12pp 104436 PC World Engine Road INV_06

PC World, Middle engine lane, north ShieldS

Newly Built Retail Warehouse with RPI Linked Rent Review

Newcastle upon Tyne

• the subject property serves an extensive catchment on the eastern side of newcastle upon tyne and north Shields. newcastle upon tyne is a major conurbation with a population of 1.38 million within 12 miles of the city centre

• the property is situated in a highly accessible position being approximately ¼ mile to the west of the intersection of the a19 and the a1058

• Situated in an established and improving retail warehouse location, being immediately adjacent to units occupied by B&Q Warehouse, Wickes diY store and gala Bingo, and close to the Silverlink retail Park

• a recently completed, purpose built retail warehouse unit extending to a ground floor area of approximately 16,495 sq ft gia

• the property benefits from bulky goods planning consent

• Freehold

• the property is let to the substantial covenant of dSg retail ltd for a term of 15 years from 9 March 2007 at an initial rent is £371,138 per annum, equating to £22.50 per sq ft

• the lease includes upwards only rent reviews after 5 years to the lower of open market rent or an increase of 2.5% per annum compounded, and after 10 years to a sum equivalent to the original rent increased by 120% of the increase in the rPi for the 10 year period, being capped at 2.5% per annum

• Price £6,380,000, subject to contract and exclusive of Vat

Net Initial Yield 5.50%

Estimated Nominal Equivalent Yield 6.47%

Estimated True Equivalent Yield 6.73%

Estimated Reversionary Yield 7.04%

Purchase costs taken at 5.7625%

Investment Summaryinvestment Summary

Investment Summary

NewYork

PrestonGrange

Billy Mill

Preston

Willington

WillingtonSquare

Holystone

WestAllotment

TheAllotment

WillingtonQuay

Howdon

PercyMain

Meadow Well

PercyMain

Chirton

NorthShields

Hadrian Road

Rosehill

Palmersville

Palmersville

BentonSquare

WestChirton

COAST ROAD

COAST ROAD

ANCHOR STREET B1315

WALLSEND ROAD A193

LIME ROAD B1505

WHITLEY

ROA

D A191

STATION ROAD A186

NORTH STATION ROAD

BENTON ROAD

NEW YORK ROAD

NEW YORK BY-PASS

PRESTON NORTH ROAD

BEAC

H RO

AD A1

058

WAL

TON

AVEN

UE N

ORTH

B13

04

HOWDEN ROAD A187

HADRIAN ROAD

ST PETERS ROAD

CHURCHILL ST

ROSEHILL BANK

TYNEMOUTH ROAD

PRESTON ROAD

(Proposed)

A19

A19

A1058

A193

(Proposed)

locationthe city of newcastle upon tyne is the commercial centre for the north east of england, being situated approximately 275 miles north of london and 105 miles south east of edinburgh.

the subject property is situated approximately 5.5 miles to the east of newcastle city centre and approximately 1 mile to the west of north Shields.

the property benefits from excellent communications, being situated immediately to the north of the a1058 Coast road, which provides the principal carriageway leading from the south of the city to the east where it joins the a19, which connects with Junction 64 of the a1(M) motorway, situated approximately 9 miles to the south. the a1 then goes on to provide to access to edinburgh in the north and Washington and Middlesbrough in the South.

demographicsnewcastle upon tyne has a district population of approximately 260,000, rising to in excess of 1.38 million within 12 miles of the city centre. the district population of north Shields itself is in excess of 191,000, extending to 1.26 million within 12 miles of the town centre.

the economic base of the district area of the city has developed in recent years and its once dominant manufacturing base only now accounts for 10.3% of employment as compared to a national average of 14.8%. Service industries are now stronger, with “banking, finance and business services” accounting for 15.5% of employment, as opposed to a national average of 17.5% and ”other services” equating to 29.8%, as opposed to a national average of 23.9%. Major employers in the city include Benicks ltd, Sage UK and transco. the current unemployment rate within the travel to work area stands at 3.4%, compared to a national average of 2.6%.

it is therefore clear that the subject property benefits from excellent communications and serves an extensive catchment.

A1

A696

65

A194(M)

A167(M)

NEWCASTLE UPON TYNE

GATESHEAD

WASHINGTON

BLAYDON ON TYNE

NORTH SHIELDS

WHITLEY BAY

SOUTH SHIELDS

EAST BRUNTON

A191

A186

A1

A692

A1231

A19

A1058

A167

A184

Middle Engine Lane

Silver Link Retail and Leisure Park

Newcastle upon TynePC World, Middle engine lane, north Shields

NewYork

PrestonGrange

Billy Mill

Preston

Willington

WillingtonSquare

Holystone

WestAllotment

TheAllotment

WillingtonQuay

Howdon

PercyMain

Meadow Well

PercyMain

Chirton

NorthShields

Hadrian Road

Rosehill

Palmersville

Palmersville

BentonSquare

WestChirton

COAST ROAD

COAST ROAD

ANCHOR STREET B1315

WALLSEND ROAD A193

LIME ROAD B1505

WHITLEY

ROA

D A191

STATION ROAD A186

NORTH STATION ROAD

BENTON ROAD

NEW YORK ROAD

NEW YORK BY-PASS

PRESTON NORTH ROAD

BEAC

H RO

AD A1

058

WAL

TON

AVEN

UE N

ORTH

B13

04

HOWDEN ROAD A187

HADRIAN ROAD

ST PETERS ROAD

CHURCHILL ST

ROSEHILL BANK

TYNEMOUTH ROAD

PRESTON ROAD

(Proposed)

A19

A19

A1058

A193

(Proposed)

Situationthe subject property is situated immediately fronting the roundabout off Middle engine lane, which connects directly to the a1058 Coast road which forms a dual carriageway leading from north Shields and the a19 to the city centre.

the subject property forms part of an established and expanding out of town retail destination, with other occupiers on Middle engine lane including a B&Q Warehouse (100,000 sq ft), Wickes (28,000 sq ft) and gala Bingo (33,000 sq ft).

approximately ¼ mile to the east close to the junction of the a19 and the a1058 is the Silverlink leisure and retail Park. the retail Park extends to a total of 250,000 sq ft and is owned by hercules Unit trust. over recent years, the landlords have successfully capitalised on the scheme’s open planning consent and have turned this from what was a bulky goods park into a top quality fashion park where tenants include Marks & Spencer, new look, next, Boots, the outfit, Borders and Sports World. there are a number of remaining bulky goods retailers being Carpetright, harveys, Comet, Currys, halfords and SCS.

the general area has seen a significant amount of commercial development in recent years including the Silverlink Business Park, where tenants include glaxo and leeds Building Society. to the north, Colebrook Business Park is due to be developed to provide 2.25 million sq ft of high quality office accommodation and existing occupiers here include Fujitsu, edS and Procter and gamble.

We believe there is a strong likelihood that Middle engine lane will continue to develop into a strong bulky goods destination serving the significant catchment on the eastern side of newcastle. a key driver for this has been the fact that rents have increased considerably on the nearby Silverlink retail Park to £37.00 per sq ft. this increase in rent and the “softening” tenant line up is likely to result in the remaining bulky goods tenants relocating elsewhere. indeed, PC World relocated from their store on the scheme which has now been let to Marks and Spencer.

Middle engine lane provides an excellent alternative location with the benefit of a strong anchor being the B&Q Warehouse, together with Wickes and PC World. this has been borne out from our understanding that PC World are trading very well since they opened earlier this year. We believe it is feasible that all of the land between the subject premises and the B&Q Warehouse could be amalgamated to form a single retail development where additional accommodation could be provided for those retailers seeking to relocate from Silverlink retail Park.

newcastle upon tyne is a major conurbation with a population of 1.38 million within 12 miles of the city centre.

Middle Engine Lane

Silver Link Retail and Leisure Park


descriptionthe development comprises a recently completed, purpose built retail warehouse unit of steel portal frame construction under a pitched, steel clad roof. elevations are clad with attractive masonry up to a height of approximately 8 ft, with a flat metal cladding system above forming a parapet. the front of the unit is an attractive full height entrance lobby. the property provides an approximate gross internal ground floor area of 16,495 sq ft (1,532 sq m).

at the front of the store is a tarmacademed surface customer car park providing approximately 83 car parking spaces, equating to a ratio of 1 per 199 sq ft (1 per 18.46 sq m). there is a service area situated to the southern side of the site where goods are off loaded in a dedicated service area. access from Middle engine road is via an estate road which is shared with the adjacent Wickes unit.

a recently completed, purpose built retail warehouse unit extending to a ground floor area of approximately 16,495 sq ft gia.

Newcastle upon TynePC World, Middle engine lane

Planning????? ????? ?????

tenurethe site as outlined in red opposite is held freehold.

tenancythe subject property is let to dSg retail ltd for a term of 15 years from 29 March 2007 by way of a full repairing and insuring lease.

the current rent is £371,138 per annum, which equates to £22.50 per sq ft. the lease provides for upwards only rent reviews at the end of the fifth and tenth years in accordance with the following:-

Mid

dle

Engi

ne L

ane

Battle Hill Drive

Fifth year rent review

The rent is to be increased to the lower of the previous rent being increased by 2.5% per annum compounded or the open market rental value.

Tenth year rent review

The rent will be increased to a sum calculated by multiplying the original rent by 120% of the increase in the Retail Price Index (RPI) for the proceeding 10 year period (subject to a maximum cap of 2.5% per annum).

Newcastle upon TynePC World, Middle engine lane

retail Warehousing in the locality

Given the size of the Newcastle-upon-Tyne conurbation, there are a number of strong out of town retail destinations which have developed around the city. These are summarised below:-

Silverlink Retail Park

approximately ¼ mile east of the subject property is the Silverlink retail Park, which has developed into a highly successful shopping destination extending to 250,000 sq ft. tenants here include the outfit, M&S, Borders, next and Sports World with the highest lettings of up to £37.00 per sq ft.

Kingston Park

on the west side of the city, close to the a1 and the city’s airport, there is a collection of retail warehousing adjacent to a very successful tesco extra store. tenants here include Currys, PC World, Marks & Spencer’s Simply Food, tK Maxx, Matalan, next, Brantano and Boots. rents here are generally historic, being up to £25.00 per sq ft, however, if a unit became available today, we believe a rent in excess of £30.00 per sq ft would be achievable.

Team Valley Retail Park

to the south of the city centre is the team Valley Shopping Park at gateshead, which extends to 380,000 sq ft and is owned by land Securities. this is a successful scheme where tenants include next, the outfit, Mamas & Papas, Mothercare World, PC World and homebase. historically, rents were up to £31.00 per sq ft and we understand that more recent lettings to asda and new look have increased the rental tone of the scheme to £35.00 per sq ft.

Metro Retail Park

elsewhere in gateshead, adjacent to the Metro Centre is the Metro retail Park which is a secondary scheme which benefits from open non food planning consent. here a letting in 2004 to Barker and Stonehouse on a unit of 15,000 sq ft was at a rent of £25.64 per sq ft.

Newcastle Shopping Park, Byker, Newcastle

to the east of the city centre in Byker, is the newcastle Shopping Park, which extends to approximately 218,000 sq ft. this scheme benefits from an open planning consent and tenants include JJB Sports, Woolworths, tK Maxx and a Marks & Spencer outlet.


Given the size of the Newcastle-upon-Tyne conurbation, there are a number of strong out of town retail destinations which have developed around the city. These are summarised below:-

A1

A696

65

A194(M)

A167(M)

NEWCASTLE UPON TYNE

GATESHEAD

WASHINGTON

BLAYDON ON TYNE

NORTH SHIELDS

WHITLEY BAY

SOUTH SHIELDS

EAST BRUNTON

A191

A186

A1

A692

A1231

A19

A1058

A167

A184

Middle Engine Lane

Silver Link Retail Park

Kingston Park

Team Valley Retail Park

Metro Retail Park

Newcastle Shopping Park


Financial Performanceat the first rent review the rent will be increased (on an upwards only basis) to the lower of 2.5% per annum or open market value. if one was to assume that the rental value of the unit would increase by 2.5% per annum from the passing rent for this period then this rent would increase to £419,908 (£25.46per sq ft).

at the second rent review, the rent will increase by 120% of the increase in the retail Price index (rPi) for the proceeding 10 years, subject to a cap of 2.5% per annum.

the annual increase of the retail Price index (rPi) for the year to May 2007 stood at 3.30%. the government’s target annual increase for the Consumer Price index (CPi) is 2% per annum, however, for the year to May this was 2.50%. historically, rPi increases have been larger than those in the CPi principally due to the additional factors taken into consideration such as housing costs. therefore on average, over the 10 year period we would expect the 2.5% per annum cap to be applicable. if one assumes that the rent will therefore increase by this annual cap then in the tenth year it will rise to £475,088 per annum (£28.80 per sq ft).

tenants CovenantdSg retail ltd are the principal UK operating company for dixons international, the largest electrical retailer in the UK. the tenant company’s latest accounts for the last 2 years are summarised below:-

DSG Retail Ltd 30/04/05 £4,570.60m £148.72m £831.92m 5A1

01/05/04 £4,456.30m £128.31m £859.77m

Year to Turnover Pre-Tax Profit Net Worth D&B Rating


Vatthe property is elected for Vat and therefore Vat will be payable on the purchase price.

Proposal offers are invited at a price in excess of £6.38 million, which will reflect a net initial yield of 5.50%.

assuming rental value is increased from the passing rent at 2.5% per annum, the yield would rise to 6.21% in the fifth year and on the basis that the rental increase cap at 2.5% per annum is met, it will increase to 7.04% after 10 years. this income stream will provide a nominal equivalent yield of 6.47%. these yields assume full purchaser’s costs of 5.7625%.


MISREPRESENTATION NOTICE Wilkinson Williams LLP give 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, artist impressions, photographs or digitally enhanced imagery) is given in good faith but should not be relied upon as being a statement of representation or 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 plans, artist impressions, photographs or digitally enhanced imagery appearing in this brochure show only certain parts of the property and certain aspects may have changed since they were produced and it should not be assumed that the property remains precisely as displayed within these particulars. Furthermore, no assumptions should be made in respect of parts of the property which are not shown. 5. any areas, measurements or distances referred to herein are approximate only. 6. Where there is reference in the particulars to the fact that alterations have been carried out, or are proposed, 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 an intending purchaser. 7. descriptions of the property are inevitably subjective and the descriptions contained herein are given in good faith as an opinion and not by way of statement of fact. 8. Plans are published for convenience of identification only and although believed to be correct, their accuracy is not guaranteed and they do not form part of any contract.

PC World | Middle engine lane | Birmingham | July 07 | ref: 104436

Wilkinson Williams Mellier House 26a Albemarle Street London W1S 4HY

Miles Marten Tel: 020 7317 3777 Fax: 020 7495 5432 [email protected]

Drew Moore Tel: 020 7317 3789 Fax: 020 7495 5432 d.moore@wilkinsonwilliams co.uk

www.wilkinsonwilliams.co.uk

Contacts for further information

12pp 104436 PC World Engine Road INV_06

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