the take-up level has remained at an equal level. In 2017, however, there was a slight decline due to a shortage of suitable and high-quality products within some market segments. This was particularly evident in the office market. The total take-up in 2017 amounted to just over 9 million sq m. In the first half of 2018, the Dutch real estate market recorded a take- up of approximately 2.7 million sq m. On this basis, expectations are that the peak levels of the past three years are not likely to be matched, due to a lack of high quality product.
Graph total take-up volume of Dutch real estate 2010 - 2018 YTD
Due to the outlined economic situation and the stable situation on the occupiers market, stable growth in investment volume has been achieved in recent years. In 2017, € 22.6 billion was invested in Dutch real estate. Striking here is that the growth manifested itself in all sectors within the real estate market.
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Graph total investment volume of Dutch real estate 2010 - 2018 YTD
The office market is still the most dominant with 35% of the total investment volume, followed by the retail market with 20% and the residential market with 19%. Up to this date, 2018 has shown strong deviations in regards to 2017. Residential investments have the majority (35%), whereas offices follow with a share of 31.1%. The other three categories each account for around 10%.
14.2 The Dutch office market In the following sections, the characteristics of Dutch office market and the pursued government policies in regard to developments in the office market are discussed in detail. These different elements indicate the current position of the office market and the directions it is developing towards. Based on this, we can conclude what opportunities and threats exist for investors who (want to) invest in the office market.
Characteristics of the Dutch office market Stock and vacancy The size of the Dutch office market is approximately 48.6 million sq m. A large part of these offices is located in the Randstad region, a metropolitan area which includes the four largest Dutch cities. The following table shows the total stock and vacancy per agglomeration and municipality.
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Table office stock G4 - agglomerations
Gebied Population Stock (sq m) – Vacancy (% of Stock (sq m) – Vacancy (% of agglomeration total) - municipality total) - agglomeration municipality
Nederland 17,181,100 48.6 m 13.8% 48.6 m 13.8%
Amsterdam 972,000 6.8 m 6.1% 6.1 m 5.8%
Den Haag 713,400 4.9 m 9.1% 3.9 m 7.6%
Rotterdam 783,500 4.1 m 13.9% 3.7 m 14.0%
Utrecht 495,100 3.7 m 9.0% 2.8 m 7.8%
The Dutch office market can roughly be divided into three categories based on location: prime, secondary, and other locations. In recent years, prime office locations in the G4-agglomerations have shown high take- up rates, rising rents, and rising investment volumes. Prime locations in Amsterdam’s city centre, at the South Axis and near Schiphol are particularly dealing with more demand than supply, resulting in an overheated market. The market is still showing movement despite its limited supply, causing rising rental rates. Due to the overheated market, we observe a dichotomy in the secondary locations. On the one hand there exist secondary locations that benefit from the limited availability on prime locations and experience a fall in the vacancy. These are for example a few sub-areas of the agglomeration Amsterdam; Southeast, Teleport- Sloterdijk and Hoofddorp. But cities situated outside of the Randstad, like Eindhoven and Den Bosch, are benefiting from the economic growth as well. While on the other hand, secondary cities and locations outside of the centre show a less significant growth. These areas display higher vacancy rates, with fewer offices being rented or sold. Additional to this categorization, the Dutch office market has, among other things, the following characteristics:
Role of the government The Dutch government has a strong influence on spatial planning in the Netherlands. By means of zoning- and spatial vision plans, various levels of government exert their influence on the configuration of the built environment and thus on the locational policy of private companies. After the financial crisis, there existed a structural vacancy problem at the national scale. In order to prevent further speculative and superfluous developments, the majority of the municipalities adjusted their spatial policy plans and -vision for offices. Particularly in the largest cities, a restrictive location policy was established. To prevent the proliferation of offices, among other things, the number of square meters of land to be issued for offices was determined for a set period of time. Also, the majority of the office space of a new office building needs to be let prior to the start of the construction, as to prevent immediate vacancy after realization. Municipalities have a certain degree of freedom to determine these kinds of policies, which allows the possibility of substantial differences between office areas that vary in popularity. In many municipalities a construction stop for offices was for example imposed in the years after the crisis.
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Ownership With 64% versus 36%, the share of tenants in 2015 in the Dutch market was almost twice as large as the share of owner-occupiers. This ratio has remained unchanged since 2005.
Age of the office stock The diagram below shows the age of the Dutch office stock. The outer circle illustrates the age distribution for the total Dutch floor space, while the inner circle shows this fact for the number of offices. It becomes clear that about half of the total of offices were built between 1980 and 2000. Since offices generally have a life cycle of 30 to 40 years, a substantial part of the stock will need an upgrade in the coming years.
Withdrawals, conversions and new developments The majority of Dutch cities faced structural vacancy problems after the financial crisis. Partly because due to the impact of the crisis, municipalities and provinces started to stimulate the withdrawal of obsolete and vacant offices as means to upgrade the stock. Due to the increasing urbanization, more pressure was exerted on the housing market in those same years, particularly in the cities in the Randstad. In order to meet this increasing demand, the conversion from offices to homes has also been strongly encouraged. The graph below shows how the total stock has decreased by over 3 million sq. m (around 6%) since 2013. After a substantial increase of the vacancy rate of 10.1% in 2010 until the peak of 14.6% in 2017, the vacancy rate since then dropped to 13.8% in 2018 Q2. This was mainly caused by a combination of conversions, withdrawals, and restrictive new-construction policy by municipalities.
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Since mid-2017, however, there has been a sharp decline in the number of initiatives for the removal of offices for conversion. The main reason for this is the disappearance of the easily convertable buildings, resulting in newer buildings also being used. In the Randstad for example, the median year of construction of the converted offices, went from 1973 in 2014 to 1990 in the past year. This is remarkable since such buildings are more difficult to convert from a constructional technical point of view.
Current balance between supply and demand The following table shows the current balance between demand and supply per market and per sub-segment. The primary focus in this table lies on the location. For Amsterdam, for example, the South Axis falls under 'Prime', Southeast under 'Secondary' and an office in Buitenveldert under 'Other'. We make this distinction as these markets classify differently based on their performance. Per segment and area, a coloured arrow indicates how the supply and demand has developed in the past period. These gradations range from a strong rise (dark green) to a strong decrease (dark red). Subsequently, it is indicated whether there is a current mismatch, and whether this mismatch concerns a shortage (S) or a surplus (P) of available offices in that segment. Here the color red means a large mismatch, while the color green indicates a (relative) balance.
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Table Development office market per area and per segment
Assessment match between demand and Demand Supply supply
Prime ↑ ↓ S
G1 Amsterdam Secondary ↑ ↓ S
Other ↑ ↓ S
Prime ↑ ↓ S Den Haag, Rotterdam, G5 (excl. Amsterdam) Utrecht and Eindhoven Secondary ↑ ↓
Other → ↓ P
Prime ↑ ↓
e.g. Den Bosch, Top 25 (excl. G5) Secondary P Zwolle or Breda → ↓
Other ↓ → P
Prime/ P e.g. Roermond, secondary → → Overig Nederland Woerden, Nijkerk or Waalre Other ↓ ↓ P
Policy for the office market In the coming years, municipalities will continue to focus on stimulating and facilitating conversions of outdated and obsolete offices. This applies in particular to municipalities that have conducted a reactive policy with regard to conversions in recent years. Expectations are that the stock will continue to decline substantially in the coming years. However, as the supply is becoming increasingly limited in prime office areas, some municipalities have now relinquished their construction shutdown cautiously. Amsterdam, for example, is taking this a step further, where the municipality has decided to extend at least two tenders per year for the construction of new offices. It is expected that a stringent policy will mainly be followed despite this ‘loosening’ of policy.
Minimum energy label C Starting the 1st of January 2023, it will be legally prohibited to use an office building with an energy label of D or less. For each office larger than 100 m2, this means a required Energy Index of 1.3 or better. A building is defined here as an office when the occupier area of the office function is greater than the occupier area of the individual other functions in that building. At the end of 2017 it is estimated that 80% of the offices did not yet meet the energy label. Older offices in particular are becoming increasingly out of favor.
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Other developments Persistent rise of the flexible office The market for flexible office concepts is relatively new, though it has been growing substantially. This includes office buildings where tenants can claim one or more (temporary) workplaces instead of square meters. This is useful both for small businesses that do not need more space and for larger offices to respond more quickly to changing market conditions. Flexible office concepts currently account for 2% to 3% of the total office stock (NVM, 2017). Research shows that this market has increased by an average of 13% per year over the past ten years. This growth has taken place mainly in the G5 cities and is being pushed by economic trends, such as the sharp increase in the number of office establishments with only one employee since 2010 (46%). This is partly due to the lack of A-grade supply in the CBDs of these cities. This leads to a shortage for small-scale and medium-sized occupiers demanding this type of space. Expectations are that the market share of flexible market concepts will have increased to 5% - 10% of the Dutch office stock in five years' time.
The effects of the Brexit The effects of the Brexit have been discussed extensively, but the expected (substantive) relocation of firms from London to Amsterdam seem not to have taken place so far. The parties that are considering relocating their (head) office out of the United Kingdom, seem more likely to choose cities such as Frankfurt, Paris, or Dublin. So far, the only ‘catch’ from the Brexit has been the relocation of the European Medicine Authority (EMA) and the decision of Unilever to move headquarters to Rotterdam. Possible relocations are partly deterred by the limited promotion policy and restrictive municipal policy. An example of this is the slow tender process for new developments.
Occupier market further considered The occupier market for offices peaked in 2015 and 2016. In 2017, take-up amounted up to 1.8 million sq m, which was a 17.7% decrease to the year before. This decline was not caused by a lower demand, but mainly due to a shortage of high-quality offices in the large Dutch cities. Companies are therefore forced to relocate less often than they would prefer.
Graph office take-up in the Netherlands
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Since 2010, the take-up ratio by sector has remained largely unchanged. The business and financial sectors together accounted for about half of the total take-up. This is also characteristic of the Dutch economy, where these sectors have been strongly represented for several decades.
Chart take-up differentiated per sector 2010 - 2018 YTD
The following three maps show the development of office vacancy in the Netherlands in conclusion of this section. Apart from a few short periods of stability, vacancy levels have been following an unabated increasing trend in the period from 2001 up to 2015. This increase can be attributed, among other things, to the economic downturn after the crisis, the flexibilisation of the occupier market combined with a lower floor space per employee, and particularly the speculative office developments. Since the peak in 2017, there has been a steady decline in vacancy. The imposed restrictive locational policies by municipalities combined with the substantial withdrawals and conversions seem to be bearing fruit. The expectation is that this will decrease further in the coming years, in particular due to the continuing restrictions on new office construction.
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Map office vacancy trend per municipality (source: PBL)
2001 2015 2017
Vision of developments on the occupier market The following table illustrates how Savills expects the balance between demand and supply per market segment to develop, in view of the outlined developments and current policies. The change in supply and demand has an effect on price developments. This is why expectations have also been estimated for this. The starting point is that prices rise with inflation. The estimate gives the expected relative price development compared to the price increase due to inflation.
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Table of expected developments in the office market by area and segment
Assessment match Estimated changes between demand match between demand and supply and supply Estimated price changes
Prime Prime S ↑ ↑ Secondary Secondary S Other ↑ ↑
Other S → →
Prime Prime S ↑ ↑ Secondary Secondary Other ↑ ↑
Other P → →
Prime Prime → → Secondary Secondary P Other → →
Other P → →
Prime/ secondary Prime/ P → → secondary Other
Other P ↓ ↓
A closer look into the investment market The Dutch office market is popular among (international) investors. In 2016, the investment market for offices grew by 64% in comparison to 2015, reaching an investment volume of almost € 6.3 billion. Last year, we saw a further increase of the investment volume to € 7.7 billion. The combination of this increasing interest and a limited supply, is resulting in yield compression in virtually all sectors and locations. Gross yields at prime locations such as Amsterdam Centre and Amsterdam South Axis are unprecedentedly low and stand at 3.5%.
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Graph investment volume offices (billion €)
Share of foreign capital The fact that the Dutch office investment market has booked record years is mainly due to the increasing interest from foreign investors. The graph below clearly illustrates how capital from Dutch investors has increased relatively strongly (doubling since 2014), but that the real growth can be attributed to the increased interest of foreign investors. In 2017, the share of foreign capital accounted for more than 71% of the total.
Graph investment volume differentiated between domestic and foreign capital (billion €)
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Opportunities, threats and expectations Supported by the economic growth, resulting in high demand and limited supply, Savills expects take-up rates to stabilize. Restrictive policy of municpalities regarding new office developments, leads us to believe that office supply on prime locations will see a further reduction. Subsequently, limited new developments will result in low relocation tendency, low incentives and high rental rates on prime locations. This scarcity also affects secondary locations by boosting prices. Investment interest, in particular of international investors, will remain high in 2018. Therefore, high investment volumes are also expected for 2018. These will be accompanied by a further decline in initial yields at secondary location, while yields are expected to stabilize at prime locations. The reason for this is that prime locations in the Netherlands have caught up from an international perspective and price levels are now comparable to those in other prime cities. In addition to rising investment volumes, we observe a strong increase in the demand for flexible and serviced office space. This is in line with the trend of flexibilization of the economy in general. This is one of the reasons why leases will increasingly become more short-term, and why the traditional office market will slowly transform into a more dynamic and flexible sector. There is also a potential threat to both owners and tenants by not being able to meet the sustainability requirements of their offices in 2023. Particularly outdated offices will need an upgrade to meet the (future) market demands and regulations. The shrinking supply of easily transformable buildings further contributes to the expectation that the conversion trend has reached a (provisional) peak. The developments on the supply and demand side in recent years have led to a current three-way division in the Dutch office market (prime, secondary and other). A possible threat is the current, and possibly further increasing, shortage of prime (and partly secondary) offices in the G5 cities. The question is whether within the restrictive locational policies, sufficient new construction can be facilitated in order to continue to meet the demand. In addition, structural vacancy is still common in the bottom of the market. There are opportunities here for initiators who can creatively cope with the limitations of these buildings in regards to conversions and redevelopments. The stability in the mid-range segment is expected to remain balanced in the coming years. Sources: CBS, Lisa, Oxford Economics, CPB, Consensus Economics, Focus Economics, Neprom, Vastgoedmarkt, PropertyNL, Calcasa, RCA, PBL, Savills Research.
14.3. Lokal market analysis This chapter gives an overview of the local office market of the municipality in support of the valuation report. First an overview is given of the demographics and employment developments of the municipality. After that the key facts of the occupier and investment market of the municipality will be discussed in detail. Finally the developments of the office market will be discussed.
Demographics The first map below shows the location of the municipality in the Netherlands. The second one shows the major office locations in the municipality.
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Map location municipality Map office locations
Before going deeper into the office occupier and investment market of the municipality, some facts about demographics and employment will be highlighted. Development of the number of inhabitants says a lot about the attractiveness of a municipality. Moreover, the distribution of the age groups shows the vitality of the municipality. Average household income in € per year of the municipality in comparison with the national average shows the economic power of the municipality. Other key facts as the percentage growth of companies and jobs reflect the economic activity of a municipality.
Table key numbers about demographics and employment INHABITANTS AGE GROUPS HOUSEHOLD INCOME COMPANIES JOBS Growth Growth Growth 2018 2040 <20 20-65 65+ €/yr 2017 2017 AREA in % '12-'17 '12-'17
Utrecht 347.483 440.718 26,8% 22% 67% 10% 36.300 37.100 26,4% 248.540 5,1%
Netherlands 17.2 mio 18.2 mio 6,0% 22% 59% 19% 37.904 1.55 mio 18,1% 8.4 mio 2,1%
To get a good image of the office occupier and investment market, it is useful to have an overview of the distribution of the different sectors in the municipality. This distribution shows which sector(s) the focus is on and which sector(s) are under-represented.
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Graph growth of companies and jobs Graph jobs per sector
In the municipality of Utrecht, the unemployment level is 3.0%.
Key facts occupier market The key facts of the occupier market of the municipality are summarized in the following table and visualized in the following graphs. The table shows the total office stock and the current supply of the office market. The first graph shows the development of the total and average office take-up during the years 2010 - 2018 YTD. Related to this the vacancy rate is visualized in the other graph below. Vacancy in the municipality compared to the national average shows the attractiveness of the municipality and how tense the office market in the municipality is.
Table key numbers occupier market municipality and subarea
Area Utrecht Sub area Papendorp Office stock (sq m) 2,828,946 Office stock (sq m) 298,625 Current supply (sq m) 206,143 Current supply (sq m) 38,872 Prime rent (€/sq m/year) 265 Prime rent (€/sq m/year) 175 New developments 2017 (sq m) 12,150 New developments 2017 (sq m) 0 New developments 2018 YTD (sq m) 28,295 New developments 2018 YTD (sq m) 0
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Graph take-up offices municipality and subarea 2010 - 2018 YTD
Graph vacancy rate municipality and subarea
Table vacancy in terms of number of buildings municipality and subarea City Total number of Total buildings Ratio buildings with vacancy
Utrecht 686 140 20,4%
Papendorp 56 22 39,3%
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To get a better overview of the content of the occupier market in the municipality, in the following table several transactions of 2017 and 2018 YTD are included. These are the most important leasing transactions that represents the occupier market in the municipality. Comparables of the subject property are shown in the valuation report.
Table leasing Transactions 2017 - 2018 YTD Year to date Rent (€/sq City Name/Address Sq m Period Tenant m/year) Utrecht Van Deventerlaan 30 - 40 925 n/a 18Q3 Apleona Utrecht Van Deventerlaan 30 - 40 310 n/a 18Q3 Zorg Invest Utrecht Staat, Papendorpseweg 75 1,800 n/a 18Q2 Regus Utrecht Van Deventerlaan 31 - 51 2,400 165 18Q1 T-Systems Utrecht Blaeulaan 60 1,339 n/a 17Q4 Fugro NL Land B.V. Utrecht Papendorpseweg 93 8,500 165 17Q4 Sociale Verzekeringsbank Utrecht Papendorpseweg 97 1,193 155 17Q4 Teleperformance
Key facts investment market The key facts of the investment market of the municipality are summarized in the following table and visualized in the following graph. The table shows the total investments volumes for 2017 and 2018 YTD. The investment volume during the period 2010 - 2018 YTD is visualized in the graph. The amount of the investment volume is related to the development of the economy in the Netherlands, but is also related to the attractiveness of the municipality itself.
Table key numbers investment market municipality and subarea
Area Utrecht Sub area Papendorp Total investment volume 2017 (€) 526.9 m Total investment volume 2017 (€) 23.5 m
Total investment volume 2018 YTD (€) 246.3 m Total investment volume 2018 YTD (€) 8.7 m
Gross Initial Yield (GIY) prime locations 5.00% Gross Initial Yield (GIY) prime locations 6.50%
Graph investment volume municipality and subarea 2010 - 2018 YTD
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To get a better overview of the content of the investment market in the municipality, in the following table several recent transactions are included. Comparables of the subject property are shown in the valuation report.
Table investment Transactions 2017 - 2018YTD City Name/Address GLA Period Price € / sq m Purchaser Glazen Duo, Van 23,41 Utrecht 18Q3 n/a n/a Forma Real Estate Deventerlaan 101 - 121 8 Utrecht Orteliuslaan 1041 3,886 18Q1 € 8.7 m 2,232 Intown Utrecht Orteliuslaan 871 3,266 17Q4 € 4.7 m 1,439 Aventicum Kroonstaete, Maatschappij Doelenstraat Utrecht 7,065 17Q2 € 5.8 m 821 Papendorpseweg 75 - 79 BV 14,94 Utrecht van Deventerlaan 31 - 51 17Q1 € 13.0 m 870 Angelo Gordon 7
New developments The planning policy of the municipality of Utrecht is focused on a controlled and coherent (re)development of office locations and business parks. The municipality also pursues a restrictive stance regarding the issuing of new land for office use. This number for office and business park is fixed for a longer period. In addition, the end user must already be known at the time of issue. As a result, the municipality has more control over the vacancy in the city. This location policy applies to all office buildings larger than 1,500 sq m. Within the municipality, there are currently a number of office projects under construction or planned. These are almost exclusively realized in the station area of Utrecht. The most important developments that are planned or are currently being built are: • The Platform, also known as ‘Zuidgebouw’, comprises of a development of 20,000 sq m and will include apartments, office space, a gym and a restaurant. Delivery is planned in 2018; • The Noordgebouw is a new project whose construction was started in March 2017. The object comprises a combination of hotel, office space (8,000 sq m), 16 apartments, and retail space (3,100 sq m). The planned delivery will be by the end of 2018; • On the Mineurslaan, along the train track, comes Central Park. Central Park becomes a 90-meter building with a green space dividing the building into two parts. The area of the object will cover approximately 30,000 sq m of office space. The planned construction will be in early 2018 and the expected delivery by mid-2020; • Another new development is Wonderwoods. The project contains two towers of 90 and 70 metres both with functions for residential, office and leisure. Hereby, one of the towers will look like a vertical forest in which greenery is growing against the façade and on balconies. The two towers provide room for 300 dwellings (60% rental), 27,000 sq m for commercial functions, 200 parking spaces for car and 2,500 for bicycles. Expected completion of Wonderwoods is in 2022. Sources: CBS, CPB, IMF, Lisa, Municipality of Utrecht, Vastgoedmarkt, PropertyNL, Calcasa, OpenStreetMap, Savills Research
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15. Market rent and investment analysis
15.1. Market rent analysis Utrecht, Orteliuslaan 1041 Compared property: Transaction date: Q2 2017 Area: 3,945 sq m office Rent: € 168 per sq m Commentary: The compared property was constructed in 2001. Multiple associations in sports have moved to this property in 2017. The multi-tenant building has a comparable building quality and is situated in the vicinity of subject property.
Subject property: Rent: € 160 per sq m office € 1,250 per parking space
Utrecht, Van Deventerlaan 31 Compared property: Transaction date: Q2 2018 Area: 2,300 sq m office Rent: € 170 per sq m office € 1,350 per parking space Commentary: T-systems has signed a long- lease for this property, which was fully renovated to office building ‘Life’. We consider the compared property to have a better building quality and a more striking appearance. This is reflected in the higher rent price.
Subject property: Rent: € 160 per sq m office € 1,250 per parking space
Utrecht, Papendorpseweg 97 Compared property: Transaction date: Q1 2017 Area: 2,266 sq m office Rent: € 155 per sq m office € 1,150 per parking space Commentary: Comprises offices ‘Secoya’. The property has an energy label A and asking rents lie in the order of € 175 per sq m for offices and € 1,400 for parking spaces. We consider the compared property to have a comparable building quality. Subject property: Rent: € 160 per sq m office € 1,250 per parking space
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15.2. Investment analysis Utrecht, Orteliuslaan 1041 Compared property: Transaction date: Q1 2018 Purchaser: Intown Area: 4,000 sq m Purchase price: € 8,671,930 Capital Value: € 2,168 per sq m Commentary: The compared property was constructed in 2001. Multiple associations in sports have moved to this property in 2017. This transactions reflects a yield of ca. 6%, with a 11 years unexpired. The lower capital value of subject property can be attributed to the vacancy in the property.
Subject property:
Capital value: € 1,737 per sq m.
Utrecht, Vliegend Hertlaan 15 - 97 Compared property: Transaction date: Q1 2018 Purchaser: Highbrook Area: 18,233 sq m Purchase price: € 35,000,000 Gross initial yield: 7.5% - 8.0% (confidential) Capital Value: € 1,920 per sq m Commentary: The compared property was built in 1985 and had ca. 75% occupancy at the time of the transaction. The comparable reflects the high investment demand with a focus on the Utrecht region.
Subject property: Capital value: € 1,737 per sq m.
Utrecht, Fentener van Vlissingenkade 1 Compared property: Transaction date: Q3 2017 Purchaser: Warburg HIH Area: 3,832 sq m Purchase price: € 8,500,000 Capital Value: € 2,218 per sq m Commentary: The compared property was built in 1999 and is of a similar size. We consider the location to be better compared to subject property. The building quality is lower. The property has been traded for a gross initial yield of ca. 8.2%.
Subject property: Capital value: € 1,737 per sq m.
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16. Estimated market rent We consider the estimated market rent of the property to lie in the order of € 160 per sq m for office space and € 1,250 for parking spaces. This results in € 184 per sq m overall. Accordingly we estimate the market rent for the entire property to be € 609,540.
17. Valuation methodology In arriving at our valuation we have used two methods. One is a capitalisation method. We have capitalised the net market rent and have made corrections for existing lease terms. As a net yield on market rent we have used a yield of 7.50% and for the corrections we have used a yield of 7.00%. In addition we have made corrections in case of vacancy. For this we have estimated the period for which the vacancy is most likely to continue. At the assumed moment of reletting we have made adjustments for reletting costs and incentives. In case of ground lease, overdue maintenance or any other reasons for corrections, these corrections were made calculating the net present value of these cash flows using a yield of 7.00%. The second method is a discounted cash flow method. We have used a 20-year cash flow period. The gross rents and the annual outgoings are used to come to a net rent. These cash flows are corrected for vacancy, reletting costs, incentives and refurbishment costs. Additional corrections can be made in year one, in the year during the cash flow period we expect the expenses to occur or in the exit value at the end of year 20. We have used a discount rate of 7.10%. Using the above mentioned methods, we have arrived at a rounded gross value of € 6,150,000. After deducting purchasing costs at a rate of 7.00% we have arrived at a rounded net value of € 5,750,000. This reflects a gross initial yield of 10.60%.
18. SWOT analysis We consider the property to have the following commercial strengths, weaknesses, opportunities and threats.
Strengths: • Ground lease has been paid off. • The property has a good appearance and is in a good state of repair. • Attractive office location in Utrecht with renowned tenants as Bol.com, Deloitte and KPMG. • Close to the main road (good accessibility). • Relatively modern office building, with similar buildings in the vicinity. • Good car parking ratio.
Weaknesses: • Fully vacant. • Amenities in the direct surroundings are limited. • Vacancy in at office location Papendorp is around 13%.
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Opportunities: • Lease-up vacant space. • Take-up in the subarea was strong in 2017. Should this trend continue the coming years, it would pressurise rents on an upward curve.
Threats: • There are extensive development plans for offices in the city centre. • Long term vacancy. • Competitive supply in the direct vicinity.
19. The property as security for a loan As a security for a loan, the property has the following characteristics:
19.1. Security of income The property is currently fully vacant . We assume that the lettings will be subject to covenant tests to ensure that the quality of future tenants is sufficient, and also that the owner will obtain the maximum lease term possible from each tenant.
19.2. Letting period Taking into account current market conditions, we consider a period of 9 months necessary to cover the lettings campaign and a tenant incentive of one year rent.
19.3. Evolution of rental and capital values Improving economic fundamentals and positive forecasts of economic growth, employment, consumer demand and consumer confidence are expected to further strengthen the performance of property markets in general. Investor demand for prime real estate has been high for the past few years and continues to be high. This is mostly triggered by the high availability of funds from a wide variety of national and international investors in combination with low interest rates. As a result supply of prime real estate has decreased, causing yields to contract. Moreover these prime locations have an upward market rent potential due to higher occupier demand. As supply for prime product has become scarce, investors became more willing to move up the risk curve while seeking return. Therefore yields in secondary property markets have stabilised. For good secondary locations yields are even showing a decrease. Occupier demand for secondary property is also expected to improve due to the economic upturn as tenants will look for alternatives for higher priced prime locations. This in turn will cause market rents for secondary locations to stabilise. Capital values in high vacancy submarkets will remain repressed by low market rents, high incentives, long periods of vacancy, and bankruptcies of tenants.
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19.4. Investment demand Further to our comments under ‘Market Analysis’, we consider that this type of investment is likely to appeal to institutional investors and private investors. We anticipate keen investment demand given the fact that this property is of good design and specification.
20. Property rating
1 2 3 4 5
Location assessment x
Property assessment x
Lettability x
Saleability x
1 = poor, 2 = moderate, 3 = reasonable, 4 = good, 5 = excellent
Lettability: We consider the lettability to be good. The property has a prominent location along Orteliuslaan and has a good state of repair. The office location accommodates various renowned tenants such Deloitte, KPMG, Accenture and Bol.com. For this property we are of the opinion that a multi-tenant strategy is favourable. The existing lay-out with canteen facilities is suitable for multi-tenant use and there are other multi-tenant concepts at this location which have been successful in terms of occupancy. We consider that a period of between 6 to 12 months is a reasonable period to lease-up the property.
Saleability: We consider the saleability of the property to be reasonable. Overall the property has good building specifications and Utrecht has witnessed high investment demand, which has resulted in favourable yields in the past years. However, the property is currently fully vacant, which has a negative impact in terms of value. We consider that a period of 9 months is a reasonable period within which to negotiate completion of a sale of the property.
21. Sources For this valuation we have used the following sources:
• Technical due diligence, prepared by SGS Search on 26 June 2018 • Historical soil survey, prepared by SGS Search on 19 July 2018 • Energy certificate • Deed of transfer • Deed of ground lease • Measurement certificate, prepared by BBN Adviseurs on 9 September 2014 • www.calcasa.nl • www.mijn.kadaster.nl
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• www.planviewer.nl • www.bodemloket.nl • www.bagviewer.kadaster.nl • www.funda.nl • www.openstreetmap.org • https://onboard.dnb.com • Savills database. • Property NL transactiedatabase. • Vastgoed Exploitatiewijzer, Koëter Vastgoed Adviseurs, Vastgoed Adviseurs Online, 2017. • Taxatieboekje [Her]bouwkosten 2017, Vakmedianet, Helene Hartlief, 2016.
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D. Appendices
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Appendix I Photographs
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
Appendix II Location plan
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
Appendix III Land registry extract
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
BETREFT Utrecht T 1204
UW REFERENTIE 06505
GELEVERD OP PRODUCTIEORDERNUMMER 03-08-2018 - 11:55 S11010251789
VOLLEDIG GESIGNALEERD T/M VOLLEDIG BIJGEWERKT T/M 02-08-2018 30-07-2018
BLAD 1 van 2
Eigendomsinformatie
ALGEMEEN
Kadastrale aanduiding Utrecht T 1204 Kadastrale objectidentificatie : 028540120470000 Locaties ORTELIUSLN 101 UTRECHT Orteliuslaan 1001 3528 BE Utrecht Locatiegegevens zijn ontleend aan de Basisregistraties Adressen en Gebouwen Orteliuslaan 1003 3528 BE Utrecht Locatiegegevens zijn ontleend aan de Basisregistraties Adressen en Gebouwen Ontstaan op 17-12-2009 Kadastrale grootte 5.190 m² Grens en grootte Vastgesteld Coördinaten 134079 - 453172 Omschrijving Bedrijvigheid (kantoor) Parkeren Ontstaan uit Utrecht T 1163
AANTEKENINGEN
Publiekrechtelijke beperking Er zijn geen beperkingen bekend in de Basisregistratie Kadaster. Basisregistratie Kadaster
Publiekrechtelijke beperking Er zijn geen beperkingen bekend in de Landelijke Voorziening WKPB. Landelijke Voorziening
RECHTEN
1 Eigendom belast met Erfpacht (1.1) Soort recht Eigendom (recht van) Afkomstig uit stukken 84 UTT00/45781 84 UTT00/45786 Hyp4 5865/16 Utrecht Ingeschreven op 26-05-1988 Hyp4 3689/6 Utrecht Hyp4 1785/26 Utrecht Hyp4 2316/124 Utrecht BETREFT Utrecht T 1204
UW REFERENTIE 06505
GELEVERD OP PRODUCTIEORDERNUMMER 03-08-2018 - 11:55 S11010251789
VOLLEDIG GESIGNALEERD T/M VOLLEDIG BIJGEWERKT T/M 02-08-2018 30-07-2018
BLAD 2 van 2
Hyp4 10029/19 Utrecht Ingeschreven op 29-01-1998 Hyp4 7884/36 Utrecht Ingeschreven op 11-02-1994 Hyp4 11347/42 Utrecht Ingeschreven op 16-03-2000 Hyp4 6126/41 Utrecht Ingeschreven op 15-03-1989 Er zijn meer stukken bij dit recht Overige stukken Hyp4 13236/173 Utrecht Ingeschreven op 28-12-2004 Hyp4 8307/20 Utrecht Ingeschreven op 23-12-1994 Hyp4 10619/6 Utrecht Ingeschreven op 25-01-1999 Hyp4 10511/4 Utrecht Ingeschreven op 24-11-1998 Hyp4 1751/55 Utrecht Ingeschreven op 26-06-1963 Naam gerechtigde Gemeente Utrecht Adres Stadsplateau 1 3521 AZ UTRECHT Postadres Postbus 10080 3505 AB UTRECHT Statutaire zetel UTRECHT KvK-nummer 30280353 (Bron: Handelsregister) Voor de meest actuele naam, zetel en adres, raadpleeg het Handelsregister
1.1 Erfpacht (recht van) Afkomstig uit stuk Hyp4 13460/81 Utrecht Ingeschreven op 04-04-2006 Naam gerechtigde Stichting Anthos Real Estate Custodian Postadres Jachthavenweg 111 1081 KM AMSTERDAM Statutaire zetel AMSTERDAM KvK-nummer 33101566 (Bron: Handelsregister) Voor de meest actuele naam, zetel en adres, raadpleeg het Handelsregister
Aantekening recht Wijziging t.a.v. de erfpachtvoorwaarden en/of -canon Afkomstig uit stuk Hyp4 62254/41 Ingeschreven op 04-12-2012
De Dienst voor het kadaster en de openbare registers behoudt ten aanzien van de kadastrale gegevens zich het recht voor als bedoeld in artikel 2 lid 1 juncto artikel 6 lid 3 van de Databankenwet. Heeft u nog vragen? Neem contact op met het Klantcontactcenter. Uittreksel Kadastrale Kaart Uw referentie: 06505 1145
80 1250 Ptolemaeuslaan
984
1001-1003
Blaeulaan
1312 Blaeulaan
1204
Hondiuslaan 30-44 Janssoniuslaan 1205
41-47
1041
0 m 10 m 50 m
Deze kaart is noordgericht Schaal 1:1000 12345 Perceelnummer 25 Huisnummer Vastgestelde kadastrale grens Kadastrale gemeente UTRECHT Voorlopige kadastrale grens Sectie T Administratieve kadastrale grens Perceel 1204 Bebouwing Overige topografie Aan dit uittreksel kunnen geen betrouwbare maten worden ontleend. Voor een eensluidend uittreksel, Apeldoorn, 3 augustus 2018 De Dienst voor het kadaster en de openbare registers behoudt zich de intellectuele De bewaarder van het kadaster en de openbare registers eigendomsrechten voor, waaronder het auteursrecht en het databankenrecht.
Appendix IV Zoning plan
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
3-8-2018 Papendorp: Artikel 8 Kantoor
Plan: Papendorp Artikel 8 Kantoor Status: onherroepelijk Plantype: bestemmingsplan IMRO-idn: NL.IMRO.0344.BPPAPENDORP-0601 8.1 Bestemmingsomschrijving
De voor 'Kantoor' aangewezen gronden zijn bestemd voor:
a. kantoren, met bijbehorende congresfaciliteiten, congresruimte en opleidingsruimte, en additionele horeca; b. (kleinschalige) dienstverlening, zelfstandige congres- en vergaderfaciliteiten tot maximaal 1.500 m2, sportvoorzieningen, horeca behorende tot de categorie B t/m D van de bij deze regels behorende Lijst van Horeca-activiteiten en hotels; c. ter plaatse van de aanduiding 'gemengd': 1. detailhandel; 2. dienstverlening; 3. horeca behorend tot de categorie B t/m D van de bij deze regels behorende Lijst van Horeca- activiteiten; d. de bij de bestemming behorende voorzieningen, zoals verkeers- en groenvoorzieningen, gebouwde (ondergrondse of halfverdiept gelegen) parkeervoorzieningen, nutsvoorzieningen, water, tuinen, erven en terreinen. 8.2 Bouwregels
Binnen deze bestemming mogen bouwwerken ten dienste van deze bestemming worden gebouwd, met inachtneming van de volgende bepalingen:
8.2.1 Gebouwen
a. het bebouwingspercentage ter plaatse van de aanduiding 'maximumbebouwingspercentage' (%) mag niet worden overschreden; b. de bouwhoogte ter plaatse van de aanduiding 'maximale bouwhoogte' mag niet worden overschreden; c. een gebouwde (ondergrondse of halfverdiept gelegen) parkeergarage telt niet mee in het bebouwingspercentage, zoals bedoeld in lid 8.2.1 onder a; d. de verticale diepte van ondergrondse bouwwerken mag niet meer bedragen dan 8 meter, gemeten vanaf peil. 8.2.2 Bouwwerken, geen gebouwen zijnde
a. de bouwhoogte van bouwwerken, geen gebouwen zijnde mag niet meer dan 3 meter bedragen; b. het onder a. gestelde geldt niet voor bouwwerken, geen gebouwen zijnde ter geleiding, begeleiding en regeling van het verkeer; c. in afwijking van het gestelde onder a. mag de bouwhoogte van palen en masten niet meer dan 6 meter bedragen. 8.3 Nadere eisen
Burgemeester en wethouders kunnen nadere eisen stellen aan de plaats en afmeting van de bebouwing, ten behoeve van:
a. een samenhangend straat- en bebouwingsbeeld; b. de verkeersveiligheid; c. de milieusituatie; d. de sociale veiligheid; e. de gebruiksmogelijkheden van de aangrenzende gronden. 8.4 Specifieke gebruiksregels
Ter plaatse van de aanduiding 'gemengd' geldt dat het gezamenlijk bedrijfsvloeroppervlak ten behoeve van de functies genoemd onder 8.1 onder b niet meer mag bedragen dan 600 m².
8.5 Afwijken van de gebruiksregels
Burgemeester en wethouders kunnen afwijken van het bepaalde in artikel 8.1 onder b ten behoeve van het toestaan van zelfstandige congres- en vergaderfaciliteiten groter dan 1.500 m2, mits geen sprake is van: 1. verkeersaantrekkende activiteiten die kunnen leiden tot een nadelige beïnvloeding van de normale afwikkeling van verkeer dan wel tot een onevenredige parkeerdruk in het openbare gebied; 2. activiteiten die vermeld zijn in bijlage C of D van het Besluit milieu-effectrapportage 1994.
Lees hier meer over dit bestemmingsplan. https://www.planviewer.nl/imro/files/NL.IMRO.0344.BPPAPENDORP-0601/r_NL.IMRO.0344.BPPAPENDORP-0601_2.8.html 1/1
Appendix V Calculation
Orteliuslaan 1001 - 1003 (odd) Utrecht, the Netherlands 06508-01
VALUATION SUMMARY
Client Morgan Stanley Capitalisation Property Office Building Av. inflation (5 years) 1,78% Vacancy Address Orteliuslaan 1001 - 1003 (odd) 800.000 Discount rate corrections 7,00%
City Utrecht 600.000 Net initial yield on MR 7,50%
File number 06508 400.000 Gross value 6.155.082 Valuation date 9-8-2018 Net value 5.752.413 200.000 Lettable floor area (m²) 3.309 Net initial yield 8,89% - Gross floor area (m²) 5.320 Gross yield (gross value) 9,90% Gross yield (net value) 10,60% Income Outgoings Management Rent passing 0 Repairs Promotion Theoretical rent 609.540 Insurance Discounted cash flow Market rent 609.540 Property Tax Av. Inflation (20 years) 1,95% Av.rem.leaseterm (yrs) 0,00 Water Board MR growth for review 1,00% Sewerage Vacancy rate 100,00% Other Discount rate 7,10% Gross value 6.145.536 Outgoings Net value 5.743.492 Management 6.095 12.000.000 Net initial yield 8,91% Repairs 26.600 10.000.000 Gross yield (gross value) 9,92% Promotion 0 8.000.000 Gross yield (net value) 10,61% income Insurance 3.621 6.000.000 net value 4.000.000 Property Tax 23.209 outgoings Water Board Charges 2.321 2.000.000 Reported values - Sewerage 214 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Gross value 6.150.309 Other 0 2.000.000- Purchasing costs 7,00% Total 62.061 Net value before rounding 5.747.952 Outgoings (% of MR) 10,18% Rounding 4 8.500.000 Adjustments
Leasehold NPV ground rent 0 8.000.000 Net yield 8,90% Leasehold NPV buying off 0 Gross yield (gross value) 9,91% Overdue maintenance 0 7.500.000 Gross yield (net value) 10,60% VAT adjustments 0 Gross yield (nv) on MR 10,60% - 0 IRR 7,09% 7.000.000 Other 0 7,00% 7,25% 7,50% 7,75% 8,00% Net value 5.750.000
File name: 06508-01 © Savills Valuations Page 1 Print date: 3-9-2018 INCOME
Client Morgan Stanley Lettable floor area Office Market rent by use Office Rent by tenant
Property Office Building Storage Storage Vacancy Address Orteliuslaan 1001 - 1003 (odd) Other City Utrecht Other 1.000.000 Parking inside 500.000 File number 06508 Parking outside Valuation date 9-8-2018 -
Tenancy schedule Office Storage Other Parking inside Parking outside VAT Remaining lfa Market rent lfa Market rent lfa Market rent # Market rent # Market rent Tenant Unit Rent passing Market rent y/n Indexation Expiration lease term in m² per m² in m² per m² in m² per m² places per place places per place 1 Vacancy Orteliuslaan 1001 - 1003 - (odd) 609.540 y 9-8-2019 8-5-2024 5,75 3.287 160 22 50 - - - - 66 1.250 Total - 609.540 #DEEL/0! 3.287 525.920 22 1.120 - - - - 66 82.500
File name: 06508-01 © Savills Valuations Page 2 Print date: 3-9-2018 OUTGOINGS
Property Office Building Address Orteliuslaan 1001 - 1003 (odd) City Utrecht File number 06508 Valuation date 9-8-2018 Outgoings Management actual % of MR estimated % of MR Repairs Management - 0,00% 6.095 1,00% Promotion Repairs - 0,00% 26.600 4,36% Insurance Property Tax Promotion - 0,00% - 0,00% Water Board Insurance - 0,00% 3.621 0,59% Sewerage Property Tax - 0,00% 23.209 3,81% Other Water Board Charges - 0,00% 2.321 0,38% Sewerage - 0,00% 214 0,04% Other - 0,00% - 0,00% Total - 0,00% 62.061 10,18%
% opted for VAT Opted for VAT % of MR estimated % of MR
Opted for VAT 100,00% Not opted for VAT Not opted for VAT 0,00% Outgoing subject to VAT 32.695 5,36% VAT 21,00% 6.866 1,13% Non recoverable - 0,00%
File name: 06508-01 © Savills Valuations Page 3 Print date: 3-9-2018 ADJUSTMENTS
Client Morgan Stanley Adjustments Property Office Building 1 Address Orteliuslaan 1001 - 1003 (odd) 1 NPV ground rent City Utrecht 1 NPV buying off - File number 06508 0 Overdue maintenance - Valuation date 9-8-2018 0 - - VAT adjustments - Ground lease adjustments No Start date 3-4-2006 Expiration date leasehold period Perpetual Overdue maintenance End date leasehold Perpetual Options N.a. Overdue maintenance / sq m gfa 0 Conditions AV 1989 Gross floor area 5.320 Adjustment overdue maintenance 0 Annual ground rent 0 Inflation 1,78% VAT adjustments Discount rate 7,00% Real interest 5,12% VAT adjustment operating costs 0 Remaining period (years) n.a. VAT adjustment construction costs 0 NPV ground rent n.a. Total VAT adjustment 0
Land value / sq m gfa 0 Other adjustments Land value n.a. Annual land value growth 1,50% Discount rate 7,00% Real interest 5,42% Remaining period (years) n.a. Land value end of period n.a. NPV buying off n.a.
Total ground lease adjustment n.a. Total adjustments 0
Transfer tax freehold 6,00% Transfer tax leasehold n.a.
Filename: 06508-01 © Savills Valuations Page 4 Print date: 3-9-2018 CAPITALISATION
Property Office Building Discount rate corrections 7,00% Net initial yield 8,89% Address Orteliuslaan 1001 - 1003 (odd) Av. inflation (5 years) 1,78% Gross initial yield (von) 9,90% City Utrecht Real interest 5,12% Gross initial yield kk 10,60% File number 06508 Outgoings 10,18% Multiplier kk 9,44 Valuation date 9-8-2018 Mark.+ letting 16,00%
Remaining Net Initial Corr. Diff. Vacancy Incentives Adjustment Other Tenant Unit Rent passing Market rent Indexation Expiration lease term Yield RP and MR in months per m² lfa vacancy adjustments Gross value 1 Vacancy Orteliuslaan 1001 609.540 - 1003 (odd) 609.540 9-8-2019 8-5-2024 5,75 7,50% - 9 184 1.144.644- - 6.155.082 Gross income 609.540 609.540 #DEEL/0! 6,00 - 1.144.644- - 6.155.082
8.500.000 Sensitivity analysis NIY Net value
NIY minus 50 basispoints 7,00% 8.379.233 8.000.000 Purchasing costs 7,00% NIY minus 25 basispoints 7,25% 8.127.182 NIY in valuation 7,50% 7.891.935 7.500.000 Net value before rounding 5.752.413 NIY plus 25 basispoints 7,75% 7.671.865 Rounding 4 NIY plus 50 basispoints 8,00% 7.465.549 7.000.000 7,00% 7,25% 7,50% 7,75% 8,00%
Net value 5.750.000
File name: 06508-01 © Savills Valuations Page 5 Print date: 3-9-2018 CASH FLOW
Property Office Building Exit after 10 years Address Orteliuslaan 1001 - 1003 (odd) Discount rate 7,10% Outgoings 10,18% Gross value 6.145.536 NIY 8,91% Gross exit value 7.007.951 City Utrecht Av. Inflation (20 years) 1,95% Mark.+ letting 16,00% GIY von 9,92% Purchasing costs 7,00% File number 06508 MR growth for review 1,00% Purchasing costs 7,00% Net value 5.743.492 GIY kk 10,61% Net exit value 6.549.487 Valuation date 9-8-2018 Exit GIY kk 10,49%
Index 1,42% 1,62% 1,88% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% Period until Period until Periods Tenant Unit Rent passing Market rent Indexation Expiration indexation expiration (1 year) 1 2 3 4 5 6 7 8 9 10 1 Vacancy - 609.540 9-8-2019 8-5-2024 1,00 5,75 609.540 621.403 633.497 645.826 658.395 674.561 648.411 661.030 673.895 687.010 Gross income - 609.540 #DEEL/0! 609.540 621.403 633.497 645.826 658.395 674.561 648.411 661.030 673.895 687.010
4.500.000 Annual outgoings 62.061 63.222 64.569 66.022 67.508 69.027 70.580 72.168 73.792 75.452 Net income before vacancy 547.479 558.181 568.927 579.803 590.887 605.535 577.831 588.862 600.103 611.558 4.000.000
3.500.000 Potential vacancy 609.540 - - - - 674.561 - - - - Average vacancy period 12 - - - - 12 - - - - 3.000.000 Average chance of vacancy 100% 0% 0% 0% 0% 25% 0% 0% 0% 0% 2.500.000 Service charges vacancy 67.129 - - - - 18.439 - - - -
2.000.000 Vacancy 676.669 - - - - 187.079 - - - -
1.500.000 Marketing and letting 97.526 - - - - 26.982 - - - - 1.000.000 Improvements and incentives per m² before inflation 184 - - - - 138 - - - - Improvements and incentives per m² 186 - - - - 154 - - - - 500.000 Other expenses before inflation ------Other expenses ------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Total letting, improvements and incentives 712.969 - - - - 154.053 - - - -
Net cash flow 842.158- 558.181 568.927 579.803 590.887 264.403 577.831 588.862 600.103 611.558
File name: 06508-01 © Savills Valuations Page 6 Print date: 3-9-2018 CASH FLOW
Property Office Building Exit after 20 years Address Orteliuslaan 1001 - 1003 (odd) Discount rate 7,10% Outgoings Gross value 6.145.536 NIY 8,91% Gross exit value 10.362.570 City Utrecht Av. Inflation (20 years) 1,95% Mark.+ letting GIY von 9,92% Purchasing costs 7,00% File number 06508 MR growth for review 1,00% Purchasing costs Net value 5.743.492 GIY kk 10,61% Net exit value 9.684.645 Valuation date 9-8-2018 Exit GIY kk 8,60%
Index 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% 2,00% Period until Period until Periods Tenant Unit Rent passing Market rent Indexation Expiration indexation expiration (1 year) 11 12 13 14 15 16 17 18 19 20 1 Vacancy - 609.540 9-8-2019 8-5-2024 1,00 5,75 700.381 714.012 727.908 742.074 756.516 771.240 786.250 801.552 817.151 833.055 Gross income - 609.540 #DEEL/0! 700.381 714.012 727.908 742.074 756.516 771.240 786.250 801.552 817.151 833.055
4.500.000 Annual outgoings 77.150 78.886 80.660 82.475 84.331 86.228 88.169 90.152 92.181 94.255 Net income before vacancy 623.231 635.126 647.247 659.599 672.185 685.011 698.081 711.399 724.971 738.800 4.000.000
3.500.000 Potential vacancy 700.381 - - - - 771.240 - - - - Average vacancy period 12 - - - - 12 - - - - 3.000.000 Average chance of vacancy 25% 0% 0% 0% 0% 100% 0% 0% 0% 0% 2.500.000 Service charges vacancy 20.358 - - - - 89.906 - - - -
2.000.000 Vacancy 195.453 - - - - 861.146 - - - -
1.500.000 Marketing and letting 28.015 - - - - 123.398 - - - - 1.000.000 Improvements and incentives per m² before inflation 138 - - - - 670 - - - - Improvements and incentives per m² 169 - - - - 903 - - - - 500.000 Other expenses before inflation ------Other expenses ------1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Total letting, improvements and incentives 167.942 - - - - 3.111.886 - - - -
Net cash flow 259.837 635.126 647.247 659.599 672.185 3.288.021- 698.081 711.399 724.971 738.800
File name: 06508-01 © Savills Valuations Page 7 Print date: 3-9-2018
Savills Valuations Claude Debussylaan 48 1082 MD Amsterdam The Netherlands
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