rics valuation professional standards january 2014, · arazim investments 7 menachem begin st....

30 Warwick Street London W1B 5NH

tel +44 (0)20 7493 4933 fax +44 (0) 20 74087 5555

www.joneslanglasalle.co.uk

21 March 2016

Arazim Investments 7 Menachem Begin st. Ramat-Gen Israel Dear Sirs

CAPELLA PORTFOLIO

In accordance with instructions, we have valued for balance sheet purposes the freehold and long

leasehold interests in the 6 properties known as the ‘Capella Portfolio’, as identified in the attached

schedule, as at 31 December 2015.

1 The properties have been valued in accordance with the RICS Valuation – Professional

Standards January 2014, on the basis of Market Value by suitably qualified external valuers.

2 Market Value means the estimated amount for which a property should exchange on the

date of valuation between a willing buyer and a willing seller in an arms length transaction

after proper marketing wherein the parties had each acted knowledgeably, prudently and

without compulsion.

3 (a) Third parties have provided us with such information as details of tenure, tenancies,

and the like, including the current net income.

(b) We have previously undertaken inspections of the properties during May 2009 and

have subsequently reinspected all of the properties externally for the purpose of this

valuation. Measurements of the properties were taken in 2009 in accordance with

the RICS Code of Measuring Practice and we understand there to have been no

material change to the properties that would affect our investment values. You

have confirmed that all units are still occupied by the tenants.

(c) Our Valuation excludes any expenses which would be incurred on a realisation and

also any liabilities to tax, including Capital Gains and Development Land Taxes.

4 (a) We were not instructed to carry out a structural survey for the purpose of this

valuation and have assumed there to be no structural defects within the properties.

We have assumed that no known deleterious materials have been utilised in the

construction of any of the properties.

2

(b) No soil tests have been carried out and we cannot offer any opinion as to the

suitability of any site for existing or proposed developments, nor the condition of, or

potential liability for embankments or retaining walls.

(c) No specialist tests have been carried out on any of the services systems and for the

purpose of this valuation we have assumed that all are in reasonable working order

and in compliance with any relevant statutory or by-law regulations.

(d) No allowance has been made in our valuation in respect of rights, obligations or

liabilities arising under the Defective Premises Act 1972.

(e) We have not seen any Contaminative Uses Reports on the properties and have

therefore assumed there are no adverse factors which would materially affect the

valuation. Copies of Phase 1 and Phase 2 Environmental Assessments

undertaken by Waterman Environmental in 2007 were made available at the time of

acquisition and these generally identified the sites as being of low to medium risk,

as would be expected for properties of this age and use.

5 We have made no written town planning enquiries in respect of any property nor have we

effected Official Searches and for the purpose of this valuation we have assumed that full

planning consent exists for the existing development and present uses.

6 The properties have been valued by qualified valuers of JLL and the valuation has been

overseen by J P Asquith FRICS.

Having regard to the foregoing we are of the opinion that the Market Value of the portfolio of freehold

and long leasehold interests in the various investment properties identified in the attached schedule,

with the benefit of the tenancies as advised producing an estimated current net income of

£4,085,174 p.a. is £34,760,000 (Thirty Four Million Seven Hundred and Sixty Thousand

Pounds) as at 31 December 2015. The Market Value reflects normal purchasers’ costs of Stamp

Duty, legal and solicitors fees, totalling approximately 5.8% of Value

We have attached summary sheets on each of the properties including current photographs,

together with a summary of the valuation methodology and our understanding of the covenant status

of the tenants.

This Valuation Certificate is for the use only of the party to whom it is addressed and no responsibility

is accepted to any third party for the whole or any part of its contents, except the inclusion and

attachment of this valuation to the 2015 annual reports of Arazim Investments Ltd.

Neither the whole, nor any part of this Valuation Certificate, nor any reference thereto may be

included in any published document, circular or statement, nor published in any way without our

written approval of the form and context in which it is to appear.

3

Jones Lang LaSalle gives its consent that the valuation be used in the financial reports of Arazim

Investments Ltd.

Yours faithfully

J.P.ASQUITH FRICS

Director

Valuation Advisory

Jones Lang LaSalle Ltd

CAPELLA PORTFOLIO

Summary of Individual Market Values

Address Tenure Tenant Rental Income Market Value

Gross Net

Palethorpes Pork Farms Ltd Market Drayton TF9 1QS

Freehold Pork Farms Ltd £653,668 £653,668 £7,060,000

Pork Farms Ltd Queens Drive Nottingham NG2 1LU

Long Leasehold Ground Rent - £95,000 pa

Pork Farms Ltd £822,954 £727,954 £5,980,000

Dorset Foods Pork Farms Ltd Shaftesbury SP7 8PL


Pork Farms Ltd £197,707 £167,803 £1,440,000

Riverside Bakery Crossgate Drive Queens Drive Industrial Estate Nottingham NG2 1LS


Pork Farms Ltd £647,489 £468,479 £3,850,000

Park Cakes Ltd Oldham OL8 2ND

Freehold Park Cakes Ltd £1,514,927 £1,514,927 £11,460,000

Park Cakes Ltd Bolton BL3 4DY

Freehold Park Cakes Ltd £552,343 £552,343 £4,970,000

TOTAL

£4,389,088 £4,085,174 £34,760,000

APPENDIX A

COMMENTARY ON VALUATION APPROACH AND COVENANT STATUS OF

TENANTS

The properties have been valued on an investment comparable basis whereby we would have

regard to the prices and initial yields paid in the market for investments with similar lease structures

and adjusted these for the tenure, perceived strengths of the tenants’ covenants and the nature of

the properties.

All the properties have the benefit of leases for 20 year terms from 14 June 2007 with annual RPI

uplifts capped and collared at 2 and 3%.

Whilst the properties have the benefit of lease structures which would be attractive to the investment

market the age and nature of the properties is such that investors and funding sources would have

particular regard to the covenant status of the tenants and relettability of the units. Due to the annual

rental uplifts the properties have become over-rented and inevitably the unexpired term is

decreasing. Furthermore three of the properties are held leasehold with high gearings and these

would be increasingly unattractive in the investment market, due to their shortening unexpired terms.

In addition to considering the initial yields, for properties which are secondary in nature and either

with short leases or (as is the case with the subjects) considerably over-rented, investors will take a

“sense check” by comparing the investment value with a figure derived by adding the vacant

possession value to a maximum of three or four years rental income. In the case of the subjects,

where the vacant possession values are low, the investment values reported are generally slightly

higher than those derived from the “vacant possession plus rent” calculations.

We have obtained the following information from Creditsafe in relation to the two tenants, Park

Cakes Limited and Pork Farms Limited, both of whom were incorporated in November 2006 and

were acquired by Vision Capital soon afterwards.

Park Cakes Limited

Year ending Pretax Profit / (loss)

£,000

Turnover £,000 Shareholder Funds

£,000

Credit Score (out

of 100)

28/03/2015 (12,304) 141,316 (7,647) 39

29/03/2014 (3,044) 112,245 (26,312) 46

31/03/2013 (414) 116,854 (23,268) 43

We are advised that the loss recorded by Park Cakes last year derives from exceptional items only, relating to additional new

products launched in the year as a result from the new agreement with M&S. We would note that the gross profit increased

from £33.4m in the y/e March 2014 to £39.78m in the y/e March 2015.

2

Pork Farms Limited

Year ending Pretax Profit / (loss)

£,000

Turnover £,000 Shareholder funds

£,000

Credit Score (out

of 100)

28/03/2015 53,762 158,427 (40,379) 68

29/03/2014 (12,248) 152,581 (107,060) 55

30/03/2013 (12,780) 152,128 (92,302) 43

We understand that Addo Food Group will be the group’s new identity as it pursues further growth following the acquisition of

the chilled savoury pastry business of Kerry Foods in 2014, which added sites in Poole Bakery, Dorset, and Spalding Bakery,

Lincolnshire, to the group.

Both companies are within a sector (manufacture of food products) which remains competitive but

should always have a potential market. The ultimate global holding companies are Eliot

(Luxembourg), SARL (Luxembourg) and Eliot Luxembourg Holdco SARL (Luxembourg),

respectively.

During the last year there have been more examples of secondary industrial investments having

been sold, however the preference is for good quality covenants and assets which are not too over-

rented. Furthermore the yields being paid have invariably been in excess of 10% unless the asset

has a development angle. We would particularly note the sale of the Stephenson Portfolio which

comprised 14 industrial properties of similar age to the Capella portfolio, mainly located in the north

of England. The majority of the properties were over 100,000 sq ft in size and single let with an

average of about 8 years to lease expiries and the apportioned yields ranged from 8% to 16%, with

an overall initial yield of about 11%.

As a reflection of our perception of the market’s interpretation of the tenants’ covenant status as

noted above, as well as the property specific factors such as location, age, tenure, future

occupational demand and development potential as noted in the following property summaries, the

respective yields used in arriving at our valuations are as follows:-

Market Drayton 8.75%

Bolton 10.5%

Oldham 12.5%

Shaftesbury 11%

Pork Farms, Nottingham 11.5%

Riverside Bakery, Nottingham 11.5%

3

APPENDIX B

PROPERTY SUMMARY SHEETS

4

PORK FARMS LTD, MARKET DRAYTON, TF9 1QS

Material changes since 2015

Since our previous inspection there does not appear to have been any significant structural

alterations to the subject property, significant refurbishment having been undertaken in the early

2000’s. We do not believe these alterations would have a significant impact on the overall value.

In respect of the local area, there does not appear to have been any significant new residential or

commercial development, despite it being previously thought that a residential development scheme

could commence in relatively close proximity to the subject property.

Part of the site remains undeveloped landscaping.

5

Property specific valuation considerations

Market Drayton is considered a secondary industrial location, with occupiers in the area

predominantly characterised by a mix of local and regional tenants. The subject property, a

production unit / warehouse of piecemeal construction, would be considered large for the local

market, and, as such, we would anticipate a substantial letting void of 12-24 months should the

property be exposed to the market. Furthermore, due to the piecemeal layout, we do not believe the

property would subdivide into smaller units, more suited to the local market. Accordingly,

redevelopment of the site may be a long term option. The property occupies a site of some 6.34

hectares (15.7 acres) and therefore has a low site cover of only 26%. Consequently this site has

greater potential in this respect than the other properties within the portfolio.

6

QUEENS DRIVE, NOTTINGHAM, NG2 1LU

Material changes since February 2015

Since our previous inspection and from our external re-inspection of the property there do not appear to

have been any major demolitions, structural alterations or additions to the subject property, which would

have either a beneficial or onerous effect upon value.

The Queens Drive Industrial Estate remains an established and popular industrial location located about a

mile south of Nottingham City Centre. The subject property is at the front of the estate and also fronts

the A453 Queens Drive, one of the main arterial routes to the south of Nottingham City Centre. The

Queens Drive Industrial Estate is flanked to the north by the more modern NG2 Business Park and to the

south by the Riverside Business and Retail Park which is also a mature fully built out scheme.

7


The property occupies an irregular shaped site extending to some 3.09 hectares (7.64 acres). It is a

prominent site at the front of the Queens Drive Industrial Estate accommodating a sizeable food

production facility with ancillary office accommodation dating from the 1970s and subsequently

extended and adapted. The facility is predominantly a single-storey food production building with a two-

storey office component to the front.

Due to a combination of the size of the subject facility, its age and specification we believe there would

be limited occupational demand for it at the current time should it be vacant. There may potentially be

interest in it from other food production operators but for alternative industrial uses, whether it be

production or ambient warehousing, we believe demand at the current time would be modest at best.

The configuration of the property does not allow for easy breakup should a multi-occupational scenario

be considered and, in any event, we consider that the resultant space from sub-division would be likely to

be let for relatively short term leases and require a high level of ‘hands on’ management.

As a result we consider the property, which is a large facility in the context of its physical locality where

typical unit sizes are 10,000 – 30,000 sq ft, would be best disposed of as a single entity to occupiers

within the same use sector with a longer term likelihood that the site, which is well located, is

redeveloped. We do not, however, see this occurring in the short-medium term and envisage the current

building having a useful economic life of at least a further 15 years.

The property is held on a ground lease with approximately 54 years unexpired, and although the reviews

are infrequent the ground rent is not insignificant at £95,000 per annum and the short unexpired term

would render redevelopment difficult to justify.

8

RIVERSIDE BAKERY, CROSSGATE DRIVE, QUEENS DRIVE INDUSTRIAL ESTATE,

NOTTINGHAM, NG2 1LS

Material changes since February 2015

Since our previous inspection and from our external re-inspection of the property we noted one

reasonably substantial extension into the yard area which has been completed, presumably as a despatch

facility. Otherwise there have been no major demolitions, structural alterations or additions to the

subject property, which would have either a beneficial or onerous effect upon value.

The Queens Drive Industrial Estate remains an established and popular industrial location located about a

mile south of Nottingham City Centre. The subject property fronts the A453 Queens Drive at the

entrance to the Estate and is flanked to the north by the more modern NG2 Business Park, which is now

reaching maturity. To the south is the Riverside Business and Retail Park which is also a mature fully built

out scheme.

9


The property occupies a somewhat irregular but roughly square shaped site extending to some 3.37

hectares (8.35 acres). It is a prominent site at the front of the Queens Drive Industrial Estate

accommodating a sizeable food production facility with ancillary office accommodation dating from the

early 1980s and subsequently extended in the mid-1980s and late 1990s. The facility is predominantly a

single-storey food production building with a two-storey office component to the south west. This is a

large facility in the context of its physical locality where typical unit sizes are 10,000 – 30,000 sq ft.

Due to a combination of factors including the size of the subject facility, its age and specification we

believe there would be limited occupational demand for it at the current time should it be vacant. There

may potentially be interest in it from other food production operators but for alternative industrial uses,

whether it be production or ambient warehousing, we believe demand at the current time would be

modest.

The configuration of the property does not allow for easy breakup should a multi-occupational scenario

be considered and, in any event, we consider that the resultant space from sub-division would be likely to

be let for relatively short term leases and a high level of ‘hands on’ management. As a result we consider

the property would be best disposed of as a single entity to occupiers within the same use sector with a

longer term likelihood that the site, which is well located, is redeveloped. We do not, however, see this

occurring in the short-medium term and envisage the current building having a useful economic life of at

least a further 15 years.

The property is held on two ground leases with approximately 60 years unexpired and a highly geared

ground rent with a pay away currently at £179,479.21 per annum.

10

DORSET FOODS, PORK FARMS LTD, SHAFTESBURY, SP7 8PL

Material changes

There does not appear to have been any material changes to the property since our precious

inspection,

The subject property is situated on Longmead Industrial Estate, predominantly comprising a mix of

local companies, and is located on the north eastern edge of the town centre, accessed directly off

the A350. Surrounding land uses are predominantly commercial, although Units 30 & 32 are

bordered by residential on the northern boundary and there have been no discernible changes since

2009. The property comprises four units; Units 6 & 7 and 30 & 32. Units 6 & 7 which have been

amalgamated and are located on the north side of Longmead Road whilst Units 30 & 32 are located

on the south side of Longmead Road, which cuts directly through the Estate.


Pork Farms is one of the biggest employers in Shaftesbury. The other commercial area within

Shaftesbury is Wincombe Business Park, which is slightly further north of the town centre.

11

The subject property occupies an irregular shaped site, with an approximate site area of 0.76 ha

(1.87 acres), and a site cover of 57%, providing a production and warehouse facility.

Whilst the buildings have been amalgamated and extended there is no doubt that a modern

equivalent would provide a more efficient facility. Due to a combination of the size of the subject

facility, its age and specification we believe there would be limited occupational demand for it at the

current time should it be vacant. There may potentially be interest in it from other food production

operators but for alternative industrial uses, whether it be production or ambient warehousing, we

believe demand at the current time would be limited. The configuration of the property would allow

for easy breakup should a multi-occupational scenario be considered but, in any event, we consider

that the resultant space from sub-division would be likely to be let for relatively short term leases. As

a result we consider the property to be best disposed of as a single entity to occupiers within the

same use sector.

The property is held leasehold but only for a further 75 years and the recent rent review resulted in

an increase in the ground rent by 73% to a figure equivalent to 15% of the passing rent.

12

PARK CAKES LIMITED, BELLA STREET, BOLTON, BL3 4DY


The subject property is situated just over 1 mile to the south west of Bolton town centre on Bella

Street at its junction with the A579 St Helens Road. The A579 links Bolton town centre and junctions

4 and 5 of the M61 via the A6 approximately 1.5 miles to the south and south west of the property

respectively. As such the surrounding area is very mixed in character, typical of suburban areas

surrounding arterial routes. There have been no discernable changes with the subject property still

dominating the area and being exceptional in both its size and use. Other uses in the area include

industrial, predominantly motor related, retail in both a parade of local shops and a small format

Asda supermarket, multi storey warehousing, an Islamist health centre and meeting hall and

residential predominantly in Victorian terraces.


The subject property occupies an irregular site of some 1.632 hectares (4.033 acres) and provides a

production and distribution facility with offices, extending in total to approximately 11,337 m² (122,036

13

ft²). We understand that the buildings were constructed between 1992 and 1996 replacing a

previous manufacturing facility and are of steel portal frame construction with metal sheet clad

elevations with the three storey office building at the junction of Bella Street comprising brick

elevations beneath a flat roof. We have been advised that a significant amount of new machinery

has been installed within the property and this gives confidence as to the future viability of the

premises. This view is further supported by the presence of banners outside the unit which state

“recruiting now”.

There are two entrances from Bella Street but the property has restricted loading access via a single

dock level loading door to the north western elevation and three level access loading doors towards

the centre of the Bella Street elevation. Therefore whilst the current use of the property has evolved

within the site there is no doubt that a modern equivalent would be developed more efficiently. There

would be limited demand for the facility due to its size, bespoke nature and poor loading and hence

any demand for the premises from another occupier either for the same or alternative use is unlikely.

A break-up of the buildings might be viable although only with a loss of floorspace and the expense

of redistributing services. Even then the demand for the resultant space will only be of a local nature

with low rents and short leases. The residual value of the site is therefore likely to be based on an

employment use or a residential led scheme, subject to planning, with ancillary employment uses as

the local authority would undoubtedly resist any significant loss of employment resulting from the

closure of this facility.

14

PARK CAKES LIMITED, ASHTON ROAD, OLDHAM, OL8 2ND


The subject property is situated on the A627 Ashton Road close to its junction with the A6104

Hathershaw Lane. Oldham town centre lies approximately 1.25 miles to the north of the subject

whilst junction 22 of the M60 lies within 1.5 miles, accessed via the A6104. The surrounding area is

mixed in character and there have been no discernable changes since last year with the subject

property still dominating the area, being considerably larger than other commercial enterprises and

over twice the height of local housing. Other uses in the area include industrial, a small element of

local retail, and residential, predominantly in Victorian terraces.


The subject property is not typical of the area, occupying an irregular site of some 3.83 hectares

(9.45 acres) and comprising a variety of industrial / storage / production and office buildings with a

total area of approximately 39,808.10 m² (428,494 ft²). The buildings have been developed

piecemeal since the 1930s with the original buildings being brick built and is heavily bespoke to the

15

current bakery operation. The most recent extension is a standalone high bay warehouse of steel

portal frame construction with metal clad walls. This is an exception however as the majority of the

accommodation is multi-level with low eaves height.

Whilst the current use of the property has evolved within the site there is no doubt that a modern

equivalent would be developed more efficiently. It is extremely doubtful therefore that there would be

any demand for the premises by another occupier and it is only inertia and the cost of relocation

which prevents the current operation from relocating. A break-up of the buildings might be viable

although only at a significant loss of floorspace and the expense of redistributing services. Even

then the demand for the resultant space will only be of a local nature with low rents, short leases and

potentially high vacancy rates. The residual value of the site is therefore likely to be based on a

residential led scheme subject to planning with ancillary employment uses as the local authority

would undoubtedly resist any significant loss of employment resulting from the closure of this facility.

2016-03-29T13:24:13+0000Not specified

rics valuation professional standards january 2014, · arazim investments 7 menachem begin st....

Documents