Prime Multi-Let Grade A Quayside Office Investment

116 QUAYSIDE, NEWCASTLE UPON TYNE NE1 3DYRotterdam House

Investment Summary

• Prime Grade A city centre office investment occupying a prominent waterfront position on Newcastle’s Quayside, one of the city’s core office locations.

• Purpose built modern office accommodation extending to 3,315.37 sq m (35,686 sq ft) over ground and four upper floors.

• Fully let to three tenants including Ramboll, Stantec and Regus at an annual rent of £696,550 reflecting a low average rent of £17.81 psf (excluding parking), which is strongly reversionary.

• All three tenants heavily embedded in the building, with both Stantec and Ramboll not exercising recent break clauses and Regus having been in occupation since 2000.

• Good rental growth in the market with £21.50 plus parking, achieved in Quayside House and £23.50 at Central Square South

• WAULT of 5.92 years to expiry

• Excellent parking provision with 122 spaces, a ratio of 1:293 sq ft.

• We have been instructed to seek offers in excess of £9,500,000 reflecting a NIY of 6.87% after purchasers costs of 6.69%. A purchase at this price reflects a capital value of only £266 per sq ft.

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Newcastle upon Tyne is the commercial and administrative capital of the North East with a population of approximately 280,000 people [census 2011]. The city forms part of the wider Tyneside conurbation with a total population in the region of 1.1 million people, making it the 7th largest in the UK. Newcastle is the largest retailing, leisure and office centre in the North East and has an international draw as a business, education and tourism centre. Major occupiers in the city include Sage Group, NPower, Barclays Bank, BSkyB and Proctor & Gamble. The city is also a major public sector hub, not just for local and regional government, but also for national operations, most notably the Department for Work and Pensions and HM Revenue & Customs.

The city is home to two leading Universities, Newcastle and Northumbria, which attract in excess of 55,000 students, from both the UK and 136 countries abroad. Newcastle University is a member of the prestigious Russell Group, comprising the leading 24 Universities in the country.

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RoadLocated approximately 286 miles north of London and 105 miles south of Edinburgh, the city is well connected to the wider road network, with the A1 approximately 2 miles south west and the A19, 7 miles to the east. The Quayside itself is serviced by the A186 City Road, which connects this area to the rest of the city centre and the A167 (M) Central Motorway. This provides rapid transport links to the A1(M) and the rest of the North East region.

RailNewcastle Central Station is a major transport hub and key stop on the East Coast railway line. The city has direct services to London Kings Cross and Edinburgh, with journey times of less than 2 hours and 40 minutes and 1 hour 30 minutes respectively.

Newcastle Central is also the main interchange with the Tyne & Wear Metro, the rail network which runs throughout Tyneside. The network supports 60 stations throughout Tyne and Wear extending as far as Newcastle Airport, 6 miles to the North West and Sunderland to the south east and is the second largest system in the UK behind the London Underground.

AirNewcastle International Airport is situated 7 miles to the north west of the city centre and serves in excess of 4.46m passengers annually, to 74 direct destinations globally. Flights are provided via 13 scheduled airlines, including Air France, British Airways, Flybe, Easyjet and Emirates. Newcastle International Airport is one of the leading regional airports and benefits from regular flights to London with a flight time of less than one hour.

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Rotterdam House is well positioned within the city centre and has excellent access to both the regional road network and public transport links.

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Rotterdam House

Situation

Rotterdam House occupies a prominent waterfront location on Newcastle’s Quayside. The area was developed from the 1990's as office occupiers sought larger, more modern floor plates outside the traditional office core of Grey Street and Pilgrim Street. The Quayside now offers an attractive, landscaped working environment, better car parking provision than the traditional CBD and a good range of leisure facilities including hotels, restaurants and bars.

The property occupies a very prominent position with broad views of Newcastle’s iconic bridgescape and the Baltic Centre for Contemporary Art and the Sage Music Venue. Surrounding leisure occupiers include The Malmaison Hotel, Pitcher & Piano, Gusto, Starbucks and Las Iguanas. Office occupiers located on the Quayside include Knight Frank LLP, Womble Bond Dickinson LLP, KPMG LLP, Regus, The Northumberland Estates and NEP&I.

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1 Quayside2 Barclays3 Mal Maison4 Pitcher & Piano5 NEP&I6 Millennium Bridge

7 Baltic Centre for Contemporary Art8 Baltic Place9 Law Courts10 The Sage Music Centre11 Trinity Gardens12 Central Motorway

13 Tyne Bridge14 Grey Street15 Northumbria University16 Newcastle Civic Centre17 Northumberland Street18 Newcastle University

19 Eldon Square20 Hilton Hotel21 Copthorne Hotel22 Central Square23 Central Square South24 Stephenson Quarter

- The Rocket/Crowne Plaza

25 Central Station26 Citygate27 Wellbar Central28 St James' Park29 Newcastle Science

Central Development

Investment and Development

Science CentralA 24 acre landmark development for science and business. Legal and General Capital have been brought on as an investment partner with an initial investment of £65 million into the site creating 2,000 jobs. Planning has already been sought and approved for two Grade A office buildings, the first of which will start construction in Q4 2018 and will provide 120,000 sq ft of office accommodation, with building B delivering 100,000 sq ft.

Stephenson Quarter An extensive 11 acre site in the heart of Newcastle City Centre, phase one completed in Q1 2016 comprising the Crowne Plaza Hotel, The Rocket, a 35,000 sq ft grade A office building and a 24 hour 360 space multi storey car park. Phase 2 is currently under construction and includes the UTC (the North East Futures University Technical College) with plans to deliver a second 50,000 sq ft Grade A office building. Overall the regeneration scheme is valued at £200m.

Gateshead QuaysA 9.49 acre site on the southern bank of the River Tyne, in between the iconic Sage Gateshead and the Baltic Centre for Contemporary Art and fronting onto the Millennium Bridge. The site is earmarked for mixed-use development with conferencing, exhibition and leisure uses being prioritised amongst office, residential and ancillary retail use and is being brought forward by Ask Developments and Gateshead Council.

East Pilgrim StreetThe East Pilgrim Street development site is mostly owned by the Reuben brothers, who have been working closely with Newcastle City Council in creating a development framework for the prime site. The site is split into two blocks, with demolition already underway on the northern block, which has been earmarked for retail-led development. The southern block has been earmarked for residential, leisure and office uses.

Newcastle has seen extensive regional and inward investment in recent years, delivering a number of significant schemes throughout the city and the surrounding Quayside.

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Description

Rotterdam House comprises a five storey Grade A office building constructed in 2000 to the following high specification;

• Open regular floorplates with extensive floor to ceiling glazing, giving excellent natural light and fantastic views of Newcastle’s iconic bridgescape

• Raised access floors (150 mm void)

• Air conditioning units throughout

• Suspended ceilings incorporating fluorescent or LED lighting

• Male and female w/c facilities on each floor.

• Shower facilities on each floor

• 2 X 10 person passenger lifts

Stantec replaced all lights throughout their accommodation with LED fittings as part of their fit out in 2015 and Regus are undertaking a rolling replacement of lighting to LEDs.

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Ground Floor Plan Upper Floor Plan

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Tenancy11

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The property is fully let to three tenants in accordance with the following tenancy schedule.

TenureThe property is held freehold.

122 spaces are held in the adjacent St Ann’s Car Park on a 999 year lease commencing 26th October 1999 from East Quayside Management Limited at a peppercorn rent.

Service ChargeAn estate charge is payable for the upkeep, maintenance and security of the wider Quayside estate which is fully recoverable from the tenants. Full building and estate service charge information is available upon request.

Accommodation TenantArea Parking

Spaces Rent Rent per Sq Ft (Excl. parking)

LeaseRent Review Comments

Sq M Sq Ft Start Expiry

Ground Floor Ramboll UK Limited 526.0 5662 - £102,095 £18.03 29/05/2015 28/05/2020 -Excluded from L&T 1954 act. May 2018 break notice elapsed. Service charge cap of £35,004 per annum. Cap excludes utilities.

First Floor Stantec UK Limited 671.0 7223 25 £138,955 £17.50 01/07/2015 30/06/2020 -

Option to determine not exercised therefore principal rent reduces to £63,227.50 from 20/06/2018 to 29/06/2019 (inclusive) plus the 25 parking spaces demised in the lease at a rent of £500 per space, which is payable in addition to the principal rent. This is to be topped up by the landlord to the full rent of £138,995. June 2018 break right lapsed. Service Charge cap of £46,824.48 reviewed annually in line with RPI subject to a cap of 3%. Service charge cap excludes utilities.

2nd, 3rd & 4th Floor

Newcastle Quayside Centre Limited 2118.3 22801 77 £445,500 £17.85 27/10/2000 26/10/2025 28/10/2020

Lease includes 77 parking spaces at St Ann’s car park. Tenant in occupation since 2000. Regus PLC guarantee of six months rent.

Car Parking Stantec UK Limited - 5 £2,500 - 01/07/2015 30/06/2020 - Excluded from L&T 1954 Act

Car Parking Stantec UK Limited - 5 £2,500 - 27/07/2015 30/06/2020 - Excluded from L&T 1954 Act

Car ParkingThe North of England

Protecting and Indemnity Association Limited

- 10 £5,000 - 27/05/2016 26/02/2021 - Excluded from L&T 1954 Act. 6 month rolling mutual break. Significant neighbouring occupier

Total   3,315.3 35,686 122 £696,550          

Tenants’ Covenant Strength

31/12/2016 (000’s) 01/01/2016 (000’s) 02/01/2015 (000’s)

Turnover £110,671 £103,963 £92,920

Pre tax Profit £7,941 £13,041 £6,720

Net Assets £32,181 £39,878 £29,246

31/12/2016 (000’s) 31/12/2015 (000’s) 02/01/2015 (000’s)

Turnover £1,079 £1,194 £1,443

Pre tax Profit (£352k) (£163k) (£43k)

Net Assets (£1,154) (£802k) (£639k)

31/12/2016 (000’s) 31/12/2015 (000’s) 31/12/2014 (000’s)

Turnover £75,362 £75,642 £75,080

Pre tax Profit (£1,507) (£8,321) (£6,401)

Net Assets £22,054 £23,211 £15,362

Stantec UK Limited (Formerly MWH UK Ltd)Company Number 1188070

Stantec UK Limited is a global company and world class market leader specialising in solving complex infrastructure and environmental challenges for water and natural resources. In 2016, the company was bought by global engineering company Stantec Inc and today the company operates in 35 countries employing over 22,000 people. In the UK, Stantec UK Limited employ 900 people from 7 UK offices.

Newcastle Quayside Centre Limited Company Number 6996211

Regus is the world’s largest provider of flexible workspace solutions and provides office space, meeting rooms and virtual offices in over 3,000 locations in 900 cities across 120 countries. Regus was founded in Brussels, Belgium in 1989 and is now headquartered in Luxembourg. The company provides a range of office formats allowing flexibility for all users, at different price points.

Ramboll UK Limited Company Number 3659970

Ramboll is a leading engineering, design and consultancy company providing multidisciplinary solutions from engineering design of buildings and infrastructure to the management of precious resources. Ramboll was founded in 1945 as Ramboll & Hannemann in Denmark. The company has now expanded to become an international corporation employing 13,000 people worldwide in 35 countries from 300 offices.

Further information is available at: https://www.stantec.com/en Further information is available at: https://www.regus.co.uk

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Further information is available at: http://www.ramboll.co.uk/

Newcastle Office Market

SupplyThe supply of new office space has been highly restricted and Newcastle city centre now has in the region of 161,795 sq ft of Grade A stock remaining, which reflects just 1.46 years supply, based on the last 3 year average take-up levels. Despite no new buildings coming to the market, 2017 saw two refurbished Grade A buildings return at Central Square South and Earl Grey House. Central Square South is quoting £25 per sq ft, the highest quoting rent in the City Centre.

Supply PipelineThe market has seen no new stock delivered since The Rocket and the Live Works in 2016, both of which let within three and six months of completion respectively. The next new development in what is a highly restricted pipeline is L&G’s Science Central development, with phase 1 due to complete in 2019 delivering 120,000 sq ft to the market. Two further buildings have been granted planning permission, Phase 2 at Science Central will be delivered by L&G extending to 100,000 sq ft, the second is the Phoenix Building at the Stephenson Quarter, which will deliver 50,000 sq ft. Both buildings are not expected to be completed until late 2021 at the earliest.

Take upTake up has been supressed by the lack of stock in the market. The last new space delivered was in 2016, when The Rocket and Live Works both let in their entirety within 3 and 6 months of completion respectively.

88% of 2016’s transactions and 84% of transactions in 2017 were at or below 8,000 sq ft, fitting well with the offering of floorplates at Rotterdam House.

Rental TonePrime headline rents in Newcastle are £23 per sq ft for quality core stock and are well established, with the market ready to take the next step. On the Quayside, a devaluation of the 2015 lease renewal to Ward Hadaway gives £19.34 psf for Keel Row House which does not have river frontage and £21.18 psf for Sandgate House, which does, excluding car parking at £500 per space. More recently, Quayside House has seen two lettings at £21.50, including 6,950 sq ft to Norton Rose Fulbright.

Building Locality Availability (sq. ft.) Quoting Rent (psf)

Wellbar Central Gallowgate 5,853 £24.00

Central Square Stephenson Quarter 7,400 £18.00 (Assignment)

Time Central Gallowgate 13,039 (4,851 U/O) £20.00 - £21.00

Trinity Gardens Quayside 37,109 £22.00

Central Square South Stephenson Quarter 38,424 £25.00

No 1 St James’ Gate St James’ Boulevard 5,500 £18.00 - £20.00

Stockbridge House Quayside 28,698 £20.00

Lloyds Court Grey Street 7,410 £19.00

St Nicholas Building Grainger Town 6,017 £19.50

Earl Grey House Grey Street 12,345 £21.50

Total 161,795

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Newcastle Investment MarketWe set out a schedule of recent comparable office investment transaction for Newcastle and competing regional cities.

EPCBoth the EPC and recommendation report are available upon request.

VATThe property has been elected for VAT and it therefore VAT will be payable on the purchase price. It is envisaged the sale will be treated as a Transfer of a going concern (TOGC).

Property Date Price NIY Comments

Keel Row House, Quayside Sept 17 £8.855m 5.57% Landmark Quayside building let to Ward Hadaway with 13.5 years

remaining with RPI linked reviews.

No 2. St James’ Gate July 17 £20m 7.92%

Fringe Grade A building let to 5 tenants including UBS, Serco, National Lottery and Charities Board. WAULT of 5.8 years to expiry and 4 years to break. Total passing rent of £1,690,694 per annum. Sale included 3 additional retail units.

Sandgate House, Quayside, Newcastle Dec 16 £10.75m 5.88% New 15 year lease to Ward Hadaway Solicitors off a passing rent

of £675,000 per annum.

Quayside House, Quayside, Newcastle July 16 £11.25m 6.90%

Purchased off market. Let to KPMG, Pantheon Macroeconomics, Arthur J Gallagher & Clydesdale Bank with a passing rent of £535,087 per annum.

Citygate 2, Gallowgate, Newcastle Jan 16 £19.25m 6.47% Purchased off market. Tenants included Ernst & Young & Grainger

PLC. Total rental income of £1,345,884 per annum.

Earl Grey House, Grey Street, Newcastle Jan 16 £11.9m 7.60%

The property is let to 10 tenants including established names such as Svenska Handlesbanken, Costa Coffee, Rathbone Brothers Plc and Grant Thornton UK LLP. The total passing rent is £956,639 per annum with a WAULT of 13.86 years to break and 15.73 years to expiry. 30% vacant.

Wellbar Central, Gallowgate, Newcastle Dec 15 £40.075m 6.04%

Multi-let with total passing rent of £2,561,242 and a WAULT of 7 years to expiry, Two retail units on ground floor, one let to Greggs, one vacant. Fixed rental uplift on Sky income in July 2016.

Central Square, Forth Street, Newcastle Dec 15 £21.580m 6.42%

Fully let to 9 tenants with WAULT to lease expiry 8.8 years and to break 8.2 years. Total passing rent is £1,446,126, transacted above asking.

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EAST QUAYSIDE, NEWCASTLE UPON TYNE NE1 XXX

Keel Row House

For further informationRichard Turner+44(0)191 223 5720richard.turner@cushwake.com

Peter Atkinson+44(0)191 223 5715peter.atkinson@cushwake.com

Katy Paxton+44(0)191 223 5752katy.paxton@cushwake.com

Gagan Jagpal+44(0)191 223 5709gagan.jagpal@cushwake.com

Cushman & Wakefield Debenham Tie Leung Limited ("C&W") 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 only and do not constitute any part of an offer or contract. 2. Any information contained in these

particulars (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 or that the property is in good condition or otherwise nor that any services or facilities are in good working order. 3. The photographs appearing in these particulars 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. Any areas, measurements or distances referred to herein are approximate only. 4. 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. 5. No person in the employment of C&W has any authority to make or give any representation or warranty whatsoever in relation to this property. 6. This property is offered subject to contract and unless otherwise stated all rents are quoted exclusive of VAT. 7. Unless otherwise stated, no investigations have been made by or on behalf of C&W regarding

pollution, or potential land, air or water contamination. Interested parties are advised to carry out their own investigations as required. Particulars prepared January 2018.

Designed & produced by www.creativestreakdesign.co.uk ref: 1205

ProposalWe have been instructed to seek offers in excess of £9,500,000 for our clients freehold intertest reflecting an attractive NIY of 6.87% after deducting purchaser’s costs of 6.69%. A purchase at this level reflects a capital value of £266 per sq ft.

Rotterdam House