FOR SALEINVESTMENT OPPORTUNITY

Express Engineering391 Kingsway & 398A Princesway, Team Valley Trading Estate, Gateshead

Prime Industrial Investment with RPI linked rent reviews

SAT NAV REF391 Kingsway - NE11 0EG398A Princesway - NE11 0TU

INVESTMENT SUMMARY

• Prominent manufacturing facility on Team Valley, the North East’s principal commercial estate extending to 700 acres

• Three contiguous well specified manufacturing/warehouse units totalling 5,690 sq m (61,310 sq ft)

• Fully let to Express Engineering (Gateshead) Limited on two new 15 year leases from completion, subject to 5 yearly RPI linked reviews subject to a collar and cap of 1% & 3%

• Long established tenant with a strong position in a high value engineering sector

• Strong occupational market dynamics pointing to continuing rental growth

• Annual rent of £355,000

• Heavily embedded tenant as evidenced by lease regear

• Total site area of 2.94 acres

• We have been instructed to seek offers in excess of £5,300,000 reflecting a NIY of 6.28% after deducting purchasers costs of 6.60%

NEWCASTLE

A69

A696

A1056

A70

68

A1172

Hexham

SUNDERLAND

Gateshead

TEAM VALLEY

NewcastleInternational Airport

SouthGosforth

Killingworth

KingstonPark Retail

Central Station

Manor WalksShopping & Leisure

Silverlink

Wallsend

RIVER TYNE

TYNE TUNNEL

Tynemouth

Whitley Bay

Seaton Sluice

Hospital

North Shields

South Shields

Jarrow

Gosforth

Washington

Cramlington

BLYTHMorp

eth

Otterburn

Conse

tt

Durham& South

Teesside& South

A1018

A1058

A1058

A193

A191

A191

A190

A192

A192

A1231

A184A18

4

A184

A692 A1

A1(M

)

A19

A19

A18

9

A18

9

A18

9

A19

4(M

)

A694

A69

0

Metrocentre

A1

A1

Ponteland

EnglandWales

Scotland

A1

A1(M)

M6

M1

A69

A19 A66

A1(M)

A1(M) M1

M4

M40 M11

M1

M1

M6

YORK

ABERDEEN

CARLISLENEWCASTLENEWCASTLE

MANCHESTER

LIVERPOOL SHEFFIELD

BIRMINGHAM

BRISTOL LONDON

EDINBURGH

LEEDS

GLASGOW

LOCATIONLocationTeam Valley is regarded as the North East’s principal commercial estate located approximately 2.3 miles south of Newcastle city centre. The estate is situated within Gateshead and is part of the Tyneside conurbation, the UK’s 7th largest with a population of over 775,000 people. Team Valley is bounded by the East Coast Mainline to the east, and the A1 to the west, with the recent £60m upgrade to the A1 which completed in 2016, significantly improving transport links to the estate.

The area is well served by public transport with Newcastle Central, a main station on the East Coast Mainline connecting the city to London in 2 hours and 50 minutes and Edinburgh in 1 hour 30 minutes. The Tyne and Wear metro comprises 60 stations throughout the county, and is the second largest system in the UK, behind the London underground.

SituationThe development of Team Valley began in 1935 and the estate is now one of Europe’s largest commercial areas and a leading commercial hub for the North East of England.

Comprising in excess of 7 million sq ft of accommodation over 705 acres, the estate is home to many national and international occupiers including De la Rue, Yodel, Screw Fix, Howdens, DHL, Doosan, Royal Mail, Parker Hannfin, Smiths News and Sevcon.

To support the estate’s workforce population in excess of 24,000 people, Team Valley benefits from a wide range of amenities including hotels, restaurants, supermarkets and banks. Retail World is located to the southern end of Team Valley and is one of the 20 largest retail parks in the United Kingdom, attracting occupiers such as Wren, Next, New Look, M&S Simply Food.

The site benefits from dual frontage onto both Kingsway, the estates main thoroughfare, and Princesway, another key route on the estate.

Kingsway North

Dukesway

Earlsway

Fo

urt

h A

venue

Seco

nd

Ave

nue

Fir

st A

venue

Thir

d A

venue

Seve

nth

Ave

nue

Fif

th A

venue

West

ern

Ave

nue

Six

th A

venue

Eig

th A

venue

Tenth

Ave

nue

Nin

th A

v

Ele

venth

Ave

nue

Eleventh Avenue

Marquis Way

Duke

sway

West

Dukesway

Queensway

Queensway

Princesway Princesway

East

ern

Ave

nu

e

Kingsway South

RetailWorld

Sainbury’s

Maingate

A1

To A1(M)Durham& South

A1 North& NewcastleAirport

East Coast Mainline

A6

92

Express Engineering

The property is situated 2.5 miles north east

of Newcastle city centre on Benton Park

Road (A191) in South Gosforth, which is

one of the city’s most popular and affluent

suburbs. Benton Park Road is in close

proximity to the popular residential suburbs

of Gosforth and High Heaton and is a main

arterial route between Newcastle city centre

and the commuter district of Longbenton.

The surrounding area is primarily residential

in nature with Promis identifying Gosforth

as a pocket of affluence on Newcastle’s

northern fringe. Nearby occupiers include

Majestic Wine and Sainsbury’s Local.

South Gosforth and Longbenton Metro

stations are both within 10 minutes walking

distance providing rail links to Newcastle city

centre and the rest of the North East.

SITUATION

Express Engineering Ltd

A1 North

A1 South

Kings

way

Sou

th

Prince

sway

Kings

way

Nor

th

The property comprises three modern warehouse / manufacturing units with both Factory 1 and Factory 2 interlinked and fronting onto Kingsway, and Factory 3 fronting onto Princesway.

Factory 1 comprises a large single bay industrial unit and of steel portal frame construction with cavity block and profile metal sheet clad elevations under a pitched profile metal roof. The office elevation comprises cavity blockwork walls with a combination of brick and glazed curtain wall cladding. The office accommodation features an impressive double height atrium and is well specified to benefit from gas central heating and suspended ceilings as well as WC’s, kitchen facilities and a squash court.

Factory 2 is a single steel portal frame industrial unit with block and profile sheet elevations under a pitched profile metal roof incorporating translucent panels. Internally the unit has concrete floors, suspended lighting throughout with 4.5m minimum eaves rising to 6m at the apex. There is a roller shutter door to the northern elevation, which leads into the large yard shared with Factory 1.

Factory 3 comprises a single bay industrial unit of steel portal frame construction, with part block, brick and profile sheet clad elevations, under a pitched metal roof incorporating translucent panels.

Internally, the warehouse is well specified to include concrete floors, heating and lighting throughout and has a minimum eaves height of 5.1m rising to 7.5m at the apex. The unit benefits from 17 electrically operated doors on the north, south and west elevations into the large secure yard. The offices comprise two storeys of modern accommodation fitted out to a very high specification, including suspended ceilings with integrated lighting, air conditioning and gas central heating, WC’s and kitchen facilities.

DESCRIPTION

For indicative purposes only

ACCOMMODATION

The property has been scaled from plans with check measurements taken on site and reflects the following Gross Internal Area;

Unit Accommodation sq m sq ft

391 Kingsway Warehouse 2,653.3 28,559

Ground Floor Offices 596 6,415

First Floor Offices 333 3,585

Total 3,582.3 38,559

398a Princes Way Warehouse 1,638.4 17,635

Ground Floor Offices 241.8 2,603

First Floor Offices 233.6 2,514

Total 2,113.8 22,752

5,696 61,311

Site Area The site extends to 1.19 ha (2.944 acres) and reflects a low site coverage of 43%.

Tenure Both properties are held on a long leasehold basis at a peppercorn without review. Unit 391 Kingsway is held from 25/1/1988 expiring 24/1/2113 and Unit 398a Princes Way from 29/1/1989 expiring 28/1/2114.

Tenancies The properties are let to Express Engineering (Gateshead) Limited on two co-terminus FRI leases. The newly regeared leases will run for 15 years upon completion, with five yearly RPI linked rent reviews subject to a collar and cap of 1% & 3%. From completion, the tenant will pay an annual rent of £355,000.

391 Kingsway

398a Princesway

TENURE For indicative purposes only

Express Engineering provides precision manufacturing solutions of complex components in exotic metals and works across aerospace, defence, oil and gas, marine and nuclear sectors. They have been based in the North East since inception and have occupied the subject property since 1988 and now employ over 200 highly skilled workers.

The company have expanded into global markets significantly and have spent over £9,500,000 on machinery in the last three reported accounting periods to keep pace with demand. Clients include Rolls Royce, GE, esterline, BAE and Siemens.

The company’s financial accounts for the period ending 30th September 2016 show a Turnover of £43.6m with an operating profit before exceptional items of £4.3m and Shareholder’s Funds of £17.2m. These figures reflect the group refocussing away from the declining Oil and Gas sector, including the closure of the group’s Brazilian operations at a one off exceptional cost of £13m. The groups balance sheet has subsequently been further strengthened by a refinance which reduces the interest costs, whilst providing capital to invest in expansion into high value markets.

Acc. Period Ending 30.09.2016 31.03.2015 31.03.2014

18 months 12 months 25 weeks

Turnover £43.6m £43.4m £18.2m

Operating profit before exceptional items

£4.3m £9.6m £4.9m

Pre-Tax Profit£4.3m

(£10.0m)*£9.4m £4.8m

Shareholder’s Funds £17.2m £26.6m £18.6m

TENANT’S COVENANT STRENGTH

Express Engineering (Gateshead) Limited Formerly Express Engineering (Oil & Gas) Limited

Company Number 01405214

*after exceptional items

For indicative purposes only

ACCOMMODATION

OCCUPATIONAL MARKET

Date Address Tenant Sq Ft RentRent (psf)

Lease Length

March 2017

Unit 1 Dukesway Central, Team Valley

Under Offer 26,834 £207,964 £7.75 -

March 2017

380 Princesway South, Team Valley

Pyramid Displays 16,819 £92,505 £5.50 10 Years

February 2016

392 Princesway North, Gateshead, NE11 0TU

Gate 7 LTD 8,041 £45,030 £5.60 10 Years

October 2016

Unit 12, Queens Court, Team Valley

Adept Displays 11,620 £94,122 £8.10 10 Years

July 2016Unit 14 Kingsway Interchange

Muss Media 5,018 £32,500 £6.50 5 Years

April 2016270 Queensway South, Gateshead, NE11 0SD

Silver Rock 3,251 £20,000 £6.15 3 Years

April 201615, Octavian Way, Gateshead, NE11 0HZ

Pet Supermarket LTD

7,290 £45,563 £6.25 10 Years

January 2016

Unit 7 Stirling Court, Team Valley, Gateshead, NE11 0JY

Skyline Storage 3,003 £18,100 £6.03 3 Years

December 2015

Allan House, 5 Bamburgh Court, Team Valley

The Pen Shop Limited

4,827 £34,706 £7.19 10 Years

The North East Industrial market continues to perform well with demand outweighing supply over the last 24 months.

Positive market sentiment has been highlighted through both increased activity from key regional exporters in manufacturing and engineering, and expansion in the evolving sectors of logistics and warehousing. The manufacturing and specialist engineering sectors in particular, have attracted global businesses such as Nissan, Hitachi and Caterpillar along with their respective supply chains. Nissan continues to perform very well, with their plant in Washington now recognised as Europe’s most productive plant and the UK’s largest car manufacturer, producing over 500,000 cars a year, with obvious spin offs for their supply chain.

Enduring levels of demand coupled with little speculative development in the region have had a positive effect on rents throughout the North East with this trend expected to continue. The rental tone on Team Valley ranges widely depending on location and specification typically between £5.25 psf – £6.50 psf. This level has continued to increase over the last 12 months with the most recent development on the estate at Dukesway Central achieving £7.75 psf.

INVESTMENT MARKET

The North East Investment market continues to perform strongly as investors continue to seek higher returns than those typically found in the South East. We set out below a schedule of recent transactions;

Date Address Price Yield Size (Sq ft) Review Unexpired Term

Marketing Princes Park, Team Valley Q£8,000,000 6.47% 98,123 OMV4.8 to expiry (3.7 to break)

July 2017 SPS Aerostructures, Sherwood Park, Nottingham £9,300,000 5.89% 143,578 OMV 15

July 2017 Royal Mail, Team Valley, Gateshead, NE11 0YY £16,150,000 5.22% 207,812 OMV 13.5

February 2017 SNOP UK, Rainhill Road, Washington, NE37 3HP £5,500,000 6.34% 152,507 OMV 7

May 2016 AAH Pharmaceuticals, Winwick Quay, Warrington £13,950,000 5.31% 131,960 OMV 15.5

September 2015 FPE Seals, Yarm Road, Darlington £3,075,000 5.70% 34,002 RPI 15

PROPOSAL

We have been instructed to seek offers in excess

of £5,300,000 reflecting a NIY of 6.28% after

deducting purchasers costs of 6.60%

EPCThe properties have been assessed and benefit from the following EPC ratings;391 Kingsway D(78)398a Princesway D(91)

Copies of the recommendation reports are available upon request.

VATThe property has been elected for VAT and it is anticipated the transaction will be treated as a TOGC.

Richard TurnerTel: 0191 223 5720Email: richard.turner@cushwake.com

Peter AtkinsonTel: 0191 223 5715Email: peter.atkinson@cushwake.com

Katy PaxtonTel: 0191 223 5752Email: katy.paxton@cushwake.com

Gagan JagpalTel: 0191 223 5709Email: gagan.jagpal@cushwake.com

CONTACT

Disclaimer

MISREPRESENTATION CLAUSE Cushman & Wakefield gives notice to anyone who may read these particulars as follows: 1. These particulars are prepared for the guidance only of prospective purchasers. They are intended to give a fair overall description of the property but are not intended to constitute part of an offer or contract. 2. Any information contained herein (whether in the text, plans or photographs) is given in good faith but should not be relied upon as being a statement or representation of fact. 3. Nothing in these particulars shall be deemed to be a statement that the property is in good condition or otherwise nor that any services or facilities are in good working order. 4. The photographs appearing in this brochure show only certain parts and aspects of the property at the time when the photographs were taken. Certain aspects may have changed since the photographs were taken and it should not be assumed that the property remains precisely as displayed in the photographs. Furthermore, no assumptions should be made in respect of parts of the property which are not shown in the photographs. 5. Any areas, measurements or distances referred to herein are approximate only. 6. Where there is reference in these particulars to the fact that alterations have been carried out or that a particular use is made of any part of the property this is not intended to be a statement that any necessary planning, building regulations or other consents have been obtained and these matters must be verified by any intending purchaser. 7. Descriptions of a property are inevitably subjective and the descriptions contained herein are used in good faith as an opinion and not by way of statement of fact. The particulars were prepared in October 2017

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