FOR SALE

High Yielding Single Let Office Investment

INVESTMENT OPPORTUNITY

Tyne River HouseThe Watermark, Gateshead, NE11 9SZ

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INVESTMENT SUMMARY

• Located on The Watermark Business Park, Gateshead’s premier out of town office location.

• Tyne River House comprises a modern 2,786 sq m (29,999 sq ft) purpose built stand-alone office building with extensive parking provision (1:269 sq ft).

• Excellent transport connections sitting adjacent to the bus and rail interchange and a two minute drive to A1 junction 71, providing rapid access to the wider region.

• Fully let to Teleperformance Limited on a new 10 year FRI lease from 15 November 2016 with approximately 9.76 years remaining (4.76 to break).

• Freehold

• Tenant has committed circa £2.35 million to the building through an extensive refurbishment and fit out, comprising a new VRF heating and cooling system, lighting, suspended ceilings and speedgate turnstiles.

• Annual rent of £423,080 (£14.10 psf).

• We have been instructed to seek offers in excess of £3,610,000 for our clients’ freehold interest. A purchase at this level reflects an attractive NIY of 11.00% and a low capital value of £120 psf assuming purchasers costs of 6.509%.

A66

A68

A688

A690

A684

A689

A689

A696

A181

A68

A68

A171

A69

A167

A19

GATESHEAD

MORPETH

CHESTER-LE-STREET

ALNWICK

ASHINGTON

SOUTH SHIELDS

TYNEMOUTH

SCOTCHCORNER

A1

59

60

61

62

65

58

57

56

MIDDLESBROUGH

DURHAM

DARLINGTON

NewcastleAirport

Port of Seaham

Port of Tyne

Durham Tees Valley Airport

63

A1(M)

SUNDERLAND

HARTLEPOOL

IntuMetrocentre

Team ValleyTrading Estate

A69

A688

A66 A66

A688

Port of Sunderland

Port of Hartlepool

NEWCASTLEUPON TYNE

A1(M)

A1(M)

A19

A19

A19

A19

GATESHEAD

LOCATION

Tyne River House is located on the Watermark Business Park which lies within the Metropolitan Borough of Gateshead. Gateshead has a population of 200,500 people extending to 1,075,000 people in the wider Tyneside conurbation. The town is situated immediately south of Newcastle upon Tyne, 98 miles north of Leeds and 106 miles south of Edinburgh.

The Watermark Business Park is located to the north of Gateshead between the south bank of the River Tyne and the Intu Metrocentre. Tyne River House benefits from excellent transport links to the regional road network as a result of its proximity to Newcastle City centre and the Metrocentre. The A1 Western bypass bounds the Metrocentre to the west, whilst the Blaydon Bridge to the west of The Watermark directly connects Gateshead to Newcastle.

The area of Gateshead 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. Tyne & Wear benefits from excellent transport connections via its Metro system, which comprises 60 stations throughout Newcastle, Gateshead, Sunderland, North and South Tyneside. The system is the second largest in the UK behind the London Underground. Newcastle International Airport, provides daily scheduled flights to both domestic and international locations.

A1

A1(M)

M6

M1

A69

A19 A66

A1(M)

A1(M) M1

M4

M40 M11

M1

M1

M6

YORK

ABERDEEN

CARLISLE NEWCASTLENEWCASTLE

MANCHESTER

LIVERPOOL SHEFFIELD

BIRMINGHAM

BRISTOL LONDON

EDINBURGH

LEEDS

GLASGOW

GATESHEADGATESHEAD

MIDDLESBROUGH

Tyne River House

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DUNSTO

N R

OA

D

H

OLLIN

GSI

DE RD

ST.MICHAEL’S WAY

RIVERSIDE WAY

FRONT ST

DEWEN

TW

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RIGG

SCOTSW

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THE WATERMARK

MA

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ALE

WA

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MARCONI WAY

MARKET LANE

MARKET LANE

PINETREE WAY

A184

A694

SCOTSWOOD ROAD

WESTGATE ROAD

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ON

RO

AD

HEX

HA

M R

D

WELLINGTON ROAD

ASDA

IKEA

MetroRetailPark

MetroPark West

MarriottHotel

ASDA

IKEA

MetroRetailPark

MetroPark West

MarriottHotel

A1 NORTH

A1 SOUTH

River Tyne

Riv

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A1114 RIVERSIDE WAY

CLOCK

MIL

L R

OA

D

COLLIERY ROAD

HANDY DRIVE

ELLISON ROAD

IntuMetrocentre

GIB

SID

E W

AY

A1

NEWCASTLECITY CENTRE

(1.3 miles)

A1

A1

A694

IntuMetrocentre

Tyne River House

SITUATION

The property is located on the Watermark Business Park in Gateshead on the south bank of the River Tyne. The Watermark scheme, developed in 2002 by City and Northern, comprises 220,000 sq ft of modern, out of town office accommodation. The park was built in three phases of which the subject property forms the larger footprint buildings. The two other phases comprise smaller, self-contained office buildings at Bankside, Keel Row and Staithes, offering accommodation ranging from 750 sq ft – 4,000 sq ft.

The Watermark is prominently situated close to the Intu Metrocentre, the largest shopping centre in Europe. The centre features over 300 shops, 60 restaurants, an extensive neighbouring retail warehouse offering and IMAX cinema.

Due to the scale of the Metrocentre development, connectivity to the local area is unrivalled and has seen extensive investment in recent years. The A1, which bounds the Metrocentre to the west, has recently undergone an extensive £61 m upgrade, whilst both Bus and Rail services run every 8 – 12 minutes to Newcastle and the wider area.

A1 North

A1 South

Tyne River House

River Tyne

A1

A1

J71

A1114 Riverside Way

A1114 Riverside Way

The Watermark

Team Valley Trading Estate

Unrivaled amenities and transport connections

Bus and Rail interchange

Intu Metrocentre

5

6

Breakout Area

Co

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sRo

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Void

WC's

Cle

ane

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6 PersonMeeting

Room

WC'sCommsRoom

CommsRoom

6 PersonMeeting

Room

DESCRIPTION

Tyne River House comprises a self-contained purpose built Grade A office building extending to 2,786 sq m (29,999 sq ft) over ground, first and second floors. The building benefits from an impressive specification following a £2.35m refurbishment.

The refurbishment comprised £1.6m of landlord’s Category A works carried out by the tenant in lieu of a rent free period along with £750,000 of Category B works. In addition to the refurbishment, the tenant has committed £340,000 on new furnishings throughout the entire building.

Following the works, the specification of Tyne River House now includes:

- Impressive full height glazed atrium and reception

- New high specification VRF heating and cooling system

- 2 x 8 person passenger lifts

- WCs and shower facilities on each floor

- Suspended ceiling and recessed lighting

- Fully accessible raised floors with 219 additional floor boxes installed

- Frosted Privacy glass

- Flexible L shaped configuration allowing for future subdivision

- Butterfly speed gate turnstile entry systems

- Dedicated training and meeting facilities

- New canteen and amenity space

Externally the building occupies a generous site extending to 1.64 acres with 120 car parking spaces equating to a parking ratio of 1 : 269 sq ft.

Typical Floor Plan

ACCOMMODATION

Floor sq m sq ft

Ground 947.8 10,202

First 929.8 10,009

Second 909.3 9,788

Total 2,786.90 29,999

We understand the property provides the following net internal floor areas:

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TENANCY

TENURE

Tyne River House is let entirely to Teleperformance Limited on a new 10 year lease commencing 15th November 2016, at an annual rent of £423,080, reflecting £14.10 per sq ft. The tenant has an option to determine the lease on 15th November 2021 subject to no less than 90 days prior written notice. The lease is subject to an upward only rent review on the 15th November 2021.

Upon commencement of the lease, the tenant was granted a rent free period of 43 months, in return for a comprehensive refurbishment of the entire building. The tenants works are defined in the Licence to Alter dated 15th November 2016. This rent free is to be ‘topped up’ by the vendor.

The property is held freehold, a copy of the Registered Title and associated Title plans are available upon request.

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The tenant has committed circa £2.35m to the building through a comprehensive refurbishment

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TENANT’S COVENANT

Teleperformance Limited Teleperformance Limited forms part of the global Teleperformance brand established in 1978. Worldwide, the company employs 190,000 people across 65 countries from 311 sites. In the UK, Teleperformance employs 8,000 people from 11 offices. They are the international frontrunner in outsourced omnichannel client liaison management, providing a wide range of business solutions for clients in multiple industries including retail, telecommunications, utilities and healthcare. Services provided encompass customer care, customer acquisition, social media, technical support, accounts receivable and back office.

From Tyne River House, Teleperformance operate the UK customer contact center for a leading global technology company.

31/12/2015 31/12/2014 31/12/2013

Turnover £181,183,000 £174,523,000 £154,962,000

Pre Tax Profit £8,742,000 £9,301,000 £7,350,000

Shareholder’s Fund £43,555,000 £35,549,000 £28,396,000

OCCUPATIONAL MARKET

Supply and Availability

The North East region provides a diverse range of accommodation ranging in size and quality to appeal to numerous occupiers, attracted by the relatively low occupational costs, accessibility of skilled workforce and high quality working environment. While Newcastle city centre comprises the principal in town office accommodation in the region, the out of town office market is made up of a handful of business parks throughout Tyne & Wear which continue to satisfy the demand further bolstered by severely constrained city centre supply.

Due to the high demand for accommodation, the shortage of supply historically noted in Newcastle city centre has moved outward, with prime locations such as Cobalt Business Park now at 78% capacity (1,194,328 sq ft occupied) with only 337,148 sq ft remaining.

Despite the widespread shortage of supply in the North East out of town market, there are no speculative developments anticipated to be on site within the next 12 – 24 months, increasing the demand for refurbished grade A accommodation.

Take Up

Take up is dominated by the out of town sector which has accounted for circa 75% of take up since 2010. Despite a fall in total sq ft take up numbers throughout 2016, there was a notable rise in the volume of transactions completed during the same period. This demonstrates the depth and varied nature of demand despite market uncertainty surrounding the European Referendum, whilst also reflecting the general shortage in supply of accommodation suited to larger requirements.

Rents

Whilst headline rents in Newcastle city centre are expected to step up to £25.00 psf in 2017, the out of town office market remains at a significant discount. Rental levels now range from £10 per sq ft for secondary buildings up to £16.50 per sq ft for prime space, depending on quality, specification and location.

2013 2014 2015 2016

800,000

600,000

400,000

200,000

0

140

105

70

35

0

Sq ft Transactions

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Off

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Sp

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Take

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(S

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Out of town office take upOverall sq ft transacted v Number of deals

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INVESTMENT MARKET

The out of town investment sector has increased in popularity in recent years as investors have been attracted by comparatively high yields on offer than would be achieved in other regional locations and the South East. We set out below a schedule of recent comparable transactions in the North East;

Address Tenant Date Price Yield Comments

Onyx House, Portrack Interchange Business Park, Stockton on Tees

Onyx Group May 16 £1.3M 10.60%Fully let to Onyx Group from 2009 on a 10 year lease.

Royal Mail, Doxford, Sunderland

Royal Mail Jan 16 £4.15M 8.88%

10 years expiring 2022 with break at year 5. (22 months term certain at point of sale). Passing rent of £390,000 per annum.

Ashmore and Progress House, Teesdale Business Park, Stockton on Tees

Siemens Plc & Johnson Matthey Plc

Oct 15 £3.25M 10.70%

Two modern pavilions offices let to Siemens Plc and Johnson Matthey Plc. WAULT of 6.4 years to expiry.

Teesdale House, Teesdale Business Park Stockton on Tees

NHS June 15 £1.55M 9.27%10 year lease with break at 5. 3 years term certain at point of sale.

Q16 Quorum Business Park, Newcastle upon Tyne

Fabricom Offshore Services

LimitedNov 14 £5M 9.40%

10 year lease expiring December 2021. Tenant only break option in 2019 subject to 6 months notice.

Service ChargeThere is an estate service charge payable for the upkeep of the estate which is proportioned on a floor area basis and is fully recoverable under the lease. Further information is available on request.

VATThe property has been elected for VAT and therefore it is anticipated the sale will be treated as a transfer of a going concern (TOCG).

EPCThe property has an Energy Performance Rating of D(79). Copies of both certificate and recommendation report are available upon request.

PURCHASE RATIONALE

We have been instructed to seek offers in excess of Three Million, Six Hundred and Ten Thousand Pounds (£3,610,000) subject to contract and exclusive of VAT. A purchase at this level would reflect a net initial yield of 11% and low capital value of £120 per sq ft assuming purchaser’s costs of 6.509%.

PROPOSAL

- Fully refurbished building with minimal capital expenditure required moving forward.

- Embedded tenant who have invested heavily in the building. This is Teleperformance Limited’s second consecutive lease, having been a tenant in the building since 2002 under previous names.

- Asset management opportunities through removal of the tenant’s break clause, or lease regear.

- The property comprises one of only two buildings occupied by Teleperformance in the North East, of which Tyne River House offers better accessibility, a considerably superior car parking ratio and a lower occupational cost psf.

- Highly restricted development pipeline and huge shortage of large floorplate accommodation south of the River Tyne.

- Attractive income return and a low capital value psf reflecting a substantial discount to build cost.

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On the instruction of Rob Croxen acting as Fixed Charge Receiver

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

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

Richard WadhamTel: 020 7152 5923Email: richard.wadham@cushwake.com

CONTACT

DTZ Debenham Tie Leung Limited (the “Agents”) 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 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 the Agents 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 the Agents regarding pollution, or potential land, air or water contamination. Interested parties are advised to carry out their own investigations as required. March 2017

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