Town centre investment with significant redevelopment potential

Duke Street, Woking

Elizabeth House & The Cornerstone

Investment Summary

Located in heart of Woking town centre.

Situated in a prominent position approximately 200 metres from Woking railway station.

Prominent Freehold island site of 0.84 acres (0.34 hectares).

Comprises two interlinking office buildings totalling 54,205 sq ft (5,036 sq m) with 61 secure basement car parking spaces.

Let on a full repairing and insuring lease to Martin McColl Ltd (previously Forbuoys Ltd) for a term of 25 years commencing on the 10 June 1999 (just under 13.5 years unexpired).

The current passing rent is £470,244 per annum which equates to a low £8.68 per sq ft (£93.43 per sq m).

The rent is reviewed to 68.70% of the market rent for the property.

The tenant is not in occupation and the property is currently occupied at market levels to tenants including MWB Business Exchange, Esso Petroleum Company Limited, Geotrace Technologies Limited and Independent Derivatives Traders Limited.

Opportunity to surrender the headlease, re-gear existing subleases & refurbish and re-let the vacant space at market rent.

Significant redevelopment potential with recent massing and rights of light studies indicating the possibility of 200,000 sq ft (gross) of accommodation could be developed.

Potential for redevelopment to include alternative uses such as hotel, leisure, residential, retail and offices, subject to planning.

Offers in excess of £6,130,000 reflecting a net initial yield of 7.25% after purchasers costs of 5.80%. There is potential for a company purchase. Further information on request.

A purchase at this level reflects on a low capital value of £113 per sq ft.

Duke Street, Woking

Elizabeth House & The Cornerstone

Elizabeth House & The Cornerstone

Woking

Location

Woking is one of the principle commercial centres in the south west quadrant of the M25. The town benefits from excellent communication links to both London, and other strategic centres such as Reading and Bracknell.

Woking is home to a thriving business community and an affluent residential catchment. The town has an excellent retail provision providing approximately 550,000 sq ft of prime retail, which is mainly within the Peacocks and Wolsey Place Shopping Centres.

Due to the impressive communication links, skilled workforce and pleasant working environment, a number of blue chip companies are located within the town, including SAB Miller, Cap Gemini, Allianz Cornhill Insurance, Lastminute.com, Petrofac and Mclaren Group. In addition other major employers include Surrey County Council and Woking Borough Council.

Road

Woking benefits from excellent road communications. It is approximately 5 miles from Junction 11 of the M25 and approximately 8 miles from Junction 3 of the M3, offering good access to the UK’s motorway network.

Town Approximate distance from Woking

Guildford 6 miles

Bracknell 13 miles

Reading 24 miles

London 28 miles

Portsmouth 50 miles

Air

London Heathrow is approximately 15 miles to the north and London Gatwick is approximately 35 miles south east of Woking. The M25 motorway also provides access to both Stansted and Luton Airports.

Rail

Woking railway station is located in the town centre and within very close proximity to the subject property. There are up to eight trains per hour running direct to London Waterloo, with a fastest journey time of approximately 27 minutes. Woking station is a connecting hub which provides direct fast rail links to the rest of the South and South West of the country to towns including Southampton, Bristol, Cardiff, Exeter, Portsmouth, Bournemouth and Guildford.

Whilst there is currently a dedicated coach service providing direct access to Heathrow Airport, there are extensive plans in motion to develop AIRTRACK. The Airtrack concept will provide rail access from Heathrow to link up with the south and south west of the UK. Woking would be the key station connecting Terminal 5 directly with the national rail network, with a connection time of under 30 minutes. A public inquiry for the scheme is due in early 2011. Subject to permission being obtained and funding agreed, services could be in operation by 2016. For further information on the scheme visit www.airtrack.org

Situation

The property is prominently situated in the centre of Woking on the junction of Duke Street and The Broadway, approximately 200 metres from Woking railway station. Vehicle access to the property is via a dedicated entrance from Duke Street. The main bus hub for Woking and the surrounding area is also adjacent to the subject property, providing regular services to the local and wider area.

The property is situated less than 5 minutes walk from the Peacocks and Wolsey Shopping Centres, and the additional leisure amenities.

Elizabeth House & The Cornerstone

Description

Elizabeth House and The Cornerstone are adjacent, interlinking office buildings constructed in the early 1980s around a central landscaped courtyard. The buildings are of reinforced concrete frame construction arranged over ground and three upper floors, with a secure basement car park providing 61 car parking spaces. Externally the buildings are brick clad with double glazed, metal frame windows. The top floor is of mansard construction.

Each block has its own reception with lifts serving all floors. The internal specification of the property originally comprised carpeted floors, suspended ceilings with surface mounted lighting and central heating. However, there has been significant improvements to the specification on the majority of floors both by the tenant, and sub-tenants, to include raised floors, recessed category II lighting, air-conditioning cassettes and refurbishment of one of the reception areas and lifts cars.

Accommodation

The buildings were measured in December 2008 by Plowman Craven in accordance with the Code of Measuring Practice (6th Edition), and provides the following approximate net internal floor area:

Elizabeth House

Floor sq m sq ft

Third 484.90 5,219

Second 676.70 7,284

First 676.10 7,277

Ground 679.10 7,310

Sub-total 2,516.80 27,090

The Cornerstone

Floor sq m sq ft

Third 489.80 5,272

Second 670.30 7,215

First 685.70 7,381

Ground 673.30 7,247

Sub-total 2,519.10 27,115

Total 5,035.90 54,205

A copy of the Plowman Craven report is available on request.

NB – The specified area referred to within the Martin McColl’s lease is 50,561 sq ft.

First Floor Plans (not to scale)

Locke Way

Locke Way

Duke Street

Mayb

ury Road

N

Site

The property is on situated on an island site of approximately 0.84 acres (0.34 hectares).

Tenure

Freehold.

Tenancy

The property was originally let on a full repairing and insuring headlease to Gallaher Ltd (now Japanese Tobacco International). The property was then sub-let on a full repairing and insuring lease to Martin McColl Ltd (previously Forbuoys Ltd) for a term of 25 years commencing on the 10 June 1999, expiring 9 June 2024 (just under 13.5 years unexpired) on the same terms as the headlease. The headlease was surrendered in April 2010, and therefore the Martin McColl Ltd lease is now the headlease. The June 2007 rent review is still outstanding.

The rent is reviewed to the higher of the passing rent or 68.7% of market value. There is a schedule of facts and assumptions for use in the interpretation and operation of the rent review clause. This provides that the net internal floor area, to which full office rent applies, is 50,561 sq ft which is less than the actual measured area. It also refers to tenant’s improvements of air-conditioning and computer flooring to part of the third floor; partitioning to the first, second and third floors of the northern block; and the provision of an electricity generator in the basement. These items are specifically disregarded in assessing the rent on review. It is also recorded that the basic landlord finishes to be assessed on reviews are as follows:-

Office floors will have medium quality carpeting and carpet tiles.

The third floor of the northern block will have similar heating system to the remainder of the premises.

The premises are provided with surface mounted florescent lighting to provide an average lighting level of 500 lux.

All office areas have power wiring in the floor ducting provided, and the power supply is above the average required by normal office tenants in 1983.

There are 61 underground car spaces.

The current passing rent is £470,244 per annum which equates to a low rate of £8.68 per sq ft (£93.43 per sq m) on the Plowman Craven measured areas.

Martin McColl is no longer in occupation of the property. Within their lease they have the ability to sub-let the property at the market rent. They have subsequently sub-let the property to tenants including MWB Business Exchange, Esso Petroleum Company Limited, Geotrace Technologies Limited and Independent Derivatives Traders Limited which are summarised in the Sub Tenancy Schedule. Please note MWB Business Exchange occupy pursuant to a management agreement rather than a formal sub-under lease.

The Cornerstone

Elizabeth House

Sub Tenancy Schedule

Elizabeth House

Floor Tenant Area (per sq ft) Rent (£) £ psf Lease XP Comments

3rd MWB Business Exchange Plc 5,219 £ 0 n/a May-14Recently refurbished - Cat A. The space is let by way of a licence/service agreement. Both parties have a right to terminate giving no less than 12 months notice after the 4th year.

2nd MWB Business Exchange Plc 7,284 £ 0 n/a May-14Recently refurbished - Cat A. The space is let by way of a licence/service agreement. Both parties have a right to terminate giving no less than 12 months notice after the 4th year.

1stIndependent Derivatives Traders Limited

7,277 £ 133,902 £ 18.54 Mar-15 Tenant had option to break in March 2010, which was not exercised.

Ground Geotrace Technologies Limited 7,310 £ 130,556 £ 18.05 Jun-15 Tenant had option to break in September 2010, which was not exercised.

Sub-total 27,090 £ 264,458

The Cornerstone

Floor Tenant Area (per sq ft) Rent (£) £ psf Lease XP Comments

3rd Vacant 5,272 Shell & Core.

2ndRetail Petroleum Services Limited & Esso Petroleum Company Limited

7,215 £ 80,000 £ 11.09 April-07Esso benefit from security of tenure under the 1954 Act and are currently holding over. They are pursuing a renewal lease under the 1954 Act, key terms of which are a term expiring in April 2015 at £90,000 pa (£12.35) with 12 months’ rent free.

1st Vacant 7,381 Shell & Core.

Ground (pt) Geotrace Technologies Limited 3,441 £ 61,966 £ 18.05 Jun-15 Tenant had option to break in September 2010 which was not exercised.

Ground (pt) Vacant 3,806 Shell & Core.

Sub-total 27,115 £ 141,966

Total 54,205 £ 406,424

Covenant Information

Martin McColl is the UK’s leading neighbourhood retailing group with over 1,250 stores trading throughout England, Scotland and Wales, comprising over 500+ Convenience Stores and over 400 of the estate having a Post Office. Initially the company was formed as TM Retail when in 1998 Forbuoys acquired the Martin Retail Group. The earliest of these stores dated back to 1901 as RS McColl in Glasgow. The trading names of the stores at that time included Forbuoys, Martin and RS McColl. 1999 saw the launch of a new convenience concept McColl’s. McColl’s have subsequently been rolled out into Neighbourhood, Metro, High Street and Travel locations. In 2004, the company acquired Dillon stores and consolidated their market position as the country’s number one retailer in their sector. The company continued to grow its Convenience Store estate with the acquisition of ‘Smile’ and 30+ stores from Sainsbury’s which traded as Bells and Jackson’s. In 2005 the company changed its name to Martin McColl Retail Group. All Convenience Stores trade as ‘McColl’s’, the Newsagent / Variety Stores as ‘Martin’s’ in England and Wales and as RS McColl in Scotland.

Date of Accounts 29/11/2009 30/11/2008 30/11/2007

Turnover £324,209,000 £310,238,000 £274,278,000

Pre-Tax Profit £24,732,000 £17,994,000 £18,137,000

Tangible Net Worth £71,880,000 £54,532,000 £49,045,000

Dunn & Bradstreet have given Martin McColl Ltd a rating of 5A1 which indicates Low Risk potential.

Further information is available at the company’s website www.martinmccoll.co.uk

Occupational Market

Woking has an office stock of circa 2.7 million sq ft. The town has seen very little development since the peak of the late 1980s and early 1990s. This is predominantly due to competition from other land uses and a shortage of sites, which has tended to limit the supply of new office space.

Due to the shortage of new development, there is virtually no Grade A space available within the town, and only one under construction which is the Barratt Homes site, Guildford Road (“New Central”). This is a residential led scheme of 420 units plus 50,000 sq ft of offices and 15,000 sq ft of retail. We understand the offices will be on five floors (c.10,000 sq ft each) with parking (yet to be confirmed) at approximately 1:500 sq ft. Practical Completion is scheduled for March 2012.

Current availability stands at 353,000 sq ft or 13% compared to an overall south east office vacancy rate of 17%.

After a low point of a 29,000 sq ft take-up in the 5,000 sq ft + size range, this has recently improved with 47,310 sq ft let during 2010. Prior to the market downturn take up reached 115,000 sq ft in 2008, 89,000 sq ft in 2007 and 79,000 sq ft in 2006.

Address Area (sq ft)

Tenant Date Rent (psf)

Terms Certain

Specification

Victoria Gate, Woking 18,430 Valiant Petroleum Aug 2010 £20.50 5 years Refurbished 1990s building, tenant sublease.

Dukes Court, Woking 7,040 Southern Cross Health Care

June 2010£10.00 until

Dec 2012then £19.00

7.5 years 1980s un-refurbished space.

Export House, Woking 6,250 Perituas Jan 2010 £19.00 2 years 1975 building refurbished by tenant for sublease.

Export house, Woking 37,500 Mouchel Parkman Plc

Sep 2008 £19.00 10 years 1975 building refurbished by tenant for sublease.

Brook House, Chertsey Road, Woking

32,000 Petrofac Feb 2008 £26.50 12 years1999 building with 2005 refurbishment. Net effected rent estimated at £24.00 per sq ft.

Asset Management Options

Low Risk

Hold 13.50 years of D&B rated 5A1 income.

Pursue the outstanding 2007 and 2012 rent review.

Active Management

Submit an interim schedule of dilapidations on Martin McColl to refurbish the shell and core areas, and update the common parts within the building.

Surrender the lease with Martin McColl, and re-negotiate sub-leases to extend income length and improve the rental tone.

Re-brand the property and install tenant boards and proper signage.

Actively market the vacant space with the ability of undercutting the market to cut void periods.

Once the headlease is surrendered, the 68.7% of open market value and specified area fall away which will create additional value.

Development

Explore further development potential. The building is on an island site of 0.84 acres. A recent massing and rights of light study has been undertaken by Sheppard Robson which demonstrates that there is scope to increase the density of site within the existing envelope to provide up to circa 200,000 sq ft (gross). Consider alternative uses on all or part of the site for hotel,

leisure or residential uses.

A few of the options are highlighted on the adjacent page. Further information on request.

In terms of future demand, in the absence of sustained corporate growth, the other main drivers are lease events, breaks or expiry. In the south west M25 region, there are estimated to be 296 lease expiries generating 5.4 million sq ft of demand, of which 28 are in Woking with a potential demand of 500,000 sq ft.

After peaking in 2000 at £25.50 per sq ft at Brook House, headline rents on Grade A space in Woking steadily reduced as the Thames Valley market deteriorated. Brook House has since completed a re-letting of 32,000 sq ft in February 2008 at £26.50 per sq ft to Petrofac.

The last new development in Woking, Midas, completed in 2003 which coincided with the bottom of the market, and four subsequent letting between 2003 and 2006 achieved headline rents of £22.00-£23.00 per sq ft.

Based on current activity we are of the opinion that newly developed Grade A specified offices in Woking would have to achieve headline rents of £27.50-£30.00 per sq ft. For a major high quality refurbishment, we believe headline rents of between £22.00-£25.00 per sq ft are achievable and for grade B space, £15.00-£19.00 per sq ft depending on level of refurbishment, micro location and car parking provision.

Option 2 - Offices 170,000 sq ft (15,680 sq m)

Option 3 - Offices 170,000 sq ft (15,680 sq m)

Redevelopment Potential

Option 4 - Offices 83,958 sq ft (7,800 sq m) - Hotel 115 bedrooms

Option 1 - Offices 170,000 sq ft (15,680 sq m)

Further Information

For further information or to arrange an inspection, please contact:

Misrepresentation Act 1967Tudor Toone llp, for itself and for the vendors of this property, hereby give notice that:– (i) These particulars do not constitute, nor constitute any part of, an offer or contract. (ii) Tudor Toone llp and its members accept no legal responsibility for any statement or representation whether written, oral or implied or whether contained in any Advertisement particulars or other matters issued or any correspondence entered into by them and whether made in any antecedent present or subsequent enquiries Or negotiations. (iii) Neither Tudor Toone llp nor their principals, members, agents, servants or representatives have any authority whatsoever to make or give any representation or Warranty whatsoever whether written or implied in relation to this property. (iv) any intending purchaser must satisfy himself by inspection or otherwise as to the correctness of any antecedent present or subsequent statements or Representations, and should not rely upon the same unless he has satisfied himself accordingly. (v) unless otherwise stated all prices and rents are quoted exclusive of value added tax (vat ). Any intending purchasers or lessees must satisfy themselves Independently as to the incidence of vat in respect of any transaction. Subject to contract & exclusive of vat Tudor Toone llp is a limited liability partnership registered in England and Wales with registered number OC 305 411. Registered office: 41/43 Maddox Street London W1S 2PD. Details prepared February 2011.

Alastair Tyrrell

t 020 7495 5550

e alastairtyrrell@tudortoone.com

Proposal

Offers in excess of £6,130,000 reflecting a net initial yield of 7.25% after purchasers costs of 5.80%. A purchase at this level reflects on a low capital value of £113 per sq ft.

The property is currently held within a single asset company, Walls Woking Ltd. A purchase of the company would be considered. Further information on request.

Value Added Tax

The property is elected for VAT, and it is intended that the transaction will be treated as a TOGC.

Rob Tudor

t 020 7495 5550

e robtudor@tudortoone.com

Ben Goodberry

t 020 7495 5550

e bengoodberry@tudortoone.com